Appraisal and Lender Questions

[Hobart King]

Welp... just had a really bad appraisal. My buddy and I have been doing the BRRRR method and we just completed a house and currently have it rented for $1,100/month. It's in kind of a weird location as houses one street west sell for $300k+ and houses a few block to the east sell for very little. One of the houses on our street was purchased for $150k within the last two years. We are looking to refinance that property plus another property we own and we have a lender we like. We felt really good about getting a appraisal of $120,000 on this property given that my buddy re-did the property next door that is identical and got an appraisal of 120k. First appraisal came back at $50k which really left us scratching our heads. Second appraisal came back at $70k which again is much lower that I feel it should be (I think we could sell for $140k). We have not yet received the appraisal report, but I plan to review to see what was used at comps. Anyone have any ideas on how we can get a higher appraisal? Do we have the right to choose our own appraiser (we would choose the first guy that gave use the 120k appraisal on an identical house next door).

Also Anyone know any good lenders in Birmingham, AL (or elsewhere) that will lend at 80% LTV with no seasoning period for a smaller portfolio (2 houses worth ~165k)?

[Andy Eakes]

As far as I know, you can not choose your own appraiser for obvious reasons. I am not sure why it came in so low based on your description of your situation, but I know that many appraisers base their reports on comps in the area or other recent evaluations of the area. I know that some investors will try their best to put a figure with some back up data in front of the appraiser before they do their report. 

So to use your situation as an example, before you had your property appraised, you could've handed the appraiser the report done on your buddy's place and been like "this report was recently done on an identical property next door by an appraiser who said it was worth $120,000." I am not saying that strategy will change the value, but it never hurts to show them a figure with factual support before they go in. The factual support is what really brings it home. 

It is odd that the value would come in so much lower than what you thought. I would check to see which properties they compared yours to and call them if you have any questions. Sounds like the value of properties change drastically based on the street it's on in your market. So it may have been a case of confusion or misunderstanding of the market.   

Sorry you have to go through this. Hopefully it doesn't deter you away from REI!