Background
Patrick Kennedy agreed to buy a Seaford, Virginia property for $845,000 using VA financing. The VA appraised the property at $750,000. The purchase agreement’s VA appraisal clause allowed Kennedy to avoid penalty or an obligation to complete the purchase if the price exceeded the VA’s reasonable value, but also gave him the option to proceed regardless of that value.
After receiving the appraisal, Kennedy and the sellers executed an addendum lowering the price to $781,000, still above the appraised value. Kennedy later terminated the agreement under the appraisal clause. The sellers sued for breach, and the York County Circuit Court ruled for them, awarding damages and attorney fees and denying Kennedy’s counterclaim for his earnest-money deposit and fees.
The Court’s Holding
The Court of Appeals affirmed. It held that the VA appraisal clause unambiguously gave Kennedy a one-time choice after learning the appraisal: walk away without penalty or proceed with consummation of the agreement despite the appraisal. By signing the addendum to renegotiate the price with knowledge of the appraisal, Kennedy elected to proceed.
The addendum’s provision preserving unmodified contract terms did not convert the appraisal clause into a continuing right to cancel until closing. The court also declined to consider Kennedy’s challenge to expert testimony because he had not objected at trial, and it based its decision on the unambiguous contract language rather than extrinsic evidence.
Key Takeaways
- A VA appraisal escape clause permits a buyer to cancel after a low appraisal or proceed despite it; it does not permit both choices sequentially.
- A buyer who renegotiates and signs an amended deal above the appraised value may be bound to close despite the remaining appraisal gap.
- Failure to object to expert testimony at trial forfeits the appellate challenge under Virginia’s preservation rule.
Why It Matters
The decision treats the VA appraisal clause as protection against the unexpected financing consequences of a low appraisal, not as an open-ended contingency. In Virginia real estate transactions, buyers using VA financing should decide whether to terminate before agreeing to a post-appraisal renegotiation, while sellers can rely on a buyer’s informed election to proceed.