WELP. Low appraisal (40k lower) on pocket listing

[Alice K.]

Hello!

Thanks in advance to anyone who can offer some wisdom on this situation--

Been racking my brain on ideas but wondering if it's even worth it. Thought I'd ask some of you great BP folk if you

Here are the details! (TL;DR: Bolded pertinent facts)

1) Family friend selling duplex (husband died :( ) for ~200k. Under contract before listing. One side is rehabbed well. 

2) 3 loans on it (she claims 105k owed, but I believe at least ~160k based on what I see in the Realtor DB) Her monthly is somehow 1,200 / month. Loan atm for me would be cheaper than that -- $1k / mo.

3) Asking 200k, I do my own comps w/ realtor friend, seems reasonable based on rental rates, I can get near the 1% rule (market I'm buying in doesn't usually get to the full 1% rule but is close)

4) I go with an online broker that lives in area. Lender I select is a sketchy SF-based one. Me: "Whatever, It's the cheapest!"

4) Appraiser is hired. Guy spends 19 min at property, doesn't even turn on water. (To be fair, seller left clothes everywhere/junk due to move so he probably judged on that.)

5) Appraisal comes back at 40k lower than asking with lowest comps nearby that aren't rehabbed. I look up his credentials, he appears to be from another state as well (Idaho). But, maybe the price is b/t this and the 200k...

What would you do??

Thanks again!