Selling a Rehab Property Above Appraised Value?

Question

We've recently completed a rehab, we did a nice job and knew we'd run into appraisal issues.  I think it will appraise at $230k, on a good day, but most likely $220k.  There just is no comparable and few sales of similar properties in the immediate area.

So I listed it 3 days ago at $239,000.  We normally list it about where we think it will sell and let the offers roll in.  As of right now, I have 3 solid offers, $247, $245, $240.  Four more agents called this weekend and let me know they'd submit an offer today, one is willing to do $90k down.

Most of the buyers are going to go FHA, which is fine with me.  But say it appraises at $230k and the buyer has cash to make up the difference?  If the loan is $230 less 3.5% down can they pay the difference with an FHA loan.  Can I sell them the appliances for $15,000 or $20,000?

What have you guys done to get every dollar out of the property possible?

Will Barnard · Answer

Or,
Get a conventional buyer and avoid this problem all together.

Scott M. · Answer

Their mortgage person will select the appraiser since FHA doesn't use the same process as HVCC - and I wouldn't give out the lockbox but meet the appraiser at the property - the seller can always arrange a meeting that way with the appraiser.

However - in today's world I would be surprised if it worked.

You said there are no comps in the immediate area and appraisals are based on comps not "offers".  Heck - I could get 10 friends to submit offers.

At the same time I would go for it!  You have a fall back position so you know what you can and can't accept.

Dan McGehee · Answer

If you can have contact with the appraiser (or if your lender can), try to submit the typical due diligence material (contract, rehab cost breakdown, the old appraisal etc) with a 1 page summary and mention the number of offers you received.  Since you property is obviously sturring up a lot of demand, the appraiser should be aware of the current market but it is never a guarantee that an appraiser has a good understanding of what the actual market is.

I don't deal much with FHA but I've seen in the past that a significant amount of purchases (~90-95%) always come in at the purchase price.  Refis, especially cash out are notorioulsy more conservative but with purhases many of the appraisers take a property's purchase contract to be illustrative of true market value.

good luck

Ralph S. · Answer

Good luck, and let us know how it turns out.

Steve L. · Answer

FHA Appraisals are not assigned randomly, like conventional and VA loans are.  The lender assigns them, but typically I can contact them, or communicate through them via the loan officer.

I'll let you know what we make happen...

Steve L. · Answer

Jon, I have a willing buyer and seller.

The issue is an appraiser finding comparables in the immediate area that are in the same condition. Banks have tightened things up so much.  Can I have the buyer come in with cash over-top the appraised price with an FHA offer?

Jon Holdman · Answer

You do realize the buyer's lender will order the appraisal per the new HVCC (home valuation code of conduct) rules?  I don't think you'll have any chance to have any contact with the appraiser.

Steve L. · Answer

I don't have issues selling it at $220,000.  If that's the most I could get I would still sell it and make a profit.  I'm in it, somewhere in the mid 100's.
          
          My question relates more to the market is willing to pay $240k+ for this property, what ideas do you guys have for me to not leave this money on the table, even if it appraises for less.
          
          Ralph the reason I listed it at $239 is so I could get offers in that range and give them to my appraiser. Some appraisers take these into account and others don't...

Jon Klaus · Answer

Maybe someday in the future a property will once again be worth the price a willing buyer and seller come to.

How much did you pay?  And the rehab and other costs?

Ralph S. · Answer

Not sure with the new appraiser rules and all, but I'd make sure whoever does the appraisal gets copies of all the offers over the list price, along with your counters, etc.

But, it sounds to me like you priced poorly.  Even with that, congratulations!

Selling a Rehab Property Above Appraised Value?

Most Popular Reply