Very Interesting Short-Term Flip With $400,000 Added Value

[Sheldon Alex]

Hey everyone. This is a rather interesting scenario I evaluated a few months ago. The borrower purchased the subject property at a VERY HIGH PRICE. Why? Because I came up with an ARV of only $550,000, based on comps that sold 3 months prior located in the same subdivision as the subject property.

However, notice there's $400,000 in FORCED APPRECIATION the borrower added to the property value. It's because he had a willing and able buyer who planned to purchase the property at a steep price of $950,000.

In my eyes, this project is as risky as it gets, even though the borrower was also a real estate agent that was waiving the listing side of the commission. Banking on one buyer to purchase a property at $400,000 above the estimated ARV can easily go sideways. Thus, I instantly concluded this lending opportunity being a NO GO. What are your thoughts?