Appraisal lower than expected

[Kapil Kandel]

Hello, I just joined BP and would like to get your input on a deal my family is working on - My family is interested in purchasing a commercial property which has a small convenience store (gas station), saloon, to go food and one bedroom apartment. Recently we started managing the convenience store and have been working with lender to buy the whole property. The current total rent from the four businesses (mentioned above) that the current owner receives is $4000. His selling price for property is $500K. The appraisal last week came for $380K and this is based on comps and cost basis. The appraiser did not do income basis because he said he could not find and also trust data from family owned businesses in the property. Also the comps where done on real estate only against commercial property where there is no any business running. Any suggestions on how we should approach this situation will be greatly appreciated. Thank you.

[Melissa Kirchhoff]

@Kapil Kandel - First, you did an awesome job on step #1. You got the answers you needed. Second, I assume it's a problem because the seller doesn't want to come down that low?

Also, was this done for a sale, for your financing is going through? If so, you legally have a right to request a new one (in writing!). Do so to the bank who ordered it, in writing. A few things I personally consider: 

1. Was that appraiser local, and familiar with the area and what the business contributes to the local economy, location, etc.  

2. Does this appraiser typically do these types of mixed use properties? They say they can do anything you put them in front of but I consider that a totally different game than residential! 

3. Just get another opinion - it's just that - and I think saying "family owned business data isn't trustworthy" isn't really a good sign...

If another one comes back low, you might want to look to the seller, you might be over paying, but if you think it's wrong, I would request a new one in writing.