Renegotiating After Appraisal - Help!

[Josh Burney]

Hi everyone -

I would REALLY appreciate your advice!! My brother and I are buying our first duplex in MN and are excited to begin the investment journey after much analysis paralysis! It's a buy and hold rental with tenants in place (no active leases, month-to-month). We knew going into the deal that it was going to slightly negatively cash flow, but it's currently below market rent and we plan to add some bedrooms to the property down the road. With the negative cash flow, we were counting on having equity but the appraisal came in low - meaning we'd be in negative equity by $3,500 on day one. We thought we had conservatively estimated the value based on limited comps (small town, not a lot around), but the appraisal came in $15k below what we had estimated. We're not interested in challenging the appraisal as we're 5 days from closing. My question is - is it ever acceptable at this point to go back to the buyer and ask them to lower the price BELOW the appraised value? Meaning, if we asked the sellers to lower the sale price by $10k ($6500 more than the difference between the appraised value and the amount we offered), is that just completely bad form? Or even allowed? I've tried to research online but the only advice I can find mentions renegotiating down to the appraised value but don't mention going even further below the appraised value.

Thanks for the help!

--Josh

[Scott Trench]

Is it good form? No, not really. 

Is it common? Yes. 

The market is changing in favor of buyers, and your appraisal did not come in. 

I'm sure others will disagree, but I see no reason why you can't ask for the $15K. The seller might be happy that's all you ask for in this market. 

The bigger issue here is with your strategy. I'd hate the idea of buying and hoping for immediate equity, and relying on an expensive remodel to get to positive cash flow. That's a tough first deal.