Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Buying & Selling Real Estate
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 10 years ago on . Most recent reply

User Stats

95
Posts
29
Votes
Angelo Behar
  • Rental Property Investor
  • Arlington, VA
29
Votes |
95
Posts

Appraisal came in low, is it still a good deal?

Angelo Behar
  • Rental Property Investor
  • Arlington, VA
Posted

Hello BP, I hoping for the valued opinions of the BP community for my current predicament.

A purchase agreement was signed by both parties for the price of $152,500 for a 3/2 owner occupied, with two 1/1’s attached rented month to month without a lease. The breakdown for monthly cash flow is as follows:

$1300 main unit 3/2 (rent that it will yield)

$500 1/1

$600 1/1

$2400 total monthly in rent

-550 Mortgage @4% for 30 years

-250 insurance (yay South Florida)

-183 tax

-240 repairs

-240 vacancy

$937 monthly cash flow

$937x12 months= $11,244/$40,000 cash out pocket = 28.11% cash on cash

$1487 NOI x 12 months = $17,844/$152,500 purchase price = 11.7 % cap rate

Looks like a good deal, right? Here is the fun part. I paid $1500 out of pocket to get rid of termites and to get the electrical to pass the 4 point inspection for insurance. An addendum was made to reimburse the repairs I paid for since the seller did not have the cash to pay to get the cleared 4 point inspection.

And the appraisal came back at $136,000….the appraiser stated that the house was filed at the court house as a single family home and paying taxes as such, therefore, the two efficiency attachments were not allowed to be included into the value of the home since they are additions made recently. The additions were in legal zoning compliance on the appraisal, but added as a line item, not adding the true value of the attached 1/1's.

152,500 – 136,000 = $16,500 difference and the seller is not willing to budge one cent. And so far she is not willing to do a side deal. There were not any other offers made when the property went under contract.

The three options I believe I have at the moment are;

  • 1.Walk…but what do I do about the $1500?
  • 2.Offer cash on the side close to 16k, so far she's not listening to side deals (but why should I since no one else will be willing to pay more than 136k) ((would this deal still be worth it if I paid 16k on the side?))
  • 3.Offer 145k or less and allow her to shop the deal for 30 days.

Any other options the more experienced have to offer would be greatly appreciated, thanks!

Most Popular Reply

User Stats

3,124
Posts
2,637
Votes
Matt Devincenzo
  • Investor
  • Clairemont, CA
2,637
Votes |
3,124
Posts
Matt Devincenzo
  • Investor
  • Clairemont, CA
Replied
Originally posted by @Angelo Behar:

@wayne brooks it would be added and in compliance but the seller doesn't like its listed for 136k under a new contract. Lawyers and realtors have told her its ok but she thinks if she agrees to 136k I'm going to try and play games with the rest of the money. My verbiage of "side deal" was probably not the best way to explain the situation. I was just trying to explain that its the same result with chopped up amounts. My fault for the lack of clarity.

Why get her to agree to 136K at all? If you're comfortable paying the 152K then keep the contract as is. The only person impacted by the low appraisal is you and your ability to borrow up to that 136K number with respect to the LTV allowed. So your lender will only be willing to fund 108K-ish instead of 123K-ish. Now you just bring a check to the closing for the 44K needed on the full offer.

Lenders don't care if you pay more than appraisal for a property, they only care that they haven't lent more than their LTV requirements on the property.

Loading replies...