Counteroffer, Roof Defect, and Low Appraisal
On June 1, seller Dana listed a house at $412,000. Buyer Eli submitted a WB-11 offer at $400,000 with $8,000 earnest money, a 4% seller credit, closing June 20, a 7-day home inspection contingency, a 21-day financing contingency, and an appraisal contingency. Dana countered on June 2 at $408,000, a $3,000 seller credit, closing June 27; all other terms unchanged. Eli signed and returned the WB-44 on June 3. On June 10, the inspection report showed the roof needs $9,000 in repairs. Eli asked Dana to fix it; Dana refused. On June 22, the appraisal came in at $395,000. Eli's lender has not yet issued a commitment.
1. Was a binding contract formed, and on what terms? What is the deadline for Eli's inspection objection?
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Yes. Dana's WB-44 counteroffer operated as a rejection of Eli's original $400,000 offer and as a new offer. Eli's signed acceptance on June 3 formed a binding contract on the counter terms: price $408,000, seller credit $3,000, closing June 27, and the unchanged inspection, financing, and appraisal contingencies.
The inspection contingency is 7 days, so the written objection deadline is June 10 (counting from June 3). Eli must deliver written notice of the roof defect to Dana or her agent by that deadline; a phone call or a request after the deadline may not preserve the right. The contract, not the original offer, controls.
2. After Dana refuses the roof repair, what must Eli do to preserve any inspection-related right, and what happens if he does nothing?
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To preserve an inspection-related remedy, Eli must deliver a written notice of defects/objection before the inspection contingency expires-here June 10-and state the remedy he seeks (repair, credit, or termination, depending on the contract). If Dana refuses, Eli may terminate only if the contract gives that right for an unresolved inspection objection; otherwise he may negotiate or proceed.
If Eli does nothing by the deadline, he waives the inspection objection and accepts the property in its then condition, subject to any remaining financing and appraisal contingencies. He cannot later use the roof as an excuse to cancel unless the contract or a seller misrepresentation independently gives him that right.
3. Given the $395,000 appraisal, what are Eli's options and what determines whether he can recover the earnest money?
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The $395,000 appraisal is below the $408,000 contract price. If the WB-11 appraisal contingency gives Eli the right to terminate when the property does not appraise at the purchase price, Eli must deliver written notice within the appraisal contingency period and comply with any requirement to provide the appraisal. If he terminates timely, the appraisal contingency protects his earnest money.
If he misses the deadline, he waives the appraisal contingency; then he must either cover the $13,000 gap in cash or rely on the financing contingency. The financing contingency only protects him if he has timely applied, cooperated, and gives notice when the lender denies or cannot commit by the financing deadline. Options: renegotiate price to $395,000, ask for a price reduction/credit, bring extra cash, or terminate properly. Earnest money is returned only if he terminates within a contingency; an unconditional termination exposes the $8,000.