So just got an appraisal back on a renovated duplex I'm financing. The appraisal came in lower than I was hoping for and upon digging into it, the appraiser used 3 comps. The breakdown consists of:
Comp 1- A property which had 1 unit that was gutted to the studs and another that was in half way decent shape. Condition was listed as "poor" for this one... but how is this not considered a distressed property and therefore disallowed? (MLS had no interior pictures but I have emails back and forth between the realtor and myself around the time it was listed confirming this properties condition)
Comp 2- A property which I purchased about 11 months ago. I put about 20k into the property to get it to market rents, including floors, kitchens, baths. (MLS had no interior pictures of this property but price reflected it...)
Comp 3- Probably the best comp of the 3 for condition. However, it was 1100 sq ft larger and it went under agreement 10/20/16 and closed around 12/20/16. So this comp is nearly 2 full years old. (Trulia claims that property values in the last year in this town have seen an 11% increase.... of course this isn't super reliable but it definitely shows that property values are increasing here just like everywhere else)
Another issue I had was the market rents this appraiser used (he had 1,000 and 1,100 for market rents) where I get 1150 and 1200 and both units rented in less than 48 hours on the first two and only showings with 10+ additional requests. Being a duplex this doesn't matter really but just adds to my frustration around this appraisal.
I'll admit that there aren't any great comps in this town for duplexes that weren't either short sales or foreclosures, however, there are plenty in all the neighboring towns which are very similar. I think these comps have bumped the value of this property down about 15-20% of where I think they should be.
Find better comps. My little memory device is CCCR.
If it doesn't check all four boxes, good luck getting an appraiser to consider it a comp, barring extraordinary circumstances.
Comp 2 is a good angle to work, too, since you know everything wrong with the property. I assume you still have invoices, etc, that can show all the work you had to do in order to bring it to habitable condition, which should justify why it went for so cheap compared to what yours is worth today.