Appraisal coming in too low.

[Jimmy Stainback]

Hey everyone. I have used the BRRRR method on several projects in the past year and despite the market being hot, the properties aren't appraising for how much my comps, research, data proves they should so I ultimately end up leaving more money in the deal than I'd like to. My question is not how to add value to a property in order for it to appraise properly. Rather, when an appraisal comes in low, what do you do? Do you challenge the appraisal with your own sales comps? Do you have a different appraiser from the same lender come out to reassess? Do you start over with another lender? I have challenged an appraisal once and it worked in my favor. But seems odd to me that this has happened several times now. Is this an issue you all are facing? Is there a way I can avoid this in the future? Thanks in advance.

Lindsey Stainback

[Kevin Woodard]

The valuation from an appraisal should be a range that ideally comes in 5%-10% of what you were expecting. If they come in wildly out of range you should have your lender submit a reconsideration. Ideally they are working with the AMC to get the verbiage right and see what was wrong with the original comps. Appraisals are also subjective so understand where the appraiser is coming from.

If the reconsideration doesn’t prove fruitful a new appraisal is always an option. 

Unless you have a bad lender it’s really outside of their hands they should assist, but if they do everything for you then it’s not their doing. 

I have done both of these above and would be happy to chat more about what I submit up if your lender isn’t doing it.

I would to the maximum extent practicable do the most so you know you're maximizing the value of your property. Provide detailed SOW/Budget, comps from the MLS and why you picked them, and optimizing the rehab budget to keep cash in low.

Hope this helps!