What are your favorite tips to influence an appraiser/appraiser?
Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votesWhat are your favorite tips to influence an appraiser/appraiser?
Most Popular Reply
Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votesA bottle of Disaronno. That's not for the appraiser, that's for me after a low appraisal comes in.
38 Replies
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes4y
@Seth Hochberg Sorry to hear about the appraisal coming in low. And I don't know if I agree with the advice of your "experienced investor" because I have had many banks ask me for payment recites to verify what I have spent on the rehab. That is why I just add the rehab costs to the settlement statement like I mentioned to Jay above. You are correct in your assumption that many appraisers just add what you purchased the property for plus what you rehabbed it for and then they look for comparables that will support that value. It is much easier for them to justify that value to the bank. I think you may get some good value out of the video I recently posted about this same topic.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Shiloh Lundahl:
@Jay Hinrichs You would think that they would be able to look right through it, but in my experience they don't. Most of the time they don't ask me for the previous settlement statement or HUD. But even when they do, the people looking at the settlement statement doesn't pay much attention to the rehab credit. They just look at what it closes at and what the appraisal comes in at. And the appraiser often just looks at what it was purchased at and never asks for the settlement statement. We have been doing this for the past 2 years and whenever we use this technique, things work out really well for us with the appraisal, and whenever we don't, the appraisal comes in low. So I would say this technique has been the most powerful technique that we use to influence the appraiser. And I t works consistently.
I guess the only down side is your property tax's will be higher if they are basing it on sales price. at least in a full disclosure state. My clients have been wrestling with this since day one.. especially in the rental areas were you have extreme wholesaler and burnt out landlord activity you know the bombed out house that has been ruined by the last tenant the wholesaler snags for waaay under ARV .. and appraiser use those as comps. Its not as bad as it used to be though thats for sure.
- Member since 2021 · 6 posts · 2 votes4y
@Shiloh Lundahl
I understand you're frustrated....I'm a certified appraiser and investor.
If you know the area you re investing in pull possible comps. As you're walking the appraiser through the property and listing updates you can hand him/her the comps to CONSIDER.
Most likely not intended ....but be very careful in your wording of influencing appraisers.
Dood-Frank Act prohibits people from attempting to influence an appraiser to encourage a targeted appraisal value.
As for people that invest in out of town markets I would ask your local realtor to help you with potential comps.
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes4y
Hi @Jenny Hobbs. When it comes to real estate investing, the ability to influence others is very important. So I chose my words purposely. But keep in mind, the best influencers are the ones that are able to influence others without others even realizing it.
Here’s a list of all the people that I influence when it comes to real estate investing:
- my bankers through keeping enough in reserves and having enough cash flow to lead them to want to give me loans on my properties.
- The people who work for me by being nice to them, encouraging them, providing a good work environment, paying them, and helping them get their own real estate properties.
- My business partners by trying to be fair, making sure that they benefit from the partnership, and by helping them reach their goals all while helping me reach mine.
- My tenants I incentivizing them to take care of all the smaller issues that come up in the home by discounting the rent.
- Sellers by finding out how much they need to get out of the sale of their home in order to help them solve the problem that they’re in, then we work together to make it a win-win situation.
- Title companies by sending them previously closed settlement statements explaining how to put the rehab credit on to the settlement statement.
- Wholesalers and realtors by telling them that I own 200 properties and I am a serious buyer and that I will buy the property if I am able to buy a property A certain way or at a certain price, and that I will close on the deal as long as it is according to how they presented it.
And yes, appraisers too by buying the property at market value with a rehab credit and by giving them a list of all of the things that I have completed with the property, providing before and after photos, and bye-providing a list of comparables that support my value.
- Investor · Platte City, MO · Member since 2021 · 31 posts · 12 votes4y
I'm learning a lot from your answers to your own question, @Shiloh Lundahl! Sounds like the seller credit technique to keep purchase close to market value can be good idea, though keeping taxes on radar is good point. I just completed my first (partial) BRRR and appraised $5k over my projected ARV, so am a newbie here...
Minor interpersonal tip, but a piece of advice I heard online that maybe(?) worked for me, was to intentionally listen and posture myself as newbie "learner" when walking through w appraiser (I also sent him a renovation binder w expenses, details, and a few of the more dramatic before/after pics).
That posture's probably not for a 200+ property veteran like you, but the appraiser seemed to get a kick out of being the expert (he was an older ex-builder), and spent waaaaay more time than necessary just downloading all his tips and wisdom to "help" me out. I suppose this could back-fire and he could think I have no idea what I'm doing, but seemed like another good way to leave a good impression. Appraisers are people, and you want them to leave with a good feeling about you and your property with nothing annoying or confrontational, right?
I will also always ask at the outset if they "want space," or initially apologize for hovering over their shoulder. Take a cue from their response: if they seem to like having you around, they may be like my guy, and want to just talk forever and be an expert "tour guide" as they work. If they hesitate, maybe it's better to get busy with other things in other rooms and let them do their thing.
Originally posted by @Alicia Marks:
Quote from @Bruce Lynn:
Share with them upfront before they do the appraisal the comps you want them to use....if they are in fact comps and understand what they use for comps.
You should not be able to influence the appraisal or appraiser, but everyone is busy these days. If you make things easy of them I think their chances are better.
Also make the home look like you did when you were trying to attract buyers....lights on, blinds open, no pets, easy access, etc.
