Appraisal Gap, Concession, and a Low Appraisal on a New Build

The appraisal supports $515,000, so there is a $25,000 gap between value and price. Lenders lend against the lower of price or appraised value, so Reyes must cover the gap in cash unless the price is reduced or the appraisal is successfully rebutted. The builder's proposal does not reduce the price; it keeps $540,000 as the contract price and adds a $25,000 concession. That may help with cash at closing, but it does not create $25,000 of equity, and the lender may limit seller concessions based on loan type and loan-to-value, and may re-underwrite the value if the concession affects the comparable sales analysis. A concession can also raise the effective price and be viewed as an inducement, which appraisers may adjust for. Reyes should compare the true cash needed under each structure, ask the lender in writing how much concession it will allow, and consider requesting a reconsideration of value with the $545,000 comparable and an adjustment for the $20,000 concession sale.

The affiliate title credit is a thing of value conditioned on using a affiliated business, which raises RESPA Section 8 concerns unless the affiliate arrangement fits the affiliated business arrangement safe harbor: the affiliate must be a bona fide provider, the relationship must be disclosed, and the consumer must not be required to use it. A credit tied to using the affiliate can look like an inducement and must be disclosed clearly and not conditioned in a way that violates the rule. The $3,000 marketing fee paid by the builder to Ortiz's brokerage must be disclosed to Reyes and to the lender, because it is compensation that may affect the buyer's closing costs and the loan terms. Undisclosed fees can constitute undisclosed dual compensation and violate license law and lending disclosure rules. Ortiz should give written disclosure of the fee and the affiliate relationship, confirm the credit is optional, and ensure the settlement statement reflects all credits accurately.

Reyes's ability to recover earnest money depends on whether the appraisal contingency was properly invoked and whether the contract conditions the deposit on financing. If the appraisal contingency is written to allow termination when the property appraises below price, Reyes must deliver timely written notice and the deposit should be refunded. If Reyes waives the contingency or fails to give notice, the builder may claim breach and seek the deposit as liquidated damages or actual damages. Reyes may also have claims if the builder or agent misrepresented value or failed to disclose the concession's effect; the agent's duty includes disclosing material facts affecting value and financing. The parties should document the appraisal, the concession offer, and all notices. If the builder retains the deposit, Reyes can challenge whether the amount is a reasonable estimate of loss and whether the builder mitigated by reselling. The agent should calendar every contingency deadline and confirm notice delivery in writing.