Despite having dealt with several dozen appraisals over the past year, it never ceases to amaze me when we get wacky appraisal results…
We had two appraisals on The Probate House in the past two weeks, as expected. The buyer is getting an FHA loan and we’ve held the property for less than 90 days, so we expected the extra scrutiny. Especially given that we’re selling the property for more than double what we purchased it for.
Because we’ve severely underpriced the market on this house (we wanted a quick sale, as the property is about 30 minutes from where we live and we hate the drive each time we need to deal with the property), we were curious where the appraisals would come in. Would they be for a good bit more than the sale price? Or would the appraisers be reluctant to value the house much above the sale price, even if there were comps to support it.
Turns out we had one of each on the two appraisals…
The house is being sold for $144,900. The first appraisal came back at $165,000, which is probably pretty close to the market value (the comps I looked at indicated it was probably about $170-175K). The second appraisal came in at $145K!
So, clearly the first appraiser had no issue with valuing the property near the real market value, but the second appraiser was reluctant to go anything above the sale price. All that mattered to us was that the appraisals came in high enough to sell the property, but we know that the two very disparate appraisals are very confusing for the buyer, who doesn’t understand the games that appraisers are playing these days.
Luckily, he knows he’s getting a great deal, so we don’t expect the second appraisal to impact the sale, but it’s still frustrating that we had to spend time explaining to him all the wacky aspects of appraisals in this market…
I’ve noticed that the homes you buy look to be on the newer side (1980’s and above). Is that part of your business plan?
I’ve got to provide a second appraisal on mine as well. The contract price was $75,000 and the first appraisal came in at exactly $75,000. I’m still waiting on the second one.
The appraisers don’t want to stick their neck out to value a house for more than the purchase price which shows that we still don’t have honest appraisals being performed.
Jake –
We prefer houses that are 1970’s and newer, just because they don’t run some of the risks of older houses (lead paint, major termite damage, no central heat/AC, etc). Much of the area where we specialize was built up in the 1980’s, which is why most of our houses are from that time period. If the majority of houses were older (or newer) in this area, we’d probably change our strategy, but this seem to work for us…