Need help - Hard Money / Appraisals / Multifam Valuations

6 Replies

I'm about to close on a triplex, this is the largest deal I have done yet, and have a few questions. I am using hard money on this deal for the first time. Thankfully, I am approved to get the needed funds, so I don't want to seem like I'm being too picky. However, here are my questions. 

I paid the potential lender for an appraisal. They got the appraisal back and informed me that the appraisal determined the property value at a favorable valuation ( surprisingly on par with what SFRs in the area would get per SF). The valuation is high enough to allow me to get enough funding to acquire the property. However, the lender will not share a copy of the appraisal report with me. Is this a normal policy and is it intended to prevent borrowers from easily shopping loan rates? 

I want to make sure I am not over-paying for the property. Should I have another appraisal done by an appraiser whom I can trust, so I can review the numbers with my own eyes? I know a good appraiser but it would cost another $450. Also, I need the appraisal within 48 hours and am not sure my appraiser can get out there that soon anyways. But I'd love to hear some thoughts on this. 

Regarding valuation, when it comes to valuations and comps, is it any surprise that a triplex in a SFR neighborhood would have an ARV on par with valuations of SFRs? This property used to be an SFR and was converted into a triplex; it is located in an old but becoming popular SFR neighborhood. The new construction or renovated SFRs in the neighborhood are selling for $143-$167/sf. The ARV on this triplex came in at 150/sf.

Final question: should I shop multiple hard money lenders? The cost of the hard money, including pts, interest, and renovation escrow fees, over a 5 month period, add a significant cost of the deal, higher than I was expecting. I've never used hard money and got a quote from a company who was recommended to me, and I would like to establish a good relationship with them. They have provided good service. However, when I look at the overall cost of lending for just 5 months, it's high. The expenses associated with escrow management for the renovation are significant too. What is the usual or acceptable amount that hard money adds to the cost of the deal, when its being used just until a refinance, ie, about 5 months? I'm wondering if I should go ahead and get quotes from multiple hard money lenders?  

Thank you for your thoughts, 


@Jon S. Maybe there was no appraisal done. In most of the hard money deals that I do I do a desktop valuation followed by a BPO. When you said fees were high what are you being charged?

Originally posted by @Account Closed :

@Jon S. Maybe there was no appraisal done. In most of the hard money deals that I do I do a desktop valuation followed by a BPO. When you said fees were high what are you being charged?

I paid for the appraisal so I hope one was done. 

 13% plus 4 pts 

Hard money rates are regional and there are no rules each lender has their own way of doing business.  You can at least call around and ask other lenders for their rates.  Don't call the national guys, call the local ones.

Most HMLs that are local do their own assessment of value, they don't rely on outside appraisals.  And it is not customary to pay the lender for the appraisal if a formal appraisal was done.  It is customary to pay the appraiser directly.  You should have determined ahead of time if you were going to get a copy. 

It is possible that there is no document if the lender charged you and then did the evaluation himself.   Although if he says it came in at $150 psf that doesn't sound likely to me that he did it himself.

Ok, so now I suggest you simply ignore sunk costs and move forward from where you are now.  Sometimes it is more important that the lender actually deliver on what he says than on the actual costs.  The difference between 12% and 13% doesn't amount to that much over 5 months.  So if he has a good reputation that can be the deciding factor. 

By the same token, being an informed consumer is important to your financial health.   Call around to local lenders, and find out what they charge, and how they handle appraisals, and whether they charge for them, or do their own evaluations.  Then decide based on the amount of time you have.