Dear Bigger Pocket Community,
I'm writing this to ask for advise because I'm sure something isn't right. I'm an aspiring real estate investor. I began my real estate endeavors by buying the house next door to my mothers house in Saint Louis, Mo after she passed. The house next door is a beautiful two story brick house with an ARV of $180,000. I purchased it cash for around $20,000 and invested about $60,000 of my own money into the rehab making an all in of $80,000 . My Mother purchased her house for $190,000 in 2007 brand new 3 Bed 2.5 Bath 1,850 sqf on a single lot.
The comps for houses in the area for my mothers house range from $250,000-$325,000 within a (0.5 mile radius) that being said the approximate ARV for my mothers house is respectfully $250,000 with a $30,000 buffer on either end, low end I'll harshly accept $220,000 high end I ARV potential $280,000.
My direct next door neighbor (opposite side of brick house) with a mirror image house of my mother appraisal in late 2019 was appraised at $220,000 so conservatively the portfolio for the pair value ranges from $400,000-$460,000
After looking around for rental portfolio lender I found Lima One Capital as a lender and after seeing good reviews about them I proceeded to begin my BRRRR portfolio with them. I reached out around July 10th and began the refinance application on July 13th. I was told it usually takes 14 days but due to back up on appraisers the time line could be upwards of 30 days. I was fine with that so the appraisal date was set for September 7th 2021.
Our initial Cash Back to Borrower was nearly $220,000 at 75% LTV at a 5.125%
The appraiser arrived without a mask and looked over both of my houses, I was speaking with him of my plans of using my own equity to continue my real estate endeavors and buy back the block (which I'm starting to think was a mistake). After the appraisal communication halted for nearly a week, I had to beg for the appraisal to be sent over and when it was the valuation was nearly $30,000 less than what my mother purchased her house for in 2007 before development began in our area and $60,000 less than my neighbors appraisal and $100,000 less than comps within a (0.5 mile area) . The real estate market is hot in the area that the homes are located in and they typically sell quickly and for over asking price.
My Brick House appraised correctly at $180,000 (took 30 days to receive appraisal thats marked that they received on September 7th) which I was certain of its value and I am glad to know that one is going to be a successful BRRRR but my issue is with my mother house which prevents me from closing with them. I don't feel comfortable with the lender at all, they are attempting to put me in a Fix-N-Flip for the last few things I have to complete on the Brick House which is less than $15,000 worth of work. I've been financing my entire real estate project out of my own pocket and for the last few things to complete I want to use equity vs paying high rate interest to a hard money lender or continuing to use my own funds.
Lima One sent me a estimate completely the opposite of what our initial deal was, when my mother passed away she had a balance on her mortgage. She passed at the age of 62 Due to Lung Cancer caused by Radon in the home and I was left with the mortgage so I bought the house next door as a cash flowing asset to pay the mortgage on my mothers house. The amount owed would of been covered in our original agreement instead because of the devaluation they wanted me to bring $28,538.42 Cash from Borrower at Closing AND perform a Fix N Flip on my Brick House thats 80% complete.
The appraiser used redlining tactics when performing his search for comps. He said he was unable to find sales within the past 6 Month and had to go back to as early as January 2020 for comparable. He intentionally picked comps that are in a less desirable neighborhood. After researching the appraisal company "Associates Appraisal Inc" I found similar reviews of their homes being devalued by $100,000, The Appraiser showing up without a mask, and similar situations of the appraiser intentionally picking unfavorable comps.
After bringing it to the lenders attention that the appraiser red lined my appraisal and without saying that I'm African American but that my homes are located in a predominately African American neighborhood that he shouldn't assume that my houses marketability is only to African Americans and his sales comps directly insinuate that people who are shopping for homes on the left side of one street have no interest on homes on the right side of the street. I showed him the comps in direct correlation to my property including demographics so they can see where the appraiser made his bias judgment and analyzation communication halted.
It wasn't until today that I've taken my teams advise and inform them of the Fair Housing Act law. It does not take 101 Days to perform a Cash Out Refinance, I keep receiving updates on deals that have closed with the company and they all have taken less than 30-60 days. I have been patient but others have been bringing it to my attention that my treatment is disparate and that something isn't correct with this lender when it comes to my situation. My patients is extremely disrespected, I had to pay $550 for each of those appraisals. I have to switch lenders and pay another appraisal fee that is not productive, I have to fly back to Saint Louis for something I've already done that is not productive, I have to spend time venting on Bigger Pockets about a lender ... Hopefully this is productive.
Let me know what you think about this Lender and what I should do. I plan on growing my portfolio to 25 properties in my Saint Louis neighborhood within the next two years.
Hello @Travis Cotton . I have shared your concerns with our internal valuations team. They will be taking a closer look at everything value-related to your file, including the third party appraisal report(s). Lima One will be in touch with you directly. One item of note is that -- nationwide and across all product types -- we are seeing very elongated valuations delays. These are certainly unfortunate and we are working on solutions to reduce to total time it takes for a valuation report to be completed.
This is why brokers hold value. I don't partner with them because of things like this. If any of my refinances went over 45 days and it was the lenders fault, I wouldn't broker for them anymore.
It's worth it to pay the 1-2% for a broker.