Should appraisals drive my analysis?

Question

Speaking with a few realtors and private lenders, I am hearing that ARV appraisals are returning with conservative (low) values. Couple that with a house I currently have that has limited neighborhood comps, I am now analyzing deals with conservative ARV. Regrettably, this means that many of my offers are (in the opinion of sellers) too low.

Am I being paranoid? What resources could I find that could give insight into what banks are doing that are driving appraisers to be so conservative? What are your thoughts on this?

Am  I being paranoid? What resources could I find that could give insight  into what banks are doing that are driving appraisers to be so  conservative? What are your thoughts on this?

Rich O'Neill · Answer

Hi Denise!

In my opinion, using a low appraisal is a good thing. Appraisers are held to a very high standard and at the end of the day, the only ones a bank will listen to when it comes to the value of the home. You would be treading dangerous water if you started running your analysis based on say appraised value plus $X or X% or some other valuation tool. If sellers don't like your analysis then that is their problem. You can also "blame it on the appraisers and banks" and basically say that "this has to be my number if you want to sell your house today because my bank won't let me do any more."

You might have to do more work to find deals but it is better to do that and find actual deals than fudge your numbers and end up with a property you lose money on.

Hope this helps!