All Forum Posts by: Chris Marette

Yes a lot of appraisals are coming back lower currently, have a couple ourselves! Best to try to dispute both the value & the rental values, which you are allowed to do. Order another appraisal with a different appraiser. If you have rental verification they should go off your rental number though, maybe it's because it's a hard money lender. Why go with a hard money lender for a clean cut DSCR?

Happy to chat further!

@Chris Marette, take this with a grain of salt, because the only times I appealed appraisals were before COVID.

In my experience, if you stay with the same lender and you get a second appraisal, the best I got was an average of the two appraisals.  Your lender may be different and I would confirm how they will handle, since they already have one appraisal in hand.

If you do go second appraisal, I would be sure to supply both the appraiser AND the lender a copy of your current lease.  And I always make my own appraisal packages: comps that I best feel match my property, including pros and cons of each, and a complete list of improvements I have performed.  

I also always meet the appraiser at the property to hand deliver package, and make myself available for questions.  I use this to sort of "sell the area".  You can't be pushy, because some appraisers are grateful that you are basically doing their work for them, and others think they know better, so you need to stay in the background with the latter.

All that being said, I have heard from several of my realtor friends lately that they are seeing far more issues with appraisals coming in short.  At the end of the day, the appraiser's biases will be reflected in their report, even though they are not supposed to.  If they think property values will be crashing soon and we will be in a recession, they will come in lower.  If they have an optimistic view of your property and neighborhood, they will likely come in higher.  If they like your choice of finishes, they will use higher end properties as comps.  If they think it is ugly, they will use lower end comps in the area.

@Chris Marette

I have successfully appealed an appraisal twice. I am 2 for 2. Once, I had to switch lenders. 

I had a really poor appraisal on a BRRR where the appraiser used the same comps as when I purchased the property 9 months earlier. I ordered a 2nd appraisal and offered the bank 10 comps as well as FMR values and the leases that I signed. The 2nd appraisal came in 200k higher.

In my market, refi appraisals are conservative and use the lower range of the comps.  Disputing appraisal on comps chosen and providing my own comps has not been very successful for me.  I have to show the comps chosen by the appraiser were not as good as other comps or the adjustments made by the appraiser were absurd. 

So I have had mixed results disputing appraisals.  I had one appraiser leave the area rather than have another of his appraisals get successfully disputed by me (worse appraiser I have yet encountered).  If the appraiser leaves, apparently you cannot dispute which seems crazy.  You have to start process over.  

I find the refi appraisal to be an area of risk on BRRRRs.  As indicated mine virtually always come in lower than I could sell the property for.

Good luck

Quote from @Chris Marette:

Hi Everyone,

I need some guidance or tips or any ideas in regards to an appraisal that did not come in as expected during a cash out refi. I have done several in the past and most I have been satisfied with the outcome however this one was not as expected therefore I am trying to get creative. Long story short I disagree with the appraisers value of the home and will place rebuttal however that appraiser also completely messed up rental values so the DSCR has really impacted what I was expecting to get out of the property. I was able to rent the home for $2600 but the lender is accepting the appraisers rental value of $2050. Is this standard practice or is there any lenders out there that actually accept what the home is rented for? Additionally this hard money lender is at 75% loan to value are there any lenders offering 80%? I appreciate any input or suggestions.

Hi Chris, this is a very common issue Where borrowers see their property as superior to others listed on an appraisal compared to recently sold comps. At the end of the day, comps and recent sales usually within the last 90 days matter. If there is some significant value ad that you completed to the property, take a deeper look into the assessments and extra values that the appraiser may or may not have given your property. The rent schedule, this is a different story, but lenders will always side on the fence of conservatism. Meaning, they will take the lesser of the two rental income figures to qualify your DSCR. The reason being is because they don’t have the same strategy and approach that you do.  And so, even though you may have a lease for $2600 that’s not to say they will be able to rent it out at that price if you are forced to foreclose and order default on the loan for an equal amount. Lenders will most likely always take the lesser of the two, one must have to read into their guidelines before you work with lenders. Lastly, did you say this was a hard money lender? Generally speaking hard money lender stick to fix and flip, bridge loans. Maybe it’s the case that you can dispute the appraisal a bit and find better comps if you truly believed you were shorted on the value and also the rent, but be prepared that by providing other suggestions to an appraiser may not ultimately yield you any success because what’s happening is basically telling appraiser that they are bad at their job.  more than happy to talk over strategy and possibly help you find a different lender who can make this better for you. Good luck!

Hi Chris,

More often than not, the appraisal doesn't change much on a rebuttal or a second appraisal, but there are cases appraisals are wrong. If you believe the appraisal is completely wrong, you can order a new appraisal.

When you say 75% LTV, do you mean 75% of ARV or 75% of purchase price? Most lenders are capped at 70-75% of loan amount in ARV, but there are lenders that will go up to 90% of purchase and 100% of rehab.

I had a file recently appraisal came back 50k lower than expected, nearly killed the deal. We ordered a 2nd one and it came back 100k higher than the previous appraisal.

Order a new appraisal.

Hi Chris, that's not ideal but it happens. 

- If you have a lease they should be utilizing that rental amount not common rents. If it's not an active lease..generally just needs to be signed. Some lenders will even allow the 'vacation rental' projections. 

-Most lenders have an appraisal appeal process.

- See if another lender can use a lower qualifying DSCR ratio and 80LTV is possible on a cash out refi. They would likely want a new appraisal but some will accept an appraisal transfer.

Check in with @Joseph Chiofalo they have a wide range of no ratio programs..