Seller & Lender communicated to have appraisal raised

[Gerich Fellermann]

Hi all,

I am working on a turnkey in Kansas City, MO and the appraisal (ordered by me through company referred by Lender) returned an appraisal that was $21k below the contract price ($162k ->$141k).  The seller then communicated with the lender to add additional comps which led to a revised appraisal $6k higher.   The TK provider is asking for a sell price at an additional $2k over the revised appraisal or $8k over the initial appraisal.

I have had good communication with the TK provider, they have been patient as I navigate this 1031 exchange as a new investor, and have no reason not to trust them, but this seems odd.

I have read posts here on BP about tips for getting an appraisal revised, so I understand it is advantageous for the seller, but how wary should I be as the buyer?   

Also for the record, 

- this would be an out-of-state purchase & rental & management so trust in the integrity of all systems being established is important.  The TK provider has a good reputation here on BP and has given no other reason to pause.

- this is a 1031 and we are outside of our 45day identification window so it's pretty much this property or taxes.

Normal?  Not so normal?   Red flag?

Thanks in advance for any thoughts,

G

[Chris Mason]

Originally posted by @Gerich Fellermann:

Hello all, thanks again for the input....

I've never been under any impression that this is a screaming deal - it's meant to satisfy the 1031, avoid the taxes and buy us some time.

@Chris Mason I'm fully able to pay $162k, and willing to pay $162k for a house that's worth $162k, but not for a house that's worth $141k. I'd also rather not pay $147k off a potentially inflated appraisal for a $141k house.

@Robin Hunter Thank you for the thoughts - It is being rented for $1250, so not quite to 1%.   

@Russell Brazil Thank you for the info.

Much appreciated all!

G

Appraisals that follow FNMA guidelines often are not an accurate reflection of market value. You are a reasonably intelligent person and wrote an offer for $162k. The seller accepted it. The supply and demand curves have met in the middle. By definition, market value is $162k. There is nothing else to market value but that.

Residential real estate appraising is fundamentally broken. It was broken in 2007, then Dodd Frank etc was imposed. It's still broken, just in the opposite direction. I've seen residential appraisals two weeks apart on the exact same property vary by $400,000.