Can you renegotiate the purchase price of a home anytime before the close of escrow?
Yes. Buyers can renegotiate the purchase price of a home if an inspection turns up major problems that affect the value of the home or the appraisal yields a value lower than the agreed-upon purchase price.
Buyers generally have an home inspection before signing a written offer to purchase a home-once the deal is closed, the buyer has purchased the house as is. When buyers find a home they want, they draft a contract, either through their agent or attorney, or on their own. The offer should specify what the buyer is willing to pay for the home, when the buyer wants to close, and when he or she wishes to take possession of the home. The contract should be made contingent upon having an inspection completed and evaluating the results. If the inspector discovers major problems not disclosed prior to signing the sales contract that could affect the value of the property, the buyer can use the contingency to renegotiate the purchase price of the home to offset the cost of any required repairs. The buyer can also ask the seller to make any necessary repairs, provide closing credits, or simply walk away from the deal.
The buyer's best options are to seek either a closing credit or a price reduction, as the seller has no incentive to do anything more than make the quickest and cheapest repairs possible. In most cases, a seller will repair problems found or reduce the selling price accordingly. However, this is completely up to the discretion of the seller (although refusal to take one of the measures gives the buyer grounds to cancel the purchase offer). After the home inspection contingency has expired the buyer will no longer be able to renegotiate the price to resolve any problems revealed by the home inspection but not dealt with earlier.
Buyers can also seek to reduce the price based on the results of the home appraisal. Once the seller accepts the offer and the loan is preapproved, the lender has the property appraised. The appraiser has the responsibility of satisfying the lender that the property is worth the amount of money the lender has committed to lend. If the appraisal comes in lower than the agreed-upon purchase price, the buyer can seek to renegotiate the purchase price with the homeowner, increase the downpayment, or consider other financing plans.