Challenging an Appraisal

[Pete Fiannaca]

Wondering if anyone here has ever challenged an initial appraisal, before closing? Success? Not so much? My motive is to have a little more equity in the property from the start. Appraisal came back at contract price which was unexpected given the comps in the area. Thoughts? Pete

[Bill Gulley]

Sounds like you want to do some guru Enron Accounting. 

Gurus and the unknowing believe they obtain "equity" buying under market, that isn't so at all!  That is pure folklore!

First, if the property sold meets the definition of a market vale...exposed to the market, etc. what is sells for IS the market value.

Next, your purchase is taken during a marketing time frame, during that marketing period you purchased under certain conditions, what you paid is the strike price or market value. 

To readjust the value and claim appreciation, you'll need to hold the property 12 months, this puts you in another market period. 

Your book value of any asset purchased is the cost, plus costs of acquisition, period, it's not an opinion, at least from an accounting and legal point. 

In real estate, it will then be your cost, less depreciation or the appraised value, which ever is less. 

For any investors who may do an option later on, you better learn this stuff as your taxes will play out under new rules. 

So, when you hear some guru claim he got a property for $50,000 under market value and made an instant profit, he's full of BS and your BS Meter needs to go off.

Good luck :)