Deal Situation! Wasted $500 On Apprasial!
I found a two-flat where the couple is in pre-foreclosure. They owed about 160,000 and the comps showed a market value at low end 250,000. From the look at this, I was thinking this may be a good deal. I went and check out the property. It was in ok shape. They wanted to continue to say but wanted to avoid going into foreclosure. So I was looking to do a lease option. I was looking to get a conventional loan at the appraised value. Which I thought maybe around 250,000. I talked with an apprasial and was told properties was going for 250,000 to 300,000 in that area. So I was really excited. So I paid $500 to get it apprasied as is. Well, it came out that the apprasial said this property was not as good shape and was only worth about 150,000/160,000. So I end up losing $500 on a apprasial for a property with NO profit. How else could I have handle this or at least saved $500 on the apprasial?
You got off cheap thanks to doing your due diligence, of which, an appraisal is part. Do not lament the $500 lost, think of it as $1,000's saved.
C-
The most important thing you should have done is exactly what my mentor and friend Lufos told General Custer, "George, you got to know the territory"!!!.
You need to look at a mess of properties. It boggles my mind to imagine that you missed fair market value by $100,000. Secondly, you should have kissed the appraiser instead of lamentilng the loss of $500. That was your Christmas gift and you don't even know it.
You can always put a clause in the offer that the seller will reimburse you for the appraisal fee if it does not meet or exceed the offer price.
Consider yourself lucky.
Yes, putting in a clause for seller to pay for appraisal if it wont appraise is a great idea.
also 500 seems steep for an appraisal. In fl I use someone at 300.
This can actually work in your favor. Have you considered a short sale? If they owe what the property is worth, you may be able to convince a bank to take a discount on the property.
Also, in the future, if possible, have the homeowner pay for the appraisal. Just tell them if you do it, it will only be good for you but if they do their own, they can use it in case you can't or won't purchase the home.
Dee
Thanks for the info!
Ask for a "pencil search" in any bank. You'll get a very close idea of the value at + or - $5K. And it's FREEEEE....
what's a pencil search Cody? Never heard of that before
Whoa !
was that appraisal for the condition the property was currenly in or the after repairs value you all say is the important one? maybe it was ammenitys that you could have added. 110k is a lot of room to play with. dont hear to many swings that big on these posts
did you ask the appraiser what he thought the difference was between this one and the others you say "250k is the low end"? that answer might have been worth 500 dollars all by its self!
_________________
B.G. & Wheeler D. LLc Inc.
(A division of: Half Vast Enterprises)
[ Edited by WheelerDealer on Date 12/08/2003 ]
I think it would be really beneficial to new people here if you could share some more details. I find I always learn a lot more when things go wrong then right.
You said the 'comps' showed the property valued at at least 250k. I take it that this means either the comps were not really comps, meaning compariable sales, or there was something else? What did you use for comps? How were they so far wrong?
Imagine buying that place and putting 20k into it and then trying to sell it for 275k, only to find out a year later that you have to sell it for a 30k loser!
Quote:
On 2003-12-08 15:57, macapamole wrote:
what's a pencil search Cody? Never heard of that before
It's a quick search for property value that banks do before to say yes to a mortgage. They get a good idea on what's going on. If they feel it is ok, they could go for it, but if they see you are overpaying for a property, they will tell you right away.
The apprasial was for the condition of the property as is. The comps came from a realtor that I work with. Plus from talking with the appraisal before he went to take a look at the property he mention that two-flat's market value is around 250K. After the bad news, I was so discourage that I didn't talk with him further about why the value of the property was so low.
I know someone mention that the apprasial seem kind of high. Well, here in Chicago to appraise a multi-family dwelling is $500.
Again, I won't to think everyone for there responses!
You could still contact him and ask questions. Pick his brain and get your moneys worth. How much does he estimate the repairs would be?
Sounds very fishy that there is such a gap between appraisal and agents value.
ItzMe
An appraiser can be your best friend or your worst enemy. Talk to him more and find out ALL the details. Also LOOK AT THE REPORT. It is usually 10 or 15 pages but look at every line of it. It will tell you what other properties are selling for, what comps were used, what condition they were in, etc.
Don't just take the price he gave you and walk and say thank you for your time. I have taken an appraisal, when selling, and asked, why were these comps used. I let the appraiser know that they were NOT very comparable to the subject property.
Bottom line: Talk to him and find out why. Just think, he made $500.00 for driving out to the property, take a few pictures, pull up a few comps on the computer, and then spend an hour writing it up. If you want to pay someone $500 for a couple hours work, thats fine. I work too hard for my money to give it away like that and not get all my questions answered. ASK QUESTIONS of the appraiser. Get a firm commitment as to why he appraised the property that way.
If it is in fact worth what he said, OK, so be it. You can look at it as a lesson that you need to do more or better research. If it is worth what you think it is, then you need him to re-appraise the property and write it up again.
Do a search online for your counties property appraiser. If you are lucky enough to have a searchable online database, lookup the home you are interested in as well as homes in the area. If any have sold recently it will show you for how much. This may save you a trip to the courthouse. Try doing this before you hire a private appraiser, just to give you an idea of where you stand, this could have possibly saved you some money. $500 is cheap...Be happy.
Thanks for posting back here.
So what should we conclude here?
It sounds like an awesome deal to me if everything is as indicated.
If the comps were correct that your realtor gave you indicating that the property would be worth $250k when rehabbed, and the appraisal came in at 160k, you have an excellent short sale candidate here.
Short sale experts what do you think?
Sounds to me like you have a chance to make 50-60k in profit on this one!
If you wanna birddog this property get your $500 back and still make some $$$ let me know.
