@Reggie Greene
Hey Reggie,
As an agent and a flipper here in Denver Colorado I deal with the appraisal process all the time. Things here in Denver seem to be fairly lax as the prices seem to be increasing continuously (however, not as fast as they were over the course of the last few years, but still rising). I'm not saying Appraisers aren't doing their jobs, just saying values are easier to find. That being said we're always worried about the appraisal and proving the top of your ARV. When I am having one of my properties appraised or having an appraisal for one of my clients I always put together an Appraiser Packet. I leave a hard copy of this packet and send them a PDF as well. This packet contains the following:
1. A letter to the appraiser talking about how many offers there were and the details of the offers (in a multiple offer situation, the neighborhood, the attributes of the house that you may not see if you’re just looking at it (i.e new sewer line, new water line, etc.) and some notes on the comparables
2. Subject property information (listing sheet)
3. Detailed Improvement List (arguably the most important. An appraiser can guesstimate what you put into it but how great is it if they had a to-the-penny budget?!)
4. Comparable property one sheeters of active, under contract, and sold properties. Sold being the most important as those are closed.
As for your questions: You don’t have to sell your property at any price that you don’t want to however, one of two things has to happen in order to sell it to these buyers:
1. Drop the price to the appraised value
2. Buyers gap appraisal
People who are borrowing money to pay for a house will not be able to get a loan for more than the property is “worth”. It’s worth to the lender is based on the 3rd party opinion of the appraiser. You can do a few things in this scenario:
1. You can have your agent dispute the appraisal and ask if they can send over comps to help prove your price if you believe it is being undervalued. You should double check your ARV and make sure that it was correct also. Obviously there's no point in doing this if you are for sure overpriced. This may be a conversation you want to have with your agent, especially if they gave you incorrect information to begin with.
2. You can terminate the contract and put it back on the market and hope that another appraiser has a different opinion. The argument here is that you’ll lose time and money if the same thing happens again and you end up selling at the same price 3 weeks later. Even worse, it comes in lower...
3. This is an odd one but everything is negotiable so.... you can ask the buyers to gap the appraisal... meaning come out of pocket what ever the difference is between the contracted price and the appraisal. I don’t suggest going this route, it’s unlikely that they’ll say yes and it’s not necessarily reasonable.
To me confidence in your ARV is everything and I want to be able to prove my point relatively easily. Using the above process I've seen some really great results on properties that honestly may not have appraised without it!
Hopefully this was helpful in some way!
