Appraisal came back $35,000 lower than sales price (Turnkey)

[Daniel Mills]

OK. So here is the situation. I was in the process of purchasing a rental property through a Turnkey company that was asking $261,000  that just appraised at $226,000. Of course, I am not paying the original amount and I have sent an email asking if they will lower the sales price to the appraisal amount. I haven't heard back yet, but I am guessing they will dispute the amount and say that they will pay for a second appraisal. This is a bit worrying because I know that some appraisers who get a lot of business from the company might try to fudge a bit to get the sales price they want, right. So, I am planning on asking if I can choose the appraiser. I am just wondering if there is anything else I should consider to make sure that I don't get taken here. Any advice would be greatly appreciated.

Thanks,

Daniel

[Tae C.]

@Curt Davis

In all the experience you’ve had with your turnkey business, what chance does the potential buyer have of you as the TK company being willing to accept a lower price that is closer to the actual appraisal?  I do not ask this in a critical manner, but really out of curiosity and for educational purposes.  In your previous responses, there didn’t seem to be much mention of the real possibility that the TK provider might seriously consider lowering their price.  The examples you did mention that have taken place with Buy Memphis Now potential clients, you recommended that the buyers use your preferred lenders whose appraisers would bring in the necessary value on a second appraisal.  That seems slightly off to me, as doesn’t it make more sense for any potential buyer/client to have their own lender of choice order their own appraisals in doing their own objective due diligence vs. relying on an appraisal from a lender that has close ties and repeat referrals with the company that is selling them the property?

Obviously to me, it wouldn’t make sense in this particular scenario for the TK provider to lower their price by $35k off the original asking price, that would be quite unreasonable to expect I think.  But say the appraisal came in closer to $240k - would you be willing to meet the buyer in the middle at, say $250k?  It’s all a case by case situation of course, and heavily dependent I’m sure on how much the TK provider actually has into the specific property and what their desired margins are (though desired vs. necessary might be different numbers)...but I’m just curious as a whole, business approach-wise, how you would respond in this type of scenario.