Final answer:
If a property with an FHA offer does not appraise, the buyer can bring more money to the down payment to proceed, or they may have the option to negotiate or withdraw based on the contract. The notion that the buyer must buy or that the contract automatically terminates is incorrect.
Step-by-step explanation:
When a buyer makes an FHA offer of $101,000 with 5% down but the property does not appraise as expected, there are a few options to consider:
- The buyer is not obligated to purchase the property at the higher appraised value if it goes beyond the agreed offer. Therefore, the statement that the buyer must buy even if the property appraises at $110,000 is incorrect.
- The buyer has the option to add more money to the down payment to bridge the gap between the offered price and the appraised value, thus proceeding with the purchase if they choose to do so.
- The seller does not have the option to automatically sell at the appraised value; the contract specifics and further negotiations would determine the next steps.
- An FHA loan typically requires that the property be appraised at or above the amount the buyer agrees to pay. If the property does not appraise, the contract does not automatically terminate; instead, it may allow the buyer to withdraw or require both parties to renegotiate.
In summary, while the FHA loan process has guidelines regarding appraisals and down payments, the actual outcome in a case where a property fails to appraise as expected will depend on the contract terms and the decisions of the involved parties.