My first experience with a mysterious appraisal valuation

[Ray Johnson]

Found a Freddie Mac REO property that was in great shape.

My agent provided me comps from the last 6 months between $274,000 and $305,000 so I thought getting this property for $199,900 before it went to the investor pool and get bided up to market value was a good move.

I locked in financing and the bank sent the appraiser out, I get a report stating the following:

Sales Comp 1 - $224,300  (Comp from 9 months ago)

Sales Comp 2 - $276,500

Sales Comp 3 - $277,500 (same street 6 properties away and sold 4 months ago)

Sales Comp 4 - $274,000

Sales Comp 5 - $295,000

Sales price - $199,900

Appraised value to the bank came in at $225,000. It came in at $25,000 or 12.5% above sales price which is fine for a buy and hold property since this won’t affect the deal in a negative manner, but definitely not what I was expecting.

The appraisal report clearly states the property is in good condition, no problems, nothing needs to be repaired, there were no negative statements/comments on the report, no declining market conditions, etc..

 Is there a reason why the appraiser the bank sent out came back appraised as close to the sales price as possible, If it weren’t for “Sales Comp 1” on the report I wonder how this would have appraised.

Any thoughts or experiences with this sort of appraisal valuation mystery?