Refi appraisal came in very low

[Christopher Socha]

I am just on the tail end of my first investment and I am a little disheartened. Purchased a duplex property in very rough shape on the inside and outside. Completely updated both sides including, new furnaces, electrical plumbing, kitchens and baths. Outside got fresh paint, all new windows, soffits and gutters. I purchased the property for 49k. I have about 25k into the project. So my all in number was 75k. I projected my ARV to be at least 100k when I bought it based on the sale if a property 4 houses down that sold for 93k with zero updates inside. Ideally I would have liked the appraisal to come in at 95-110k on the low side and maybe I could get 120k on the high side, maybe. In any case, appraisal came back two days ago at 80k. I am really dumbfounded by this. How can that be. They even used the comp a few houses away. I paid cash for the property and i would like to get my money out to do it again but I am thinking of just walking away from this lender. ThIs Is a cash out refI Any suggestions?

[Chris Mason]

Originally posted by @Christopher Socha:

@Russell Brazil is that just the nature of refi? I would have assumed my unit being fully remodeled should be worth at least the comp, I was expectIng more. Perhaps I was looking at value incorrectly.

 I just had a refi appraisal come in above all but one comp, within 1% of what I was expecting, basically on the money, in the East Bay Area.

You really have to walk the appraiser through every single update and hand him or her a CMA to have the best chance possible. In addition, break out every reason you acquired the property for less than fair market value. In my case I tore into the listing agent and the myriad ways they did a horrible job representing their client's interests.

Spreadsheet template:

TOP HALF OF PAGE:

Addresses of comps - price - date - bed/bath - special feature(s) of house - condition

Properties listed here with data

Median / Mean / Lowest / Highest chart

Commentary

BOTTOM HALF OF PAGE:

Left side, improvements since purchase bullet points.

Right side, details about how/why you got the property for less than fair market value, again bullet points. 

Top half of the page is basically you making it easy for the appraiser to hit a value you want by doing their research for them.

Bottom half is information the appraiser would not otherwise have access to.

Square feet is intentionally left off of the top half since appraisers consider it a garbage data point. You're immediately setting yourself apart from all the real estate agents out there who think they know how to valuate real estate by replacing square feet (and price per square foot) with features of house, which may mean the appraiser takes your analysis more seriously.