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.
The mortgage company can't require you to increase the price that you and the seller have agreed to - all they can do is refuse to loan enough money to close the sale if the sales price is higher than the appraisal.
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.