How to Maximize Your Rental Property Appraisal

by |

When the document arrived in our inbox my husband Dave and I were giddy with excitement.

What’s your guess?” Dave asked me curiously.

I think $297,900. What do you think?” I replied excitedly.

Well… I hope $305,000, or more, but it will probably be $299,000. Let’s see ….

The room fell silent as we both stared in shock at the number that was before us … appraised value of $289,000.

Well, that’s what happens when appraisers have access to MLS and can see what you paid for a property.” I said dejectedly.

You see … we are very confident that this house we paid $289,000 for is actually worth over $300,000 … and in fact when we do a few repairs and give it a little cleaning we think the value would be more like $310,000. When we ran an electronic property valuation (a new tool available in our province of BC that uses recent sales and assessment data to calculate a value), the report valued this place at $321,000.

We think that value is a little too high, but the challenge is that there are very few properties like it. It’s an old character home, on a very unique and desirable street, with an ocean view. Homes on other streets nearby sell for $20,000 to $30,000 less. The houses on this particular street generally sell at a premium. But very few homes on this street have traded in the past six months, and anything before that isn’t a real comparable because the market conditions were so different.

It’s also hard to put a value on an ocean view. Everyone knows there is value there but how much?

rental property appraisal ocean view
So it wasn’t an easy job for the appraiser … but as we looked through the appraisal report we found issue after issue. We ended up sending her some comparables she should have used, we challenged the market rent rate she came up with, and the replacement cost numbers she used. Basically we had to have her redo her report because the first one not only gave us a much lower than market assessment, but some things in the report were downright wrong!

Appraisals are an opinion of value not a scientific fact.

And the bottom line is that many appraisals default to the “safe” answer which is usually what you paid for it. That can be a kick in the teeth if you’re paying under market value but trying to get a lender, a partner or a tenant-buyer to work with you at it’s market value.

Many of our colleagues have suggested that the best way to influence the appraisal is to greet the appraiser with your own deal summary, including the comparables you used to complete your market valuation. You can also include the rent rates for nearby rentals that are similar to this property, and indicate any work you’ve done to improve the property to ensure that it’s all included in the valuation.

We’ve never done this because we always wanted to see what the unbiased value is. We didn’t want to influence the number in anyway … but simply by our purchase price being information the appraiser can access, we’ve already influenced the value. So we have no problem getting the appraisal report redone … and that is what we did.

So, go ahead and use the tactics of our fellow investors, and hand a package to the appraiser. They should do their own research, but let’s face it, they are human and if you can make it easier on them they just might take the easy route.

But when you’re reviewing the appraisal report, even if you’re happy with the valuation assigned to the property, take a close look at:

  • The comparable properties used: No two properties are the same, but to make the valuation as accurate as possible the comparable sale dates need to be very recent (max 6 months old … ideally 3 months or less), the circumstances of sale need to be similar (don’t use a foreclosure as a comparison to a market sale or a non arms length transaction as a comparison to an arms length one), and the location of the property needs to be very comparable – preferably nearby.
  • Value assigned to special features: In this case, the appraiser assigned no special value for the premium street or for the ocean view. To us that resulted in a valuation below the market value. None of the comparable properties used in the appraisal had ocean views and there was only one property on the same street.
  • Watch the rent rates, replacement cost numbers and other specific details that change quickly. This particular appraiser had valued the rent for this home $300 lower than market rent rates. After we challenged her on it, she called around to local property managers and realized her mistake. We’re not sure if she was out of date or just out to lunch. She also had the replacement costs for the building at a much lower rate than any builder we’ve ever talked to can build for. We asked for the contact details of the builder she got her numbers from because we’d like to work with him. πŸ™‚

Whether it’s before you get the report or after the report is complete, you have every right to make sure that the valuation has been done correctly. It is an opinion, and an opinion can be changed and it certainly can be influenced. And while the banks, partners, and other parties that rely on the appraisals may not want to accept that fact, as a real estate investor it’s a reality you have to work with.

Now we’re awaiting the revised report. We don’t expect the value to change that much but we do know we’ll be doing things a little differently from now on.

About Author

Buy and hold real estate investing in Canada since 2001, Julie Broad is now a full time real estate investor and investing educator.


  1. Julie, we have had the same problem here in San Antonio as well. Here the appraisers are scared to put the fair market value on a house due to the lending melt down. Like you, we almost always have to do their job for them by providing them additional information that should have been included, but was left out. Typically, when all is said and done the appraiser has to issue a new appraisal.

    Visit Liz Voss’s last blog at San Antonio Homes.

  2. Thanks for your comment Liz. I don’t envy the job of the appraisers – the market has been changing so much that it’s a difficult job to put your finger on an exact value. But from now on my appraisers are going to be met with the market data I have on hand so they can use that from the start. In this case we had time to wait for the revised report but sometimes we don’t have time to wait …

  3. I can completely relate to this issue — and in South Florida where the values have depreciated so rapidly and dramatically over the past couple years (plus the number of foreclosures on the market), its even worse!

    On the last house we rehabbed, we actually went to meet with the appraiser and gave him a report, and he told us he’d look at it, but that their systems now were automated and mostly objective based on data points and he had little opportunity to make revisions to it. I’d never heard that before…but we’ve heard it from two different appraisers down here now. Automated systems that include the prices of highly distressed REO properties bring the market values down for the fully rehabbed homes. Just something to keep an eye out for!
    .-= Shae Bynes´s last blog ..Always, always, always follow up! =-.

  4. What a great point Shae!! I was actually thinking about that … now that we have this automated valuation service here in BC that we can use I was wondering how long it would be before the appraisers just start using the automated reports. On other properties we’ve been looking at the automated report is actually pretty much on the money. The automated report actually gives this property a higher than market value estimation – which, for the most part would be a good thing for us. But of course it could go the other way, like you’re saying, and the automated report could be too low.

    It takes the human emotion out of it which is good but it doesn’t allow for a fair market valuation in situations like yours. It really should be pulling the REO’s out. The appraisers should have flexibility in their system to be able to filter which properties get used in the report. Otherwise why do you need an appraiser to do the report at all?

  5. Hi Julie,

    My mortgage broker gave me a tip with regards to appraisals that I thought was interesting.
    He told me to always explain to the appraiser why I was getting the appraisal done. He (my mortgage broker) believes that by doing this, the appraiser will have an understanding of the value that you need to get out of the property. As such, they may become influenced to give you the value that is needed. Mind you, I don’t think this can work in all markets, especially a declining market like South Florida.
    However, I believe this method can work well in rising markets (ie: The Greater Toronto Area)

    Article #3 under your belt! Nice work! πŸ™‚ πŸ™‚ πŸ™‚
    .-= Neil Uttamsingh´s last blog ..Business Life Story Part Six =-.

    • It is a good point Neil. I do know that can make a difference, but the banks have also put a lot of pressure on the appraisers to be more conservative so sometimes telling them it’s for the bank can actually have the wrong impact we’re finding! I think, at the end of the day, it’s just like everything … we have to find a good appraiser that knows what they are doing and can balance our needs with the pressures they feel from the other parties that rely on their estimates. We had used her in the past and she was good but this was a different property type and it’s been a few years … and I couldn’t help but wonder if she had updated any of her resources since a few years ago!! πŸ™‚

  6. Steven Bitschy on

    Hi there, I know this is an old blog but I am curious if your appraisal came back higher after you challenged your appraiser. If so, was it significant? Sorry but I am about to go through this process and looking to make sure the appraisal is justified.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here