I am a bit confused. I am buying a FSBO house. We first agreed on a price of $118,000. The appraisal came back at $115,000 so the seller lowered the price to $115,000 and we both signed the contract. Now a few weeks later the mortgage company called and said that the appraisal was done incorreclty and the new appraisal amount is $120,000 so I need to go back to the $118,000 price. Can they do that?? I thought we were in a binding contract at $115,000.
Real Estate Attorney
This is pretty typical of the tactics of lenders these days. For some reason they think they have been elected dictator. That said, you do have a slight problem.
In many states part of the law of contracts is a topic called mutual mistake. If I were representing your seller, I would argue that we each modified the contract because we each believed the appraisal to be true. Now that it has been discredited, it would seem we have a mutual mistake of fact, which permits either of us to insist on voiding the contract amendment made based on that error.