Refinance & Comp Questions

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Refinance & Comp Questions

Guido Bertoli
Investor · Union City, CA · Member since 2017 · 17 posts · 2 votes

I am going to refinance my personal residence to get some cash but I had a few questions regarding how to approach a bank / credit union.

I live in a neighborhood of a bunch of 4 plex condos. I have made a list of 7 properties within 1 mile of my residence that have sold in the last 4 months. They are all 2 bed 1 bath the only difference is the square footage and the upgrades per unit. Based on my comps my "self appraisal" will be higher than any sold so far. I took all the units and got the avg per square foot and multiplied that by my square footage. This is what I've learned from the BP Podcast and what I've read on the forums and in a few books. So I feel confident, but I don't. I'm still just starting out and want to approach the bank as if I'm someone who knows what they're talking about, like they've done all their homework. I feel having more and better information will give me a higher success rate and getting what I want when talking to the bank. I have NOT included the pending or the currently listed into my comps just because those are not sold so I don't think they are accurate data. I'm not even sure if I can negotiate a refinance price or if the bank just does their own appraisal.

Here's a link to my comps:

https://drive.google.com/file/d/0B1tiA9zh4iG7YWhMb05hYnQ3X1E/view?usp=drivesdk

I still need to look at all the upgrades on every unit through zillow, redfin, and whatnot. Anyways I want you guys to look at my comps and see how reasonable my offer sounds. I also don't know too much about how this process works and any advice would be great. I obviously would like to get the most money for my appraisal. I'm assuming (correct me if I'm wrong) that the higher I can show my residence comps for = more cash out I can pull out from a refinance?? I want to try to rinse, wash, repeat, but I bought my personal residence before trying to invest in flipping or rentals.

I want to go to my credit union to get the lowest possible interest rate (I will shop around of course) but I also want to get the maximum appraisal. Does it work this way or am I misinformed?

Thanks,

Guido

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Christopher Phillips
Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y

@Guido Bertoli

You can't really influence a appraisal. It comes in at whatever it comes in at. If you did recent upgrades, you can supply receipts, but that's about it.

There's no homework for you to do. You apply for the refinance and they tell you what you're eligible for based on your financial picture and the valuation of the property at the time.

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  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Guido Bertoli

    You can't really influence a appraisal. It comes in at whatever it comes in at. If you did recent upgrades, you can supply receipts, but that's about it.

    There's no homework for you to do. You apply for the refinance and they tell you what you're eligible for based on your financial picture and the valuation of the property at the time.

    1Reply
  • Angelo C.
    Real Estate Investor · Palm Harbor, FL · Member since 2016 · 91 posts · 43 votes
    9y
    Hello Guido Bertoli "Based on my comps my "self appraisal" will be higher than any sold so far"......red flag. It would be difficult to have an appraiser to value (and a lender to approve) your property higher than any of the comps. Try to find a superior comparable (i.e. Higher value) to bracket your property's market value. Also, it is useful to do some research so you have AN IDEA of the property value, but ultimately the lender will rely solely on the appraiser's opinion. Best wishes.
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  • Guido Bertoli
    OP
    Investor · Union City, CA · Member since 2017 · 17 posts · 2 votes
    9y
    @Angelo C. that is why I wanted people to check my comps because it was a big red flag to me. Now if I were rehabbing this and trying to sell on the MLS would those numbers be accurate? I came up with the "ARV" by using the average square foot and multiplying it by my square footage. Also does the appraiser for the refinance look at the inside or no?
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  • Rick S.
    Investor · Oceanside, CA · Member since 2017 · 61 posts · 22 votes
    9y

    You can try to influence the appraiser by providing them with all of your research and comps when they arrive at your house to do the appraisal. You will have the opportunity to discuss the appraisal with them. With that said, I've had mixed results with appraisers using this method during flips. Sometimes it works, and sometimes it doesn't. 

     As far as your price per square foot theory,  if you put two houses side by side in the same neighborhood, in the same condition, one with 1000 square foot the other with 3000 square foot, the 1,000 square foot house will always sell at a higher price per square foot than the 3000 square foot home. The value of the land is what's in play here.

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  • Diogo Marques
    Financial Advisor · Cascais, Lisboa · Member since 2015 · 199 posts · 83 votes
    9y
    You can't learn and look like you know everything in the process. Let it go. Use the best info you can gather, talk with credible people that have done it before so they can guide you and start from there. Good luck
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  • Christopher Blanco
    Real Estate Consultant · Cleveland, OH · Member since 2016 · 511 posts · 345 votes
    9y

    I wouldn't recommend directly engaging the appraiser. The best thing I have found to do is to leave a book on the countertop or table that contains your comp's, the work you did  (before and after if you have them), and contractor receipts.

    Some will look at it and some won't. You don't have to accept a low appraisal either. I just did a HELOC and my first appraisal came in at $101,000. I said it was ridiculous because houses smaller than mine were selling for $135K+ in my neighborhood. I challenged it and got it revised to $138K.

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  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y
    Guido Bertoli Just to tackle one of your challenges here, price-per-square-foot doesn't scale linearly. If you have two homes next door to each other just because one is 2,000 sq ft and the other is 1,000 sq ft doesn't mean it's worth twice as much. There are things like neighborhood price ceilings, lot values, etc. that you have to contend with when you're looking at non-model-match homes. And, not for nothing, but the appraiser choice is supposed to be (relatively) independent so that you can't have a loan officer collude with an owner and appraiser to bring "bad debt" to a bank for the sake of commissions and under-the-table kickbacks. Basically, you can't pick your own appraiser or tell the appraiser which comps they have to use. Much less try to argue with them about the marginal value of that additional square foot or extra bathroom. Sure, you can provide the appraiser with your chosen comps but there's as much chance that they'll end up in the garbage as anything else. But it can't hurt to try if you've got the spare time. And you can always protest if you think it's obscenely low.
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  • Christopher Phillips
    Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
    9y

    @Guido Bertoli

    You can't use square footage to do an analysis, outside of condos and commercial space.

    Square footage only includes above grade livable areas. Won't include below grade areas, won't include unfinished above grade spaces like garages and attics. So, a three car garage house with a basement isn't comparable to a house with a car port and a crawlspace even though they have the same square footage...

    Comps are also based on similar style, size, age, within 1/2 mile to 1 mile, within previous 3-6 months, 12 months max. 

    Differences are then adjusted based on the appraiser's local knowledge. The denser the area, the closer you try to get to the subject property. You also have to account for the neighborhood - being on one side of the highway or turnpike can make a big valuation difference. Appraisers don't go past 12 months if they can help. It would be easier to go outside the 1 mile radius than try to do time adjustments for going past 12 months.

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  • Guido Bertoli
    OP
    Investor · Union City, CA · Member since 2017 · 17 posts · 2 votes
    9y
    Thank you everyone who responded, there's a lot of good information I've just read. I really appreciate all the advice.
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