Appraisals and Refinancing in Providence/ Rhode Island

4 Replies

We just completed two refis in Providence but the appraisal didn't come back at the target and I'd love to hear any stories from local investors who've followed a BRRRR strategy.

Hollis St -  Realtor.com $207,000 Zillow at $274,000 Trulia at $261,000, appraised for $230,000. It's fully occupied four-unit that rents for $3,675, so even at $270,000, it still satisfies a 1.4% gross yield. 

Harrison St -  Realtor.com $198,000 Zillow at $262,000 Trulia at $200,000, appraised for $200,000. Also, fully occupied four-unit that rents for $3,200, so even at $240,000, it still satisfies a 1.3% gross yield. 

The worst part was both appraisers used comps from over a year ago, and in a hot market that makes a big difference, and I'm confident they were anchored on the purchase price  (both acquired ~15 months ago) even though we invested in upgrades. 

Would love any thoughts or stories.

Zestimates, etc are worthless. Have you run your own comps? Ask for new appraisals and cherry pick your own comps, then meet with the appraiser and hand them your comps. As you walk through together point out all the upgrades you've made. If I have a deal (representing the buyer or seller) where I think the appraisal will be a challenge, I go and try to make my case. They usually appreciate the extra info and are happy to take my comps. If you think there are comps that could hurt you, then point those out too and give reasons as to why those are not good comps for you. If you have an agent then they should be doing this for you.

Here is what I have discovered in any market.  The value of a house is pulled out of thin air.  Ive had appraisals that were heavy handed, and others that were very light despite my efforts to hi light value ad.  Certain appraisers follow a strict guideline.  Others apply a little more common sense to the equation in addition to the analytics.  Its honestly a crap shoot. Very annoying process overall.  As far as Zillow and all of those other sites go. Rule of thumb.  No real validity to their "zestimates"

@Fan Bi meeting the appraiser is critical. I do it either myself or have my realtor do it on every refi. You can always do a second opinion but at the end of the day if you can bring comps and build rapport with the appraiser (in an honest way) that will go way longer towards getting your price than it should. As @Jason Lee mentions the comps you provide (in hand, printed) will help give the appraiser confidence that the price they’re giving isn’t unrealistic, and hence they won’t get questioned about it by supervisors or homeowners

I went through a refi myself last Sept. The bank incorrectly ordered 2 appraisals, one each from 2 different companies. One came back at 250K and the other came back at 210K.. Even the bank was confused how they can be so different when they were done at the same time. At the end they just used the average. I'd go for a different bank if you aren't getting the numbers. Based on your income, you might also want to consider a business loan by packaging these 2 properties together. You should be able to get the numbers you are asking for because the cashflow is so strong and business loan would be based on NOI.