Appraisal came out 20k lower

[Victoria S.]

We are under contract for a 4plex. The cash on cash comes out at 13%, taking into account vacancies, maintenance, HOA ect (I used very conservative numbers). The appraisal came back at 20k lower than the purchase price. The appraiser had a hard time finding sale sales comparables because only 2, 4 plexes sold within the last year in the area. so he did a sales comparable approach (which came out lower than the purchase price) and an income comparable approach (which came out 30k higher than purchase price). If you take the median of the 2 approaches, this is what we offered. If we pay 20k out of pocket the cash on cash goes down to 12%. The seller has pretty much said that he has cash buyers if we back out and will not go down on price. Has anyone ever run across this? If so, how would you handle this?

[Account Closed]

Originally posted by @Victoria S.:

We are under contract for a 4plex. The cash on cash comes out at 13%, taking into account vacancies, maintenance, HOA ect (I used very conservative numbers). The appraisal came back at 20k lower than the purchase price. The appraiser had a hard time finding sale sales comparables because only 2, 4 plexes sold within the last year in the area. so he did a sales comparable approach (which came out lower than the purchase price) and an income comparable approach (which came out 30k higher than purchase price). If you take the median of the 2 approaches, this is what we offered. If we pay 20k out of pocket the cash on cash goes down to 12%. The seller has pretty much said that he has cash buyers if we back out and will not go down on price. Has anyone ever run across this? If so, how would you handle this?

 Sure, it happens all the time. An appraisal is an *opinion* of a specific property on a specific date. Two appraiser may come in $50k different on a property in a weeks time. In the old days (pre 2008) I could have two appraisers give me two different appraisals and I'd take the higher one to the bank. (The law has changed, can't do that now.) You're stuck. You go with what the bank will fund, or pay the difference, or back out of the transaction.