So how to get past the 50k appraisal fee

20 Replies

So, I am looking at a SFR bundle that cash flows well, however the lender needs to get some value on the deal. the problem is from my basic comps, and square foot prices etc it is very close to being a "no go" situation for the lender.

Problem is. I have to spend 50k on SFR appraisals to get to the step that the lender will say yes.

How do you guys get around putting down that type of cash when you don't even know what the answer is going to be. And in my situation it's really close so I feel it could fall the wrong way really easily.

Please advise any smart way to play this.

An appraisal should only cost you half a grand:

"According to MortgageNewsDaily.com, the national average cost for an appraisal by a licensed professional is between $300 and $400 and should require roughly two hours of inspection time to complete."

Indeed do ask other investors how much appraisals cost via a conventional lender. Ask other banks for their appraisal fees. But you don't need to spend $50k to find out how much a home costs.

@Joe Calderon He's buying a bundle of properties. Likely well over 100. 

@Obin Olson How many properties?  I have no magic answer for you but just like $400 isn't that much for a $100k property, I imagine $50k isn't that much for 125 $100k properties. If you're reasonably certain of the value the appraisal should be in your range. 

With a deal of that size, you need to flip the script. It's not you that needs the money, it's them that needs to do your loan. If they can't see the value of doing your loan, move on.

that's the whole problem, I am reasonably certain they will all be plus or minus 10 or 15k of the lenders minimum required amount.

please advise, not willing to risk 50k to find out when it's this close a call...what options do I have.?

Originally posted by @Obin Olson :

so ask them to 're work the minimum requirements on the deal based on cash flow being very good?

No, I'm not saying that you convince them to skirt their underwriting requirements based on some imagined "cash flow". LOL. That's not going to happen. 

However, if you are looking at a package of 100 SFRs, you're not going with conventional financing anyway. You're dealing with a financier. A lender, not a banker. Totally different roles.

I'm not going to say it's easy. You need to have a good relationship with your lender.

Deals this size are way above my pay grade, but were I to find myself in that situation, I'd pull a random sample of houses, maybe 10% of the total, and get them appraised. Then get the lenders opinion on the sample?

There are four things I would advise you to do,and they are as follows:

1.Ask the lender if they will accept on each property ?

2.I have worked out package deals based on what it would cost to appraise a 100 unit blg and then paid a little more.Say it cost 5K to appraise a 100 unit bldg work out a deal with an appraiser on your lender's approved list to do the deal as it where for sayv$15K.

3.Have your lender do the numbers based on the cash flow of the package. Make sure the 

numbers pass their qualifications for the loan.If the package does not have sufficient cash flow to handle the debt service do not waste your money.

4.Give me a call I may have a better lender for you 202-604-5480.

relationship wise I just closed a refi on another bundle so I think that department is fine.

it's the lenders minimum value rule and how very very close to it this package may end up being that's scary...

have you approached the lender about packaging loan as scattered site housing? Doing That would qualify the SFRs as a commercial property. Appraisal fee should be exceptionally lower that way.

Originally posted by @Obin Olson :

So, I am looking at a SFR bundle that cash flows well, however the lender needs to get some value on the deal. the problem is from my basic comps, and square foot prices etc it is very close to being a "no go" situation for the lender.

Problem is. I have to spend 50k on SFR appraisals to get to the step that the lender will say yes.

How do you guys get around putting down that type of cash when you don't even know what the answer is going to be. And in my situation it's really close so I feel it could fall the wrong way really easily.

Please advise any smart way to play this.

I want to make sure that I completely understand.  Are you looking for a blanket loan for a new purchase of more than 100 homes?  If so you might be able to get the lender to drop or reduce the minimum value per house if you offer to increase the restrictions on partial releases of lien if they are offering flexible terms on the releases.

Are you going to need all of the value from all of the homes to get the loan?  Maybe some of them will not have to be used.

Another idea is to limit your risk.  Try to get the seller to enter into an agreement in advance to pay for the appraisals if the deal will not work.  It is not like you will need them if you cannot get the deal financed.  You might also be able to get him to agree in advance to split off any that do not make the cut into another package for you or another buyer to buy.

Sorry about delay in getting back to you. I'm not aware of the nuances in scattered site allowances/restrictions, especially for non-traditional lenders.

As a profession, I am a commercial appraiser and have personally appraised properties similar to what you describe for a national bank client. From what I remember on that job, the bank wanted the package appraised for internal purposes and as they were all rental households operated by same owner, in the same small town Ohio, we were able to knock out like 128 units (mixture of SF and MF buildings) as a "single economic unit", or operated as an apartment essentially. If you discuss with your non-traditional lender use single-economic unit to describe the process, a commercial appraiser would have to do the appraisal, and could maybe even include a value analysis pertaining to each property individually, if so required by lender.

The job I describe was not fully affiliated with any low income housing (section 8, LIHTC, etc.), but may have had some property based vouchers, I don't recall that detail.

As others have stated, the potential downfall of this financing is your exit strategy, as piecing them out could be a headache.

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