3-unit mfh severely underappraised
Member since 2023 · 29 posts · 10 votes
Under contract for a 3-unit mfr in Cleveland. My first purchase.
Purchase price is 177K.
Appraisal is 138K.
I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.
Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...
Under contract for a 3-unit mfr in Cleveland. My first purchase.
Purchase price is 177K.
Appraisal is 138K.
I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.
Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...
Normally I would say dispute the appraisal but if comps support the apppraisal then the appraisal s accurate.
I do not understand why you would want to pay over retail. The $39k negative initial position would consume years of cash flow. From an accounting perspective, the initial cash flow does not occur until the negative position is recovered.
I highly suspect my underwriting would not show $700/month cash flow with 80% LTV loan at current rates. However, using your cash flow numbers it 55.7 months to recover the negative position. So over 4.5 years. To place this in a different light, I have never not recovered my investment in more than 5 years (mostly I have done it in less than 2.5 years).
This is an absurd purchase. I question if any successful RE investor will disagree with my statement. Do yourself a favor and walk if the seller is unwilling to drop to virtually appraised value.
Also, I do not believe anyone who has cash to purchase would even pay $138k (they would have to be very inexperienced). Anyone who finances will encounter the same issue with the seller requesting far over value for his property.
Are you going to BPcon? If this closes at over $170k in next 90 days, I will treat you to burgers, fries, and soda at BPCon and we can discuss my wrong forecast over lunch at my treat.
Good luck
Having an exposed, untreated 2x4 at the bottom of a bathtub for molding/support is not good at all. That will warp/rot pretty quickly. If they did that, I question their workmanship mentality elsewhere.
Poor build quality means surprise repairs, sometimes simultaneous. Again, speaking from experience on this.
Did the appraiser verify it was truly a triplex and took that into account on its evaluation or did he simply compare it to other duplexes?
I’ve been in homes where they say it’s a triplex but it’s an attic where you can barely go in with a mattress on the floor and vented port holes.
Yes, it was verified. And ditto on your observations for the repairs.
I put in an adjusted offer close to the appraised value with a Saturday 5PM deadline for the seller. We'll see. No love lost if it falls through.
Under contract for a 3-unit mfr in Cleveland. My first purchase.
Purchase price is 177K.
Appraisal is 138K.
I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.
Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...
My experience has been that even if you have a second appraisal, most lenders will base their lending decision on the lower appraised value. And all the more so if, as you mentioned, the comps support the $138K appraised value. If obtaining the cash difference is not an option, you may ask the seller to lower the price to match the appraised value.
Thanks for the input. Tried that. They have cash offers waiting in line if my deal falls through. So they're only willing to budge 5K, which doesn't do much for me.
Another perspective on this is, if they are willing to go down 5K I would immediately think that they are bluffing. If am the Seller and I have multiple offers, including cash offers, I would not bother with trying to compromise or work out anything, I would just move on and accept the next best offer. Something to think about.
Just curious. Did you decide to purchase this?
Just curious. Did you decide to purchase this?
I lowered my offer significantly after the appraisal, and the seller didn't want to come down. Their last counter was 155K + and 18K promissory note to be paid over the next 12 months. Not a chance.
They relisted the property at 177K, which was the original asking price, but I think their realtor convinced the seller that it would never sell for that when the appraisal said 138K. They took the listing down 2 or 3 days ago.
Short Response to this, I'd never buy it at that price and neither should you if you want to stay in business. Regards
Under contract for a 3-unit mfr in Cleveland. My first purchase.
Purchase price is 177K.
Appraisal is 138K.
I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.
Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...
where is this? 60k per unit it better be in the best of the best areas and FULL 100% renovated. I just picked up a 7 unit, all in 220k.fully renovated. I also am looking at 2 duplex and SF in Akron on same lot, rented for 3300, PP 125k,, about 30k total reno. You need to stop, as you need a team, your realtor is NOT part of your team.
All the best
Under contract for a 3-unit mfr in Cleveland. My first purchase.
Purchase price is 177K.
Appraisal is 138K.
I cannot make up the difference with cash since I'm already at the top end of my purchasing ability.
Is ordering another appraisal worth it? Comps in the area seem to support the appraised value...
where is this? 60k per unit it better be in the best of the best areas and FULL 100% renovated. I just picked up a 7 unit, all in 220k.fully renovated. I also am looking at 2 duplex and SF in Akron on same lot, rented for 3300, PP 125k,, about 30k total reno. You need to stop, as you need a team, your realtor is NOT part of your team.
All the best
Yeah - absolutely did not move forward with this deal. Ended up closing on a different mf in east Cleveland. Better house, better part of town.