Next week the NWMLS (Northwest Multiple Listing Service) is updating a number of forms used in real estate transactions. This is pretty common and Brokers are advised to study the changes and be well-versed in the proper usage of them (I wish more were!). Most of the changes are not major and just reflect shortcomings of previous form versions.
One new Form being added is the “Notice of Low Appraisal” (22AN) form, which I think is a great idea and replaces the outdated Form 90J (Buyer’s Notice of Appraisal Less Than Purchase Price Termination). It gives a Buyer who is using bank financing a standardized form to notify the Seller when the Bank’s appraisal comes in lower than the purchase price, which is somewhat common these days. Once received by the Seller, there is place where the Seller can respond by agreeing to reduce the purchase price to the appraisal’s price. Or there is a place where the Seller can give notice back to the Buyer that a reappraisal has been done, resulting in an amount equal to the purchase price (or higher). In such a case the Buyer is instructed by the Seller to seek the lender’s approval of the reappraisal.
The procedure, process, and timeline for these notifications are laid out in new revisions to the Financing Contingency (22A). If in the end the lender does not accept the value of the purchase price or reappraisal, the Buyer then needs to decide whether to waive the Financing Contingency altogether (using the existing Financing Contingency Notice – Form 22AR) or terminate the agreement (using the new Form 22AN).
Hooray for this clarifying new form! Brokers, Sellers, and Buyers have all been fumbling with how to deal with this awkward situation for a long time. And I, for one, welcome the new standardized process!
(Information in this blog post is not to be construed as legal advice in any way. NWMLS forms are to be used only by its members, subscribers, and their client’s attorneys.)