When a Buyer's Appraisal Comes in Low, Who Carries the Risk?

The situation

Amalia and Fernanda had owned their mother's house together for two years, since inheriting it jointly. Amalia worked as a landscaper and Fernanda drove long-haul routes for a freight company, and neither of them wanted to keep managing a second property from a distance — property tax bills, a leaking roof section that needed attention every spring, a lawn that needed cutting whether or not either of them had time. They listed the house and, within three weeks, accepted an offer from a buyer named Valentina at $520,000.

What made the offer attractive was not just the price. It was firm — meaning Valentina had waived the usual conditions, including the financing condition that lets a buyer walk away and get their deposit back if a mortgage does not come through. A firm offer is a binding agreement of purchase and sale the moment both sides sign it, with no built-in exit ramps. For a seller, that is close to the best outcome available: once accepted, the buyer is legally committed to closing, full stop, regardless of what happens with their mortgage application. Amalia and Fernanda came to our team once the offer was accepted, wanting a lawyer retained early to handle the closing rather than scrambling in the final week.

What the appraisal changed

Roughly five weeks before closing, Valentina's mortgage broker called her with a problem. The lender had sent an appraiser to value the property independently of the purchase price, and the appraisal had come back at $460,000 — $60,000 below what she had agreed to pay. Lenders do not lend against the price on the agreement of purchase and sale. They lend against the lesser of the purchase price and the appraised value, on the theory that if the borrower defaults, the property is the lender's only real security, and it is only worth what an independent appraiser says it is worth.

Valentina had planned to put down 20% of $520,000 — $104,000 — and mortgage the remaining $416,000. With the appraisal capping the lender's calculation at $460,000, the maximum mortgage available at the same 80% loan-to-value ratio dropped to $368,000. That left her $48,000 short of what she needed to close, a gap that had nothing to do with her income or credit and everything to do with one appraiser's opinion of the house's value on one afternoon.

Because her offer was firm, Valentina had no legal right to walk away over this. Waiving the financing condition meant she had taken on the risk that her mortgage might not stretch to cover the full price, and if she could not close, she stood to forfeit her deposit and potentially face a claim for any additional loss the sellers suffered reselling the property. That exposure was real, but it did not solve her immediate problem: she needed $48,000 she did not currently have, and closing was five weeks out.

Her lawyer contacted our office to ask whether Amalia and Fernanda would consider a short extension while Valentina arranged the shortfall through a family loan and a slightly larger cash contribution of her own. This is a genuinely difficult moment for sellers, and it is one we see often enough to have a clear framework for it.

What we did

1. Confirmed the firm offer gave the sisters real leverage, and explained what it was actually worth. Because Valentina had waived her financing condition, Amalia and Fernanda were not obligated to agree to anything. They could hold the closing date, and if Valentina failed to close on time, they would be entitled to keep her deposit and could pursue her for any shortfall if a resale later fetched less. We were careful to explain that this leverage was real but not free: enforcing it meant a failed closing, a scramble to relist the house, weeks or months of carrying costs on an empty property, and — if a resale came in lower and Valentina disputed the shortfall — a Superior Court claim that could take a year or more to resolve, with no certainty of collecting even a favourable judgment.
2. Quantified what holding firm would actually cost the sisters if it went wrong. We asked Amalia and Fernanda to weigh the extension request against the realistic cost of a failed closing: relisting fees, a likely price reduction in a slower resale, continued property tax, insurance, and utilities on a vacant house, and months of delay before any money reached them. Framed that way, a short paid extension looked far cheaper than exercising their right to walk away, provided the extension came with real compensation and a firm new deadline.
3. Negotiated compensation for the delay rather than a free pass. We proposed a 15-business-day extension in exchange for two things: a $5,000 top-up to the deposit, made non-refundable regardless of whether the deal ultimately closed, and per diem compensation of roughly $45 a day to cover the sisters' ongoing carrying costs on the property — about $675 over the extension period. This meant the sisters were paid for taking on the extra weeks of risk and expense, rather than simply granting the buyer more time for nothing.
4. Set a hard new closing date with no further extensions built in. The amendment to the agreement specified that the extended date was final, and that if Valentina still could not close, the sisters' right to keep the full deposit — including the top-up — and pursue any further loss would apply immediately, without another round of negotiation. This mattered because an open-ended extension tends to invite a second request for more time; a fixed, non-negotiable date does not.
5. Kept the sisters informed without asking them to manage the negotiation themselves. Amalia was based nearby and Fernanda was often on the road for days at a time, so we handled the back-and-forth with Valentina's lawyer directly and confirmed each term with both sisters by phone and email before it was finalized, so neither of them had to be reachable at a moment's notice to keep the deal moving.

The outcome

Valentina's family loan and a slightly larger personal contribution closed the $48,000 gap within the extended window, and the sale completed at the original $520,000 price, three weeks later than the sisters had originally planned. Amalia and Fernanda received the full purchase price at closing, plus the $5,000 non-refundable top-up and the $675 in per diem compensation — roughly $5,675 more than the sale would otherwise have generated, which offset most of the extra weeks of property tax, insurance, and utilities they carried on the vacant house.

It was not a clean win for either side. Valentina paid an extra $5,675 on top of the shortfall she was already scrambling to cover, at a moment when money was already tight. The sisters got their sale, but three weeks later than planned and with real anxiety in between about whether the buyer would actually come through — anxiety that, had the deal collapsed, would have been followed by relisting the house, absorbing a possible price drop in a slower resale, and potentially pursuing a claim against a buyer who might not have had the means to pay it. Both sides gave something up to avoid the far worse outcome of a failed closing, which is what a negotiated compromise on a firm-offer shortfall usually looks like when it works.

What you can learn from this