Delayed financing and appraisal in Cleveland
Hi all,
My wife and I are in the process of buying a duplex rental property in Cleveland, OH. We're buying through a wholesaler, and the property already has tenants in. Our plan is to buy with delayed financing - pay cash upfront and then refinance to recover most of our cash.
We initially thought it was a great deal, but after pulling more comps around the area, we're a little concerned about what the appraisal value will come back at. A few questions around the appraisal process for you seasoned investors and/or appraisers out there. Appreciate any insight people have!
- How do appraisers choose which comps to include? For example, the wholesaler provided 3 comps from the last 90 days averaging 86k (78, 87, 94), but the 94k one was for a triplex. Running our own comps, we saw another sale posted recently for 63k, and if we look back 6-12 months there are some in the 30-50k range. We're concerned some of those will bring down our appraised value.
- As investors, where do folks research their own comps?
- I've heard appraisers have to "bracket" their appraised value in between their highest and lowest comps. Is this always the case, or can it appraise lower after adjustments?
- How are garages valued or adjusted for? Some of the comps include garages, while our unit does not.
- How are driveways valued? Does asphalt vs. concrete matter much, and does the condition impact appraisal value? Ours is an older asphalt type with a few potholes.
- What about window condition/age and age of the roof? The windows are older, and the roof is about 15 years old but seems in good condition.
- Is the appraisal process different right now with covid, particularly for units with tenants already in? Wondering if appraisers are entering the properties or relying more on comps and exterior condition, etc.
- What is the best approach with current tenants and appraisal? We'd like to keep the current tenants (been there 15 years), but not sure if this could negatively affect the appraisal vs. having the units empty and clean.
- If getting a licensed general inspection, who pays for this typically with buying from a wholesaler? If the buyer pays, does the wholesaler get to see the report or is that up to the buyer's discretion?
Thanks in advance for your thoughts!
- David