Trying to wrap up my first flip. I've learned a lot throughout the process. My latest lesson regarding the appraisal.
Turned the house into a beauty. But now my asking price is 30k higher than the appraisal! The buyer's are not able to pay the difference and I can not take the hit. Any advice from BP?
List price: 345,000
Buyer paying list price 345,000
Meet in the middle
If that was an FHA buyer, you're stuck with that appraisal for All FHA buyers for 6 months.
How did you come up with the ARV? Do you have comps that support that listing price?
I can't help you.. but I can tell you its for those reasons I will not flip in Texas anymore this has happened on virtually every flip we did in 3 different markets.. its a real issue in Texas.
You over invested. You can either meet in the middle or take the hit. You live & learn.
The recent appraisal listed 6 comps on the report with the average price $110.54 per sq.ft.
My property has a total of 2,989 sq.ft.
For out of the six comps have pools, I do not. The appraisal took this into account subtracting 15K per sale for an average Adjusted Sale Price of:
Even though my property was listed as Superior Upgrades along with 3 of the comps. The other superior upgrades do not come close to what was done to mine. Example of a Superior comp:
6727 Johns Ct
Arlington, TX 76016
My property that is located in an secluded area consisting of only 25 homes:
4006 Shores Ct
Arlington, TX 76016
I'm afraid this is what I'll have to do!
The 30K is a big deal. I have made so many mistakes throughout this process that after closing I'll be taking a loss.
Hi @Michael Clevenger . From what you said, "The other superior upgrades do not come close to what was done to mine." It sounds like you over-rehabbed and have found out that the area will keep values down in that case.
If it is truly worth what you have marketed it at, wait for another buyer. This is a market-specific approach, so if RE in your area is slow/average then you may not be able to wait. Do you have any other exit strategy available? Rent? Refinance traditional? Move-in and rent your current house?
Same experience selling my primary residence in Denton Texas in June 2015. Had good comps to back it up too.
@Tony Gunter yes frustrating.. part of it I totally blame on the absolute rampant practice of the wholesale community there tying up MLS properties and flipping those like they were off market true wholesale deals.. the apprasiser are not dumb...
But for me its bye bye texas... not to return.. much easier places for us to work. aNd cheaper those property tax's are just killer. along with all the foundation issues Mold water intrusion..
How long has it been on the market? If you are getting offers for that much you may be near the ballpark. If you're hurting to sell maybe go ahead and take the hit but if its Low DOM then maybe put it back out there and get some conventional offers that are willing to meet in the middle or make up the difference.
Thanks Bryan! With school starting next week I believe my percentage of buyers will decline. In the beginning all exit strategies were available but now weighing them out it appears as though any of these would have a larger loss than the one I'm about to absorb.
I did email the appraiser Saturday morning and explained my concern with a detailed list of work that was performed at the property, such as the new roof and all the upgrades. No response as of yet.
51 days on market. Most of this being as this is my second contract on the property. The first bailed out prior to the appraisal. I may have to learn from my mistake in that some of BP explained above that I invested too much into this property.
I would actually be okay with the 315k if it was not for future cost of closing that I'm anticipating at 9%.
@Michael Clevenger I don't believe you ever mention if the appraisal was an FHA appraisal or not. If it's an FHA appraisal then you're stuck with that for 6 months. If it's not an FHA appraisal, then I would pay to get a second appraisal to see what it amount to. If the value is higher then the first appraisal I would add the 2nd appraisal report to your MLS listing and changed the listing to not accepting FHA. In my experience dealing with FHA appraisal, the appraisers tend to over their butt a lot more by going with a more conservative number. In addition, I would update the listing to mention that you're open to owner finance at a very reasonable terms such as 6-7% interest rate with 20% down payment, no credit no problem and hope that would spurn more interest.
Thanks John! I do not expect him change his number. I also made this clear to the appraiser. If I learn something from his response then I'm happy. But why would someone not reach out to at least converse with the appraiser regardless of the initial figure. Even if to only say thank you for your time (this I did).
Very interesting! It is not an FHA. I'll have to consider this as a possibility.
What I've figured out from this experience (my first). Its not worth it to make the property immaculate with the newest trends. I should have just fixed it up from the years it was vacant and put the bare-minimum into the project. Right? Perhaps then I would have been in a better situation.
Can you have it cash flow as a rental?
Are you in a position where you are able to sell at the appraised value and hold a second position note on the remaining balance?
Just two possible options to explore before taking a hit.
What do you mean by second position note? I've googled this after you post and just got more questions than answers. Can you give me a brief description regarding your comment, please?