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Bankers Appraisal way lower than Market Value

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nubiwan

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I have a rental property that I know would sell for around $120-130K in our aggressive local market, but I am convinced the bankers appraiser would not be willing to evaluate it over $90-100K. I had an agent confirm my valuation who suggested I put it on the market for high 130`s or 140K.

The appraisers valuation makes it difficult to refinance the property at the bank, and take out my equity to buy another investment property. I am therefore left with the prospect of selling it to realize my gain. I then have to worry about capital gains triggered because I have only owned the property (that I now rent for $900/month) since April this year.

FYI I initially bought the house for $50K and invested abiout $25K in renos. Before I bought it, the appraisal I got was $75K as is. I was told by the appraiser, he`d smply look at my reno costs and add those to the appraisal which seems a bit stupid to me. I find appraisals on rental properties here to be somewhat out of line.

Anyone got any ideas or options I might want to consider?

Tks All
Tony
 
Get another appraisal done. If that doesn`t work then try a different lender for a second mortgage. Make sure you work through a broker that is networked with good appraisers. Have your realtor give you the market evaluation they performed and pass this on to the appraiser.

A common trick for realtors is to recommend a high list price to score the listing and beat out the other realtors pitching for the listing. Then when it doesn`t sell for the high price they push the owner to lower the price to where it should sell. So have a look at the comps your realtor has given you and decide for yourself what you think it should sell for... what would you pay if you were a buyer??

The appraiser would be seeing the same comps your realtor did... your best hope is that they are being interpreted differently and as a result you can show a higher value and be able to refinance.
 
QUOTE (RedlineBrett @ Sep 25 2009, 02:33 PM) Get another appraisal done. If that doesn`t work then try a different lender for a second mortgage. Make sure you work through a broker that is networked with good appraisers. Have your realtor give you the market evaluation they performed and pass this on to the appraiser.

A common trick for realtors is to recommend a high list price to score the listing and beat out the other realtors pitching for the listing. Then when it doesn`t sell for the high price they push the owner to lower the price to where it should sell. So have a look at the comps your realtor has given you and decide for yourself what you think it should sell for... what would you pay if you were a buyer??

The appraiser would be seeing the same comps your realtor did... your best hope is that they are being interpreted differently and as a result you can show a higher value and be able to refinance.

Thanks Brett. You cannot buy a new 1300 sq ft house in our Province for under $200K. It`s become quite ludicrous. Therefore my 900 square foot renovated bungalow (on a handy sized laerger than average lot) at $120-130K would be a steal for a first time owner. I understand what you mean about an agent wanting to come in high with a feel good price for the seller, but his suggested was in line with my own expectation. The agents valuation was very candid and I respectfully told him I`d expect $130K and he seemed to think I`d have little trouble meeting that. Again this is without either of us having done a true comp evaluation. There simply are not many similar size/age/price houses in the area, to be fair.
 
Another appraisal should resolve the situation but if it still comes in low than the only conclusion is that you are somewhat overly optimistic on the value. We all tend to do that when looking to sell.
 
I hear what your saying we had 3 appraisals done on 1 property and there was a 15 - 20% difference in the appraisals.

It sucks but I would chalk this up to the cost of doing business. Get 2 back to back on the same day we did and they were that far apart.

Depending on the bank or lender you can challenge the appraisal as well you just have to supply comps for the them.

Good Luck
 
QUOTE (nubiwan @ Sep 25 2009, 10:55 AM) ..
Anyone got any ideas or options I might want to consider?
talk to a mortgage broker .. he would know banks that would finance it. Have that bank`s approved appraiser do an appraisal for you (for $300 or so). Then decide on course of action.

if it was worth 75K as is .. and you spend 25K plus sweat equity is it probably WELL above 100K now ..
 
You can get comps from your realtor on what properties have sold for (not listed) in the area. You should be able to do your own appraisals and be fairly close. An appraiser has to justify his numbers and you have access to pretty much the same info he does. Realtors pricing is rarely close to what the appraiser will say due to the conflicts on what they are trying to accomplish. Now days the lenders are often requiring that their preferred appraisers are used, so the more factual information that you can come up with the more info you can give to your mortgage broker if there is a discrepancy in valuation.
 
What am I missing?
900/mo in rent?....doesn`t that make even 100K high for a rental? What`s the cashflow now? Who`s the buyer at 130? FTB?
And where is it located? How can it be suggested offhand that 130 is reasonable without a lot more info?
Bad reno`s or over renovating won`t necessarily translate directly to profit either.

Owned 6 months and wants it overappraised 25-30% to fit expectations.
Maybe get around the capital gains too?
*nudge wink*
Is that how it`s played?
 
Good point Housedoc. The rent is definitely not in line with expected value. WE are missing something here.
 
