All Forum Posts by: Clint Dorris

Hey @Sheri Henning. I'm an appraiser and investor in Jackson, TN. Let me know if I can ever help you.

I'd also be interested in buying duplexes or or smaller single family north of I-40 or in the hospital area.

Welcome.

In my market, neither tax records nor the real estate websites are very reliable. They can be great tools, and they can sometimes be right, but generally, they just aren't that accurate.

Assessed values are determined by tax people, typically in mass appraisals. This is a simplification that is unfair to people who do this work but basically, they decide how much taxes they need to collect, and divide it as fairly as possible across population and types of houses. Market value is what the market will pay.

One problem in my area is that the market has been down over the last 10 years, but taxes generally only go up. So the old rule of thumb (that was never correct, but was a rule of thumb) that your assessed value is 80% of your actual value has been turned on its head.

I just listened to the podcast @Justin Ashcraft is talking about. I agree. One other reason we rely on cap rates, is there are not as many similar comps in larger complexes, so we need to derive other numbers. All methods are valid, and it will depend on the market. Its best to look at all angles.

In my market, investors are mostly local and buy more on what the market is doing than just the income numbers. If they went on typical numbers, they would be overpaying.

However, it is a misconception that the income approach is not based on comps. Whether you are talking about Gross Rent Multiplier or Cap Rates, these numbers are ratios based on price.

So, Cap rate is income/value.

GRM is Value or price/income.

So if an income approach is used, the numbers used in the income approach should normally come from sales in the market. Theoretically, the income approach and the sales comparison approach should support each other and not be that far off. If someone is wanting a higher value based on income, it might be wise to check the actual sales to see if those numbers are supported by the market.

In the real world, these numbers can be very different, and I get how it works. All I'm saying is sometimes the sales comparison approach can be a good check and balance on income and cap rate numbers.

I think this is likely the best idea for many areas. Clearly there is disagreement, and pros and cons to both. So why not diversify.

Buy duplexes to cash flow for single family purchases to hold and get appreciation. Unless there is one correct answer in your market or for your strategy, I think long term, having a mix is good.

Have the place looking good, and that is about all you can do except for having the list you mentioned above.

Honestly, I'm trying to be honest on an appraisal. I'm not trying to be swayed. I don't want to talk to someone ignorant, but I definitely don't want to hear a sales pitch (it's always obvious).

Have your house looking good, but there is nothing to be nervous about. Maybe ask the appraiser for some insight or opinions so you can learn, but don't be overbearing.

I often get this question: "what can I do to add more value? Can I add footage?" In my market, there isn't much you can do except keep your house up to date and in good shape, and that will often cost you near what you will get out of it.

I know nothing about California.

As an appraiser, I feel I must rely on all of it. Technically, I do more adjusting than most realtors. Every appraisal I do has multiple potential comps. I look at lots of comps for each deal and even get to use comps of houses I've appraised. I have to do more appraisals than a realtor has to sell houses because appraisal fees are lower than commission fees.

But, I wouldn't count on myself. I use the best realtors in town when I have a question, and they use me, too. I'm great at adjusting. But, I don't see what a realtor sees when the potential client sees only 2 bedrooms, or pink walls, or a dated kitchen. When I have an oddball, I call a realtor. I also call realtors to find out what really happened on a comp. Appraisers often deal too much in numbers, and don't see the emotions involved in buying a house. Buyers often deal too much in emotion, and need an appraisal for checks and balances.

Finally, I count on investors. I want all the investors' business. They are the ones doing the deals, and I want to do their appraisals. If investors know I'm good, I am more likely to get their appraisals, or maybe even a deal or two as an investor. They get to call me because they know I want the knowledge and they need the info. Rarely a day goes buy, when I'm not discussing value with another investor.

So, the answer is, who cares who is best? Don't limit yourself. As a realtor, it is easy to see appraisers as low-balling idiots. But, I bet you could meet a really good, really smart one, and probably get some free advice and a companion that helps you make money. Same goes for realtors and investors. Why would you not want to use the best of all of them?

Note: sure, appraisers are bound by lender standards, and most people need a loan. Both these can influence an appraiser and a realtor. But, an appraiser should make time/market adjustments when necessary. And, if an investor pays an appraiser, that appraiser is not bound by lender standards, so they can throw out some of the limiting crap. Its the loan involved that can make things go awry.

Its really your choice. Like Karen said above, they can choose to pay over the appraised value, if they aren't financing all of it.

I just had a conversation with a guy who really wanted this piece of land. He was offering like 35K, and they wanted 38K. He stuck to his guns and didn't get the lot. 2 years down the road he is sick to his stomach because he thinks the lot is worth about 70K, and he quibbled over a few thousand.

I know your situation is different, but if your numbers are right (your time and holding cost included), and you will really make 8k, you might consider it. Or at least split the difference with the buyer. Sounds like you and the appraiser are in the same ball park. It seems a bit risky to get another buyer who will need another appraisal.

I've been offered 2 properties. The seller got them through a tax sale, and has now waited the full 1 year redemption property. However, my closing attorney says, no one will give title insurance, and there is a 3 year statute of limitations to challenge a tax sale.

This creates a loan problem (the plan was to pay cash using a credit line, then get permanent financing), and even if I could get a loan or cash, it creates a huge risk of someone challenging the tax sale. Worse case scenario, someone could successfully challenge the tax sale and be able to redeem the property for tax sale price plus interest plus any taxes. This wouldn't be so bad for the seller who just redeemed them, but it risks me losing all the spread I pay to him. FWIW, he would make a pretty penny, but I would get each property for about 30% less than a typical investor price.

The seller was very up front about the title insurance issue. But, he also said there are ways to post in the paper and eventually get title insurance. My closing attorney is currently in litigation on a similar issue, and says it is too much risk. I plan to seek another opinion, but I thought I'd come here first

Has anyone else dealt with this? Is there a creative way to structure the contract? Am I missing something? Otherwise, it looks like a deal-breaker.

Nice. I also have to chuckle. Usually people aren't this happy with appraisers.