Why can't it be funded

Question

I am interested in a duplex. It has been fully rehabbed. The numbers make sense to me.
Now, the seller is saying that it can only be sold cash ... They are cash only because there are not any comps in that area to support the appraisal needed by the bank.

First, can this be correct? I would believe so if the area doesn't have similar properties in similar condition.

Second, how would I find financing in this situation?Last, I am able to buy cash ... would I be able to refi cash out in a situation like this? How long would I need to wait to get money out?

Jason Hirko · Answer

@Michael Sarrail yes, plenty of times the comps won't support the actual value, particularly in appreciating markets or neighborhoods in transition. And no, the same rules apply to a cash out refi as a new purchase loan - it still has to appraise. Easiest thing to do is find a lender, get that sucker appraised, and then whatever the difference is between what the bank will lend and you need to come up with to close, you pay out of pocket. Happens all the time.

Shane Baganz · Answer

The point was not based upon anyone's "thinking".  The point was based upon fact.  If a property does not appraise, the bank will most likely not lend to the value.  It's also a bit obtuse to infer people don't know value or costs of appraisals within their marketplace.  $1200 may be the cost of appraisals for you, it would not be for others in their respective marketplace. Also, some appraisal costs may go even higher depending upon the level of appraisal.  I know this as I own several commercial properties.  Please keep your assumptions aside and drill down to better understand.

Matthew Paul · Answer

Or sit back and wait till the seller is hungry and offer less

Chris Mason · Answer

Appraisal fees have not been tracking with cost of living increases for some years now. It's been at a base price in the $450 neighborhood for way too long, with the AMC taking a huge cut since the post-recession regulations that prompted the creation of Appraisal Management Companies.

So appraisers have to be super high volume just to put food on the table. And a lot of the better ones have left residential for commercial, or have taken their expertise and become a REI themselves. Lenders can do things to keep high quality old school ones around (& believe me we try!), but we still cannot cherry pick pick the appraiser on a per-property per-appraisal basis, and the laws of economics still apply to everyone.

However when we know it is a complex order that will require regression analysis, comping comps, a lot of historical research, statistics-based time travel to extrapolate forward in time to the present, etc, we have the option of putting out there that we (& by we, I mean the consumer) are willing to pay more, and they can take their sweet time doing it.

We are not paying for value here, as there is still no 'guarantee' of 'hitting' value, we're just saying "hey, look, this is going to be a tough one..." and giving an appraiser that wants to practice classic high-quality trade-craft (eg, the 70% of stuff they learned during training that they never use, or haven't used for the last 6 years or so due the economics of time) an opportunity to step up to bat and give it a whack. It still might not hit any particular value, but you will get a high quality appraisal and not a churned out high-volume appraisal.

Appraisers know that if they take on one of these, and do a standard churning quality appraisal (& to be clear, these standard appraisals technically do meet USPAP/FNMA/FHLMC/FHA standards), there will be consequences. But, again, there's no assurances or guarantee of value, just of quality. The good news is that if it doesn't hit value, it will not be because someone didn't take the time to do research.

Michael Sarrail · Answer

I am not clear as to what you are saying.

Please define a $1200 high quality appraisal.

Patti Robertson · Answer

@Marshall Martinez - Portfolio loans require appraisals too.

Chris Mason · Answer

The seller thinking it "can't" or "won't" appraise is not relevant.

Did you know that it's possible to pay for $1200 high quality appraisals? Probably not. Ergo, does the seller? No, probably not.

Chris Mason · Answer

Hi @Michael Sarrail,

Cash v mortgage? Get the best of both worlds.

Delayed Financing Exception, but get the appraisal done (& loan approved) before closing on the cash purchase to ensure you will not have issues recouping your capital.

No 6 or 12 month wait.

Why can't it be funded

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