If you have a mortgage broker who specializes in investment properties, ask his advice about appraisers in your area. I worked closely with an appraiser for a while that was quite conservative with her appraisals. I switched over to another broker, one that specializes on investment properties, and he was able to provide me an appraiser that valued a property at 20% higher than the original appraisal.
 
QUOTE (fumbrunner @ Sep 29 2009, 04:03 PM) If you have a mortgage broker who specializes in investment properties, ask his advice about appraisers in your area. I worked closely with an appraiser for a while that was quite conservative with her appraisals. I switched over to another broker, one that specializes on investment properties, and he was able to provide me an appraiser that valued a property at 20% higher than the original appraisal.

I`d like this appraiser contact info please.
 
QUOTE (invst4profit @ Sep 26 2009, 06:04 AM) Good point Housedoc. The rent is definitely not in line with expected value. WE are missing something here.


My home market is Calgary and most two bedroom apartments make around $1050 per month in rent when well located and are priced around $220K. So, at first sound, a value of $130K for a property that rents for $900 sounds not entirely unreasonable.

However, seeing a property increase in value since last last april from $50K plus 25K in renovations to $130K sounds very unlikely. I agree, more info will be needed to see whether the market analysis of the realtor was realistic.

Although appraisers look at properties differently than realtors, a value discrepency of $130 vs $90K or nearly 35% sounds too much.
 
If you can have a realtor provide you with comparables that have sold recently that support your estimate of value for the subject property, have those available for the appraiser to consider. It`s important that they be comparable. I`ve had numerous people not pleased with their appraised value who call and provide me with, what they refer to as "comparables" however, they are not even remotely comparable. Keep in mind an appraisal is UNBIASED (unlike a CMA). An appraisal simply shows you what properties similar to yours are selling for. People are often disappointed with their appraised value because in their mind, their home is the nicest home in town. Or, they are comparing it to listings in the newspaper or on mls.ca which they believe are comparable to their home (and are often superior to their home in reality). Always remember an appraisal is unbiased. When I do work for people simply looking for listing advice, I tell them the appraised value I give them is my opinion of the value meaning if it were my house and I sold it for more than that, I would think I sold it at a premium, and if I sold it for less, I was clearly a motivated seller. Appraisals are often lower than CMA`s for 2 reasons. First, the appraiser is signing the value, and accepting liability for that value (imagine how CMA`s would change if realtor`s had to accept liability for their value), and secondly, the appraiser is UNBIASED. We have no hidden motivation to appraise higher or lower... we simply tell it like it is.
 
QUOTE (housedoc @ Sep 26 2009, 09:52 AM) What am I missing?
900/mo in rent?....doesn`t that make even 100K high for a rental? What`s the cashflow now? Who`s the buyer at 130? FTB?
And where is it located? How can it be suggested offhand that 130 is reasonable without a lot more info?
Bad reno`s or over renovating won`t necessarily translate directly to profit either.

Owned 6 months and wants it overappraised 25-30% to fit expectations.
Maybe get around the capital gains too?
*nudge wink*
Is that how it`s played?

Simply put, the $900 covers the $75K that I have invested and am paying less than 2% on a HELOC at around $300/month plus $100 for insurance and $90 for tax/water. My Cashflow was iniially $400 plus a month. It is currently renting at $1075 (as of this update) so it is a good number for me. The initial inquiry was to suggest a way to insure a reasonable appraisal instead of one that pleases the lender. The intent was to wihdraw some equity to use elsewhere.

In the end, I did not bother with the refinance, but have since had another agent suggest $140 a reasonable price for the property. Yes, I know agents are wont to oversell my house value. I am pretty sure an appraisers valuation would still be on the low end.
 
QUOTE (nubiwan @ Sep 25 2009, 09:55 AM) ..

Anyone got any ideas or options I might want to consider?
Sell it and pocket 50K !! profit of over 100 times monthly cash-flow !!!!

It feels good and makes you even better on next deal.

pay 10K in taxes .. where is the problem ?
 
QUOTE (nubiwan @ Sep 25 2009, 10:27 AM) Thanks Brett. You cannot buy a new 1300 sq ft house in our Province for under $200K. It`s become quite ludicrous. Therefore my 900 square foot renovated bungalow (on a handy sized laerger than average lot) at $120-130K would be a steal for a first time owner. I understand what you mean about an agent wanting to come in high with a feel good price for the seller, but his suggested was in line with my own expectation. The agents valuation was very candid and I respectfully told him I`d expect $130K and he seemed to think I`d have little trouble meeting that. Again this is without either of us having done a true comp evaluation. There simply are not many similar size/age/price houses in the area, to be fair.


Its always tough to say what an appraisal will come in at as arguably, the value could change with each compariable sale.

Its important to keep in mind that many lenders require appraisals on rental properties, however many don`t as they use a valuator system based on sales of comparables. If there are comparable properties to yours that have sold in the 120 - 130K range, its likely that the property value would be accepted for refinance without need for a full appraisal.

Drop me an email if you`d like further clarification.
 
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