How can I do a rough valuation to decide if to refinance?

10 Replies

Hello everyone, hope everyone is safe and happy and moving forward in your respective goals.

I bought a duplex house hack in San Diego County August of last year using FHA. I figured I would be in this loan for a few years while I build enough equity to go into a 90% or maybe even an 80% refinance loan to remove MIP or at least a PMI that would someday go away without having to full-on refinance.

HOWEVER, as in much of the country, pricing is skyrocketing in SD right now. I live in one of the last "affordable" beach communities in San Diego, and many properties around my neighborhood are being flipped or rebuilt and coming onto market. I am thinking I'd like to ride that wave and try my luck at refinancing out of the FHA earlier than originally planned. Where I could use some advice is on what I can do to get an idea on what my home may be worth. I have a different footprint than most sales in my area since I have a 2 unit detached parcel vs. single-family in the area. There are a couple of 4-plexes on the market with my footprint where they converted the garages to add the extra 2 units.

 The sq ft price is enough to give me a valuation of over 80%!!!  But, I understand that probably wouldn't be the metric used in calculating my valuation. I do want to try my luck at a refinance, but don't want to pull the trigger too soon.  I am already monitoring the properties for sale online and hope those similar footprint homes sell well and soon, but that likely won't give me any info till November.

Thank you for any help and have a wonderful day!!

Updated about 1 month ago

To assist anyone that is nice enough to contribute to my post, here is some info that will help clarify: My property is a Detached Duplex. Current For Sale or Comps in the area are either for SFR or Duplexes that have been converted into 4-Plex. So unfortunately, no comps to fit my property type which is a Detached Duplex. Thank you for looking and any advice!

Oscar, if you can get a loan for 80/20 Loan to Value, you can refi out of the FHA. I believe the Mort Ins is required till that point. As far as valuation, you can do a rough by just looking at what other 4 plex's in similar condition close by are selling for. If you are not in the ball park yet, no need to pull the trigger.

@Oscar Miguel to go conventional on a 2 unit, the best I've seen is a 85% LTV with a very small pmi. Look at similar sales around you that you could share with the appraiser if it supports your value. If you are close, definitely be part of the process and give the appraiser comps that you have and it may be worth spending the money to see if it appraises.

Don't go directly to an appraiser yourself, go through the lender to order appraisal.

Best of luck!

Originally posted by @Twana Rasoul :

@Oscar Miguel to go conventional on a 2 unit, the best I've seen is a 85% LTV with a very small pmi. Look at similar sales around you that you could share with the appraiser if it supports your value. If you are close, definitely be part of the process and give the appraiser comps that you have and it may be worth spending the money to see if it appraises.

Don’t go directly to an appraiser yourself, go through the lender to order appraisal.

Best of luck!

Thank you Twana, I would be 100% in for a 85% with the lesser PMI and I think I'm probably very close if not already there for 85% LTV. I'd love to do that and be done with it. I worry about not getting this done in time for whenever more inventory returns to market and values level off. If possible I'd appreciate it if you could refer me to where you saw the 85% LTV refinance option.

Thanks!

 

I have done quite a few refinances in San Diego county.   They are traditionally much more conservative than appraisals associated with a transaction.  To be safe, I would plan on a refi appraisals of 10% below what you would achieve if you had a transaction at 10% higher. 

To word it differently, appraisal associated with a transaction try to justify the value of the agreed transaction.  Appraisals associated with a refi are not trying to justify a transaction and come in much lower. 

Also learn and be prepared to appeal appraisals.   Easiest appraisal to appeal are one that used poor comps when better comps were available.  Next easiest is where the adjustment is lower than anything reflected in the market. 

Good luck

I know a few appraisers here in San Diego. If you want a direct contact, message me. Pricing is skyrocketing in SD, that's true, but everything comes down to your individual numbers. If you gain by selling, do it sooner than later. No one really knows what "later" will be like.

to @Dan Heuschele 's point...you want to be prepared with your own comps...when I do my own refi's I help guide the appraiser from the beginning to where I believe the value should be...for the cash out refi's I've done recently I have come in at top market valuations for my properties by guiding them up front.  It is definitely a bit more difficult to challenge their appraisal once it is already completed.

Originally posted by @Twana Rasoul :

to @Dan Heuschele 's point...you want to be prepared with your own comps...when I do my own refi's I help guide the appraiser from the beginning to where I believe the value should be...for the cash out refi's I've done recently I have come in at top market valuations for my properties by guiding them up front.  It is definitely a bit more difficult to challenge their appraisal once it is already completed.

 I would like some tips on how to do this.  My refi appraisals have been terrible.  I then appeal them and once got a large adjustment (that even after the adjustment was lower than I believe true value), but mostly have got token adjustments.  So all of my refinance appraisals I have considered to be low including the one I got a $60K increase on (that one was one of the 2 worse I have received and the other of the 2 worse was done by the same appraiser who ran away/disappeared in the appeal).

Do you find out the appraiser and somehow provide them suggested comps?  What I see is the refi appraisals seem to seek out the lower range of comps to use.  Also they may pass up a better comp for a less appropriate comp that adjustments will provide a lower value (this is how I have gotten the token appeal increases but they typically do not throw out the worse comp but instead add the better comp to the comps).

The appraisals so far have been the Achilles heal of our BRRRR process. Maybe acquiring good candidate properties has also been an issue (two Achilles heals?). We do pretty good with the purchases we have made (but too few) and with our rehabs.

@Dan Heuschele absolutely! Contacting the appraiser helps a lot! Sometimes these appraisers do not even live in the area, so providing them comps and talking to them makes life easier. The bank chooses an appraiser for the refi, but you can always request someone local who lives like 10-20 miles within your area.