Flip-Flop (Or: A VA Financed Offer Gone Awry)

2 Replies

Hello BP!

I am in the process of selling my 'first flip'. In quotes because I had purchased / rehabbed the property originally to be a rental, but through a confluence of events I've decided to sell the property and pursue other opportunities.

Here is the subject property for the curious...

Catch the PDF below for the full spread!

I’ve had a ton of interest in the property as I was completing the renovations. Many people came by dropping in and expressing interest. They seemed ‘amazed’ that I was going to list the property for only $160k. At the end of my renovation, a real estate agent I was considering for listing the property (although knew only as an acquaintance of my in-laws, and hadn’t fully vetted her yet), brought me a contract at $155k. Since this was near my planned listing price, and saved me the listing commission, I accepted.

That offer was contingent on VA financing and has now fallen thru. I had already done a bunch of repair work the buyers inspectors had requested (they were small things that I already had the materials for so this cost me mostly time), but the buyers appraisal came back too low. As in $142k.... and needing a roof.

Laughable to me because this is the same valuation I got on an appraisal for the home before I did a done of renovations, when the market was lower, etc. Both of those appraisals also frustratingly used the same unimproved foreclosure REO sale as a comp. Not to mention that comp is several months stale now. Regarding the roof - although it is *not* new, I was up there making some of the buyers requested repairs and the shingles are all intact and have good granular coverage. I can say for sure I’ve financed much worse, and the roof has not leaked in the 1.5 years I’ve owned the property. Oh well: I guess that’s just the appraisal biz :-/

Now I’m trying to regroup. Now I’ve always been a buy and hold rental real estate guy. I’ve never actually listed a property. So I’m definitely out of my element! I need information / advice in the following areas…

  • Roof – Is this now a ‘required disclosure’ just because of this appraisers opinion??
  • Appraisals – Are these stored in a database somewhere? Is my property ‘snake bit' because of this hack job appraisal? A relative in the biz in another state says that the VA will store this appraisal so I may as well pass on other VA offers.
  • Using a MLS Listing Service – Given the enthusiasm and interest I received without widely marketing the property, I am considering going this route, at least for a couple weeks, to see what kind of business I can drum up on my own. I’m not looking to sit on the property looking for an offer to fall thru, but if I can move it quickly and save the listing commission, that seems like a good plan. Any thoughts on this strategy?
  • Locating / Evaluating Real Estate Agents – I’m struggling to define my criteria and strategy for picking an agent. I have a sales background, which makes me want to find someone with great production, which presumably would mean they’d get my deal done quickly and efficiently. On the other hand I can see that not correlating well with their conscientious handling of my interests. Any tips on evaluating agents?
  • Any recommendations for an agent covering The Arlington Area of Jacksonville? (near Jacksonville University)

Also – Please Evaluate / Provide Feedback on the following promotional pdf I created myself: Ft Caroline Details PDF. I plan on using this as a template for future properties, so please critique both the format and the specific presentation of this property!

Thanks as always for the awesome Bigger Pockets Advice!!

The appraisal won't affect non VA applicants. The appraiser opinion about the roof shouldn't cause you any disclosure issues. If you think the roof is sound, hire an inspector to do a "4 points" inspection, which will likely be required for any future offers anyway. Generally they're looking for at least 2 years of remaining useful life for the roof. Note, any information you get from this report Will create disclosure issues. As for putting it in MLS, if you don't 80-90% of potential buyers will never know about your house.

We are running into appraisal issues as well.  Our market is moving fast, combined with the fact that sometimes appraisers are just bad at their job it can create issues.  

It sounds to me like you need to let this one go, list it on the MLS and vet your buyers. For instance, make sure they are pre approved not pre qualified, higher the down payment the better, and DONT work with Chase, Wells Fargo or Bank of America. They use the cheapest appraisal companies and attract the bad talent.

One thing we do is be at the property to walk it with the appraiser, provide before/after pictures and our scope of work for the job.  We also provide comps to justify the price.

Even with all the steps we take we still get burned every so often.  Had one tell me a few weeks ago that he will not and you can not look at price per square foot when appraising a house....I just dont know where they find these people.

A lot of the other questions you asked will be specific to your state.  But one thing we are doing is flat fee listing our properties, saves us the money, and a listing realtor really wouldnt be doing anything to earn their money the market is so fast.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here