Controlling Your Appraisals
Vikram and others brought up an interesting topic in another thread, and because it was buried pretty deep in there, I wanted to break it out into a new thread. The discussion was about how you go about getting your rehabbed properties to appraise once you get them under .
Obviously, you'd like your property's value to stand on its own without any help from you, but in this market, anything extra you can do to ensure your property hits its target appraisal price is important.
I'm going to present some of my ideas (they've worked for me and others I know) and then open up this thread to others who have had success in getting their properties to appraise in this market...which can often be very difficult...
I've found that by:
- Providing Information
- Building Rapport
- Building Trust
You can go a long way towards getting appraisers to err on the side of trying to help your appraisals come in at your target price.
From a Providing Information standpoint, remember that appraisers have a tough job these days. They need to make a lot of people (on different sides of the table) happy. Helping them do their job effectively and efficiently will make their lives easier (especially when the underwriter comes back and asks for more details to substantiate the number), and in return, make your life easier. And given new HVCC rules, you may be more familiar with comps in a given area then they are, so you may actually have better comps than the appraiser!
From a Building Rapport standpoint, if someone knows you and likes you, they are going to want to help you. Ask the appraiser about his family, ask about his business, ask
him questions that allow him to feel like you appreciate his "help", and (if it's true) insinuate that you may want to use his services in the future. We don't like to let our friends down, so the goal is to get the appraiser to feel as if you're a friend in the short time you're together
From a Building Trust standpoint, many appraisers (and others) are leery of rehabbers these days because a few of them give the rest of us a bad name (shoddy work, lie
about repairs, etc). Oftentimes, when appraisers walk into a rehabbed property, they assume that the value is LOWER than an equivalent house that isn't being flipped. By proving to the appraiser that you're in the group of rehabbers who take pride in their work and do things the right way, you'll get the him to appreciate your work and efforts and to trust that your house is probably MORE valuable than an equivalent house that isn't being flipped.
With that background, here are my concrete suggestions on how to work with appraisers:
1. Always ensure that you know when the appraiser is coming to your property. We make sure that our properties are on an agent lockbox and are alarmed. We then tell the lender/broker that the appraiser needs to call us to get access to the property. Nine out of 10 times we'll get a call the day before the appraisal, but occasionally the appraiser will call while standing outside the house when he sees the "Alarm" sign on the door; when that happens, we tell him how to disable the alarm, but now that we know he's at the property, we can rush right over or send our project manager over to meet him.
2. Always make sure you are present when the appraiser is doing his walk-through. This is your opportunity to build rapport, provide information about what work you did, brag about the fact that you pulled all required permits and only used licensed contractors, and to generally take credit for the great rehab your team has done.
3. At the end of the walk-through, you have an opportunity to provide information to the appraiser that he can take back to the office and review. This is the information that will help him do his appraisal and help him justify the number he comes up with in case anyone asks. Here are the things I provide (nicely organized in a folder):
- Renovation Overview (see example attachment to this post)
- Rehab Cost Breakdown (see example attachment to this post)
- Before/After Pictures (see example attachment to this post)
- Comps (I print out comps from the MLS that support my sale price and add them to the folder)
Of course, while most appraisers are happy to have you around during the inspection and happy to take the information you have, don't just assume this. I will always ask upfront, "Do you mind if I stick around during your walk-through" and then before I hand them the folder, I will always say, "I certainly don't want to do your job for you, but I have some documents here that will give you more information about the rehab I did, the money I spent, and some of the comps I know about in the neighborhood...would you like them?"
I've never had an appraiser who seemed bothered by the fact that stuck around during the walk-through (most of them are talkers and like the company) and never had an appraiser who didn't want my extra information (again, most of them were very appreciative of anything I had).
So, what are some of your tricks for working with appraisers and appraisals?
