BRRRR didn't appraise

[Leigh S.]

Sigh. I just renovated a duplex and have been working with a lender for a cash out refi. Because there were no comps, the appraiser used the Sales Comparison approach and valued it at $95K. I had conservatively estimated that it would appraise for $135k, knowing that the same floor plan on the next street over (converted from a duplex to a single family home) closed last week for $154k.  I tried to challenge the appraisal, using the neighboring home as a comp, but the lender wouldn't allow it since it's no longer a duplex. So, now I'm questioning whether I even move forward with the financing.  I'd love some insight on what others have done in this situation.

[Evan Polaski]

@Leigh S., I am sorry this happened. Unfortunately, refi appraisals are notorious for coming back low. If the window to contest is still open, I would focus on the GRM (gross rent multiplier) calculation. Look for other rentals, 2-4 family that have traded and what they were getting in rent. Since your rehabbed units are getting more in rent, at the same GRM, you should be able to reasonably get a higher valuation. And technically, updated units will normally trade at a higher GRM.

If your ability to close loan, or contest appraisal has closed, a couple recommendations for future refi's/projects:
- Have before and after pictures
- Typed out list of all items upgrades you did
- Cherry-picked, but realistic, comps to feed the appraiser.  Use some that are below, equal to and above your value.  Then note on the print outs why the lower valued properties are inferior to yours and above value are superior.  

Some appraisers won't take this package, or only parts of it.  But I provide it at ALL appraisals, refis and sales, 90% of the time the appraiser takes it and I get a value much closer to where I want.