All Forum Posts by: Martin Sterling

This is a continuation of the following post. If you haven't read it, here it goes.

https://www.biggerpockets.com/forums/67/topics/456...

So, the terribly low 220k appraisal that the buyer did which should have been at least 230k finally has some answers, or maybe more questions than answers.

So after we got the bad appraisal we contested it. We told them, look the 1st unit has 3 beds 1 bath, not 2 beds. The second unit has 4 beds 2 baths, not 2 beds 1 bath. And the second unit is 1700 sqft, not 1200.

The buyer's attorney sent an email back saying the appraiser will raise the appraisal to 225k and that's it. When we looked at the appraisal, he was still short not counting 1 bed on the 1st unit, a 2nd bed in the second unit, as well as missing 500 sqft. He also put the rents down for $1200 each unit, when they're actually $1500 for the first unit and $1800 for the second unit.

My mentor said this is clear appraisal fraud. The appraiser was trying to get a lower price unlawfully. 

We actually agreed that we would take the 225K offer, but, he needs to accurately depict the property on the appraisal report. The problem it seems is if the appraiser does accurately depict the property, he cannot justify 225k.

My agent says one of the problems is there's not many comps in the area. There are 3/1, 2/1's and 3/1, 3/1, but not any 3/1, 4/2. Even still, the appraisal report should reflect the subject property accurately.

If this is illegal appraisal activity, do I have any meaningful timely recourse? I don't want to spend time and energy getting this appraiser in trouble if it doesn't help my deal. 

Also, who benefits from the appraisal? The FHA buyer's already out of attorney review and getting a seller concession for the down payment. Is the bank putting the appraiser up to this? That's gotta be super illegal.

At this point the attornies are going at it. I just need to close by the 29th.

What do you guys think?

A quick note on Appraisers. 

So the buyers appraiser for my flip appraised it for 220k.

We already agreed to sell at 230k to the buyer. 

If a 220k appraisal was the final word, The buyer wouldn't get funding. They would need to come out of pocket the difference, 10k. Its an FHA buyer. Thats not happening no matter how bad they want the house unless they sold a kidney on the black market. I'm already doing a seller concession at closing to help their costs.

The deal would be dead. I was upset.  If I lowered to 220k, I'd be taken a serious Loss. 

We looked at the buyers appraisal. This gentleman didn't count 1 of 3 bedrooms in the first unit, and 1 of 4 bedrooms in the second unit along with 1 of two bathrooms. He didn't even include the sqft of the 3rd floor. He had the second unit down for 1200 sqft, when it's 1700.

He dropped the ball big time. If we didn't catch that, I'd be beat.

I know there has to be investors taking L's with buyer appraisers that screwed up. 

That situation just scared the crap outta me. 

He missed two bedrooms a bathroom and 500 sqft. Basically, another apartment. 

It's almost like he went to the wrong house. 

Do you other investors see this a lot?

Hey guys!

I was with an investor of over 30 years this pass weekend and one of the things he mentioned was an Open Permits Reported Act (OPRA) report. For those not familiar with it, it gives you a report of any permits not closed by the properties previous owners. He said he gets them every time before he buys a new property to flip. This investor also said he gets a property inspection and sewer line inspection before he purchases it as well.

Now, I did a flip with a Sherrif sale property. My mentor who JV'd with me, seems to never get these items before closing on a deal. He has his contractor take a look at the property to get the repair estimate and then does a title search, tank sweep and that's it.

Now I see the value of a tank sweep and title search, but, doesn't a Home inspection before you purchase your flip open you up to potential problems that were never reported and you could've quietly handled inexpensively, on your own timeline, in your own way and still make the property safe and sound for the final C/O inspection?

For example, undisturbed encased asbestos isn't an issue, but, if an inspector sees the house before you buy it and get a chance to encase it, he could give you a hard time and cost you money.

Also, do you guys typically pull these OPRA reports? 

So, is the investor who I JV'd with me playing it dangerous, or is the 30 year plus investor too "by the book" to be practical for most scenarios? A lot of these good deals will be gone by the time you get all your reports back to make a decision to pull the trigger when you're in a market where whale investors will do a non-refundable deposit on an initial walk through.

Thanks In Advance

Hey guys. So if doing a JV in New Jersey on a flip, what are the pros and cons of either having each partner (2) form their own entity to take title, or both forming one entity to take title, or one person use an existing llc and the other person fund it.

Thanks in advance

It's near the corner 11th Avenue West and South 7th street near Rutgers College.

Greetings,

I'm looking for a capital partner for a deal I would otherwise wholesale, but the numbers look good for a buy and hold.

Newark, NJ

153k Ask

20k Repair

320k ARV

Triplex

4 bed 2 bath

3 bed 1 bath

1 bed 1 bath

It's basically move in ready.

Looks like you can cash flow a good thousand dollars if you buy and hold. The problem is so many people out here are scared of Newark when I talk to them.

Any suggestions?

Greetings,

There's a 3 family in I was thinking about purchasing as a rental. I wanted to get FHA financing.

Purchase Price: $120k

Taxes: $7,240

Market Value: 220k-250k

With Mortgage insurance my payment I think will be around $1,300/mo

Each unit should rent for about $1000/mo.

The thing is... I don't want to live there.

I just want it as an investment. If need be, I could leave one of the units vacant, get mail there to prove as my address, and receive mail there and still probably cashflow, but that's not ideal. 

Ideally, I'd renting to Section 8 if that makes a difference.

What do you think?

Thank you in advance

Greetings. 

I know many investors who detest section 8 Tenants and can't stand or won't rent to them period. They especially hate owning or flipping properties in low income areas that usually have section 8 housing. 

Conversely, my mentor who is by all indications far more successful than the majority of local investors has built a very large portfolio in a short amount of time primarily on section 8 tenancy and prefers them to Tenants who are not qualified for section 8. 

What's the deal with these two extremes? It becomes difficult to find partners on section 8 deals when it seems most of the investor community has a bad taste in their mouth from it out here in South Jersey. 

What does the BP audience think about a section 8 prefirenze?

Thanks in advance. 

I live in NY. $50k is fine for flipping... in New Jersey. Which is right over the water. Obviously using a hard money lender as well. 

Bayonne

Jersey City

Newark

There's a lot of others.

Do any of you guys flip in C class neighborhoods out in Orange or Newark New Jersey?

If so, what kind of spreads are you seeing out there.

I had a deal:

2 Family

85k purchase

60k repair (turned into 67k)

220k Projected Appraisal

Good Deal? Bad Deal? Ok Deal?

Also, how long are you having to hold in these C class neighborhoods. I'm hoping to be out of the deal in 6 months. Is that your experience?

If not, what are you doing to make it sell faster? 

We have granite. Stainless steel appliances. Finished floors. Nothing too crazy

Thanks In Advance