Investor · Indianapolis & San Diego · Member since 2019 · 38 posts · 15 votes
I'm looking at a neighborhood that has always been rough. Today, 3 new spec homes have been built and sold simultaneously for $350,000+. In this area, nothing has sold for more than $60,000. Old properties, run-down, crime, etc. I understand why someone would want to buy these houses. I think appreciation is a sure bet based on where they are located. The neighborhood will surely "turn." But who bought these houses today?? There is literally not a single comp to support their value. I'm sure that the bank's appraiser would not agree with the $350,000 price tag. Very few retail home buyers (especially at that price point) buy their homes in cash. So this begs the question: how do appraisal gaps not restrict gentrification?
My guess is it was determined that nothing in the immediate area was a good comp due to age and finish level, so the appraiser ventured farther out for comps. Even though they are not really supposed to many appraisers lean towards the contract price pretty heavily and try to find a way to justify it.
Are you sure they borrowed money to buy them? No loan equals no appraisal.
Find the nearest new home and figure out what it sold for per SF. You’re saying you think it was a good deal, sounds like the appraiser, if there was one, agrees with you.