Appraisal came out 20k lower

[Victoria S.]

We are under contract for a 4plex. The cash on cash comes out at 13%, taking into account vacancies, maintenance, HOA ect (I used very conservative numbers). The appraisal came back at 20k lower than the purchase price. The appraiser had a hard time finding sale sales comparables because only 2, 4 plexes sold within the last year in the area. so he did a sales comparable approach (which came out lower than the purchase price) and an income comparable approach (which came out 30k higher than purchase price). If you take the median of the 2 approaches, this is what we offered. If we pay 20k out of pocket the cash on cash goes down to 12%. The seller has pretty much said that he has cash buyers if we back out and will not go down on price. Has anyone ever run across this? If so, how would you handle this?

[Dan Barli]

Well, ultimately you have to decide if the numbers still make sense for you @Victoria S.. Appraisals are subjective, as we know. Further add to that the fact that there were not many comps for your appraiser to use. Are you buying this house for the cash flow? Or are you looking for the appreciation play? If the rents are still the same and your ROI remains where it was, then you can likely still get the same exact deal.