Good deals on houses and appraisors - Posted by Mike

Posted by babs on May 20, 1999 at 22:31:03:

My problem is typically not with the appraiser, because I give good supporting facts for a higher value. My problem is with the lenders on title seasoning issues. How could you possibly buy a house for 25K that is worth 50K without doing much to it. On the foreclosures that need much work, before and after photos help. I don’t think it is going to get any easier with the lenders, to get these deals funded, what to do? Bruce

Good deals on houses and appraisors - Posted by Mike

Posted by Mike on May 20, 1999 at 10:52:50:

Anyone ever have this problem:

You find a house in the MLS. Seller is asking $39,900. You get it for $25,000. Doesn’t need anything but a few touch ups. You know you could sell this house on terms for $48,000, the market should support it. The problem is that the appraiser looks the subject and says the house was just listed for $8000 less than your asking. Furthermore, you bought way under the new price. How can I (appraisor) justify the jump in price on the report?

Any suggestions to circumvent this type of situation?

I have the opportunity to buy a house with these very numbers.


Re: Good deals on houses and appraisors - Posted by JPiper

Posted by JPiper on May 20, 1999 at 13:02:03:

I think your question is a good one?.and one that not only is presented by the appraiser perhaps, but the lender as well.

My general view on this is that a $50K neighborhood is a $50K neighborhood. In other words, if all other comparable properties are selling for prices in and around the $50K mark, the value in the neighborhood is clear. A forced or distressed sale does not change the neighborhood value.

However, having said this, in my area it’s rare to see such uniformity in the comps. What would be more likely to see would be sales ranging from let’s say $30K on the low side to $60K on the high side. The difference would likely be represented by a difference in condition, location, and terms, amongst other things. Another thing that would be unlikely would be to see a property worth $50K sell for $25K with no repairs necessary.

The question here would be do you actually have comps which indicate cash sales, or sales with new loans with no special financing, at $50K? If you do then supporting this value should not be difficult with either the appraiser or the lender. However, if the comps you have are ones with special terms, or if the comps are in better condition, location, etc. then you may well have a problem.

When I’m the seller and an appraisal is involved, I attend the appraisal supported with facts. Facts would be comps that support my sales price, comps lower where I can draw definite distinctions between my property and the comp which justifies my properties’ value. Facts are also information about what I did that led to an increased value in the property?.things like repairs. In other words, there should be hard information available which would indicate the value is $50K.

IF the ONLY reason that this property is worth $50K is because you’re carrying a second, then I would question whether the property is truly worth $50K. Again, there needs to be evidence that cash sales have taken place at that level. Cash sales by distressed sellers don’t change the value of a neighborhood. Neither do sales with special terms. The value is indicated by arms-length transactions, not under duress, with conventional types of financing. If this is YOUR situation you should have little difficulty with the appraiser, because he will see the same facts as you do.