Appraisals....

[Lindsay McLaughlin]

Happy Monday everyone!  So, I've had this chip on my shoulder for awhile about appraisals...and it's something I realize I have to accept but wanted to reach out for a discussion with other investors and get your take on these.  

I understand the need for appraisals..especially for lenders to be sure the property is a just price for what the buyer is paying, etc...However, the fact that there is SO much riding on deals with certain lenders, and other aspects of the real estate world on appraisals is really frustrating to me. Here is why...my good friend is actually an appraiser and she has even told me that appraisals are really very subjective. I completely believe this! You take two houses right next door to each other...both built 3 years ago for example, brand new (basically), same square footage...but one house is custom built - there is no house anywhere with the same floor plan, and the other house is a contractor special, with 3 other houses identical in the neighborhood. The custom home has the high quality carpet, soft close Amish made amazing cabinets, 18' ceilings wiht an 18' fire place, etc...the contractor house has contractor grade carpet, the cheapest kind of cabinet you can find with no molding, etc... However, they appraise for nearly the same amount. I asked her - how is this possible? She states, and I've witnessed it...that they don't touch, feel or anything to anything actually in the home. Appraisals show the condition in the home, new/not new/etc along with other things...but how can the true value of a home really be perceived by such a vague concept?? I've also personally had 2 appraisals on my home - these 2 appraisals, one for a HELOC and the other for the auditor were $250,000 apart from each other - I'm not complaining as it worked to our favor....but that is an insane discrepancy. When it comes to retail flips, this always seems to be the hold us as well, is waiting on the appraisal. I always find myself getting more upset about the appraiser and the whole process than the actual rehab....Any way, I will stop with my rant, but would love some feedback to help me get over this animosity towards appraisals. Again, I do understand there is a need for a type of appraisal, or perhaps a BPO to see that the value of the house really is there, but your input would be much appreciated! Thank you so much!