BRRRR question regarding appraisals

[Mark DiPietro]

We are finishing up the rehab on a property and I have a general question about the appraisal going forward.

I realize you have to pay out of pocket here, but, should we get an appraisal before going to refinance the loan so we know how much to ask for (or how much we should be able to get); or, wait for the bank or loan company to get their own appraisal (which I know we also pay for) and work from there?

Any input would be greatly appreciated.

[Evan Polaski]

@Mark DiPietro, honestly, it sounds like you put the cart before the horse. You should have a very good idea of the ARV before you bought and renovated the house. Also, how long have you owned the house? Banks will only lend on appraised value after 6 months (sometimes 12, depending on lender) of seasoning. Anything less, and they will lend on a percentage of your cost.

To directly answer your question: find your own realistic comps.  Appraisals will typically look at transaction with a 1/2 mile radius and within last 6 months.  If there are not a lot of transactions, they may extend the radius and/or the time frame.  You want to find the comps that paint the best picture for your value.  This will give you your current value, and what to ask for from the bank.

Keep these and provide them to the appraiser when the appraisal happens. Also, be on site to talk through all the renovations, and have a printed list of the improvements you performed. With the comps, the more you can know about them the better. I.e. I had a house across the street sell when I was refi'ing. But that house had no renovations, and I knew the buyers were hiring architects to undergo a major renovation. So while the SF, age, and location of property were very good, the pictures available on the MLS didn't truly reflect the renovation scope needed at the property, so the price it sold for was not indicative of the value of my fully renovated house.