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

[Angelo Behar]

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!