APPRAISAL CAME IN SHORTER THAN THE PURCHASE PRICE!!!

[Kevin N.]

Hello everyone,

I hope everyone is having an amazing weekend

I have a quick question for some of our experienced investors in the group! 

We currently have a property under contract that we plan to buy and hold. The initial purchase price for the property that we locked it in at was $350,000 however, when an appraisal was carried out we found out the property was only worth $334,000($16,000 difference). Our agent is doing his best to negotiate that difference with the sellers and the sellers recently asked if we could pay half the difference of the $16,000 and they would pay the other half. The property is a duplex no repairs needed and will cashflow. What are your thoughts on this situation and if it were up to you would you pay more than what a property is worth if there's some good indication that it would cashflow? Our lender won't finance the difference either so the difference has to come out of pocket. 

Also what tools do you guys use to calculate the potential cashflow of a property and what it's likely to rent for? Right now just going off our realtors estimates. 

By the way I am in the Lewiston, Maine market.

Cheers guys! 

[Chris Seveney]

@Kevin N.

People have asked about an appraisal or finance contingency already - which I would not increase the price

What concerns me about your post is your comment that it would cash flow, then you mentioned this was based on your realtor and not based off of your numbers.

If you don’t know how to calculate cash flow or numbers, I strongly suggest you learn before buying real estate as if they are way off, lenders today will not only go after the home but a deficiency as well if the property is upside down especially if you have assets or equity in other properties.