I do all the rehab so it may be worth it for me if the place is in bad shape (compared to paying someone to do all the work)... if you work out something with the owner and get this place for a good price let me know. I~m not greedy I`ll make sure it`s worth your time.
I usually don`t like dealing with properties in Chicago but hey if it makes sense..
Just an idea ...
Dan
[ Edited by Stiffler on Date 12/09/2003 ]
The best suggestion I can give is to find an appraiser that you can work with on a consistent basis.
I was actually able to find an appraiser that I had met about 10 years ago, before either one of us ever thought we'd be in this line of work.
I keep thinking about Lucius' advice. A cup of coffee or a nice lunch can do wonders in helping reduce those kinds of fees. If the appraiser (realtor, home inspection, etc) knows you will be coming back to do more business with him AND you pay up front, he is more likely going to discount the prices you pay for his services.
Also, if you do find someone that works with you, refer him to EVERYONE you know that needs his services.
Scratching each others backs really does work.
Good Luck.
Btw, I have a great appraiser for the Philadelphia, South Jersey area. PM me his information.
Thanks.
To keep from getting burnt on appraisales, I ALWAYS:
1. Tell the appraiser what I feel the value to be and that I have based all of my numbers on that value.
2. Stipulate that the appraiser call me with a "ball park" value prior to completing the appraisal, especially if it is going to be more than 10K off.
We have a form that we use to request appraisals that clears us from any appearance of "steering" that appraisal.
Jonathan
Quote:
On 2003-12-08 12:06, jmart2221 wrote:
I found a two-flat where the couple is in pre-foreclosure. They owed about 160,000 and the comps showed a market value at low end 250,000. From the look at this, I was thinking this may be a good deal. I went and check out the property. It was in ok shape. They wanted to continue to say but wanted to avoid going into foreclosure. So I was looking to do a lease option. I was looking to get a conventional loan at the appraised value. Which I thought maybe around 250,000. I talked with an apprasial and was told properties was going for 250,000 to 300,000 in that area. So I was really excited. So I paid $500 to get it apprasied as is. Well, it came out that the apprasial said this property was not as good shape and was only worth about 150,000/160,000. So I end up losing $500 on a apprasial for a property with NO profit. How else could I have handle this or at least saved $500 on the apprasial?
How much income does the duplex make. If you multiply the income by 100 this is what the property should appraise for. For example if each unit rents for $800 per month that equals a total of $1600 per month multiply $1600 X 100 and you get $160,000. That is the most you should pay for an income property. You could have done this little equation first and if it didn't pan out you would have known not to hire the appraiser.
But, on the other hand. I have been told a property of mine was worth $250,000 by an appraiser. I paid a second appraiser another $300 and he appraised it at $350,000 2 months later. It pays to be persistant.
Sincerely,
Laurie
Hello REI,
I just want to take the time to thank everyone whom share their knowledge and experience. After talking with appraiser, he decided not to charge me the $500 because the property was such a mess that it wasn't worth the efforts because he knew it wouldn't appraise at what we thought. So basically what was done is an inspection on the property. This guy was really cool about it and on top of that he just charge me $50 for the time he spent.
So, since this property is only worth about what the owner's owe, I decided to try to a short sale deal on this property. This is my first time doing this so I need some advise. I have talked with the homeowners and explain the situation. I lock up the property under contract with a clause stating this agreement is contingent on the lender accepting the short sale. I have an Authorization to Release Information on file with lender. I initially done this to get the pay off amount.
So now I need to call the lender. Can anyone give me any advise on how to handle this? And do anyone have an example of a Short Sale packet that you have use to send to the lender?
Thanks!
I don't know much about short sales, but I remember reading post in the short sale forum that some lenders have their own short sale package. May want to post question in Short Sales Forum.
Good Luck
Contact the lender and they will send you all the paperwork they will need to do the short sale.
PS Do a little home work in the SS area. "SS Pro" has some very good information posted on this site.
Best of luck.
Quote:
On 2003-12-10 18:21, mamaflaum wrote:
Quote:
On 2003-12-08 12:06, jmart2221 wrote:
I found a two-flat where the couple is in pre-foreclosure. They owed about 160,000 and the comps showed a market value at low end 250,000. From the look at this, I was thinking this may be a good deal. I went and check out the property. It was in ok shape. They wanted to continue to say but wanted to avoid going into foreclosure. So I was looking to do a lease option. I was looking to get a conventional loan at the appraised value. Which I thought maybe around 250,000. I talked with an apprasial and was told properties was going for 250,000 to 300,000 in that area. So I was really excited. So I paid $500 to get it apprasied as is. Well, it came out that the apprasial said this property was not as good shape and was only worth about 150,000/160,000. So I end up losing $500 on a apprasial for a property with NO profit. How else could I have handle this or at least saved $500 on the apprasial?
How much income does the duplex make. If you multiply the income by 100 this is what the property should appraise for. For example if each unit rents for $800 per month that equals a total of $1600 per month multiply $1600 X 100 and you get $160,000. That is the most you should pay for an income property. You could have done this little equation first and if it didn't pan out you would have known not to hire the appraiser.
But, on the other hand. I have been told a property of mine was worth $250,000 by an appraiser. I paid a second appraiser another $300 and he appraised it at $350,000 2 months later. It pays to be persistant.
Sincerely,
Laurie
I agree with mamaflaum. However, living in Broward, one hour from Naples, it is completely different. There is no such number anymore. Rentals bring probably 3-4% return. It doesn't worth it. And a duplex rented $800 per side will sold for between $250K and $280K.
Keep letting appraisers make or brake your deals and you will keep leaving money on the table.