I spoon fed comps for a refi I completed last month, but they refused to use them because they were off market turnkey. They would only use MLS. Lack of inventory meant they went past 6 months and beyond 1 mile to make it "fit" and ultimately I lost out on about $25k I should have been able to pull from the property when compared to other turnkey owners that had done the same. I tried to reason with them that a property is worth what someone will pay, not what they will only pay on MLS. I had 5 comps with the same team finishing out in a 1 mile radius and they used none of them. My fault that I was cash strapped and needing to start my next project, so I had to suck it up. Won't repeat that mistake again.
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The problem with this is they were "off market."
Here's the first part of the definition of market value used in an appraisal.
"The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus."
"Off market" deals are not subject to the same market forces, as a listed property on the open market.
Originally posted by @Tristan Gardner:
I've created a great relationship with my lender and ask that he use the same (more generous) appraiser each time. The appraisal company happens to be small and only has a couple of staff that alternate. A little bit of charm with them has gone a long way
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Good for you, if that works, although, it is technically not legal to dictate who the appraiser is, either by you or anyone directly connected with a financial benefit resulting in the transaction (i.e. anyone at the Lender that is tied to the transaction closing).
Originally posted by @Derrick E.:
I will be cashing out two homes in the next two months. I will give the appraiser a portfolio. It will include comps that my realtor provided. It will have before photos, rehab photos, and after photos of everything we did. It will also have a cost break down of all the work we did to the house so they full understand and appreciate all the work done. Does it help? I think so, but who knows. At the very least I know I did all that I could.
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It definitely doesn't hurt, and always a good idea to point out finishes, amenities and features, that the Appraiser may miss. But, more importantly, is to point out which comps are in similar rehabbed condition that sold for the price you are hoping yours to be valued at or above. Also, if you recently bought it in poor condition, point out why it sold for so cheap when you bought it. you may want to summarize your main points separately and briefly. Nothing worse than being handed an inch of paperwork, of information, of which they already have access to (mls listings/sales details, etc), and/or overwhelming them with info they don't have time to even look at and therefore, may miss some of the main points you are trying to convey.
But, bottom line is, value is best represented by what similar properties (similar gla, lot, location, condition, quality, views, etc) recently sold for.
Originally posted by @Shiloh Lundahl:
Hi @Jenny Hobbs. When it comes to real estate investing, the ability to influence others is very important. So I chose my words purposely. But keep in mind, the best influencers are the ones that are able to influence others without others even realizing it.
Here’s a list of all the people that I influence when it comes to real estate investing:
- my bankers through keeping enough in reserves and having enough cash flow to lead them to want to give me loans on my properties.
- The people who work for me by being nice to them, encouraging them, providing a good work environment, paying them, and helping them get their own real estate properties.
- My business partners by trying to be fair, making sure that they benefit from the partnership, and by helping them reach their goals all while helping me reach mine.
- My tenants I incentivizing them to take care of all the smaller issues that come up in the home by discounting the rent.
- Sellers by finding out how much they need to get out of the sale of their home in order to help them solve the problem that they’re in, then we work together to make it a win-win situation.
- Title companies by sending them previously closed settlement statements explaining how to put the rehab credit on to the settlement statement.
- Wholesalers and realtors by telling them that I own 200 properties and I am a serious buyer and that I will buy the property if I am able to buy a property A certain way or at a certain price, and that I will close on the deal as long as it is according to how they presented it.
And yes, appraisers too by buying the property at market value with a rehab credit and by giving them a list of all of the things that I have completed with the property, providing before and after photos, and bye-providing a list of comparables that support my value.
- *********************************
Hmmmm....that's a long drawn out, unnecessary post, with a possible passive aggressive undertone, in response to someone who was nicely trying to point out that it is unlawful to "attempt to improperly influence" an appraiser. But, I assume you are aware of that and obviously not concerned, since you thought it was smart to "purposely" choose your wording and post it as a headline, on a public website, for the world to see.
- Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes4y
Thanks for sharing some excellent strategies on influencing appraisers. I just got burned with a low appraisal this week and submitted comps to justify a higher appraisal and the appraiser was so generous that he upped the value a whopping $2,000, despite the appraisal being about 15k under what I was expecting. He gave the same value to my property as one that was half the size, used comps over a mile away, and used low rental comps from a far distance despite me owning a fully-rented property one street over that wasn't used in his analysis.
I have such a strong dislike for appraisers these days, I've considered going full 'Dexter' and ridding the world of them one at a time lol.
In all seriousness though, adding the rehab credit to the settlement statement is something I'll try out on my next property. I fully believe appraisers are most motivated/influenced by what the purchase price is and many of them don't seem to understand that buying a home at a discount shouldn't influence what the market value of the property actually is. If market value is 400k and I get the house for 200k, the appraisal shouldn't be very far off from 400k. The discounted home is the outlier, not the market value.
- Flipper/Rehabber · Phoenix Arizona · Member since 2020 · 1k+ posts · 686 votes4y
In working with several top notch agents ( top 5 in sells ). They leave comps on the kitchen counter of sold, and on market. Also been told that most appraisers will allow a 1 mile distance from said property.
We all know that those pockets of neighborhoods have some very high end homes. Those are the gems to have as comps.
If both agents are serious about making it happen they should be communicating to make it work out for the appraiser and any tricks, suggestions, etc should be worked and discussed.
The appraisal probably kills more deals than a bad inspection!
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes4y
@Brad S. I didn’t know that you had become one of the moderators for BIggerPockets to let people know whose posts are necessary and unnecessary. If you see anything that I am doing that is illegal, please let me know and I will change it. Otherwise, I stand by my posts and my methods.
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