Private Money Lending: Do I need an Appraisal or CMA
I am often asked the questions that if I am buying an investment real estate property and using a private lender to fund the deal - do I need an appraisal or is "Comparative Market Analysis" (CMA) good enough?
What is a Comparative Market Analysis? A CMA can vary in length from two pages to 50 pages depending on complexity of the property and number of comparable properties. A CMA is an evaluation of a home's value based on available local market data including:
• How much homes similar to yours have sold for recently.
• How long these homes were on the market before they sold.
• How fast you can expect to sell your home at your desired asking price.
• What your "competition" would be should you decide to put your home on the market right away.
But the answer to this questions is to use whatever you have available to use at each point in the process. Before you make an offer and need to have a good, but not expensive, indication of what the property is worth a CMA will serve this propose very nicely without spending any money. Most realtors will be happy to run a CMA assuming they are part of the deal and will get paid at closing. But keep in mind a CMA is just a "quick and dirty" analysis is worth and not to be related on without your review and analysis of the report. In other words, do not accept any computer generated report without doing your homework.
Once you have made an offer and it has been accepted, you may want to spend the typical $300 to $400 for an official appraisal. Even when dealing with private lenders you need to be able to show them that their loan will be secured by a property that is greater than the amount they are loaning to you. Typically private lenders do not want to go over 75% loan to value. An appraisal will also help you in determining how much money you may borrow from a first mortgage lender and how much you may borrow from a second mortgage lender.
To learn more about private lending please go see my eBook title "Private Lending Secrets for Real Estate Investors by going here ==> http://www.private-lending-secrets.com/
What is a Comparative Market Analysis? A CMA can vary in length from two pages to 50 pages depending on complexity of the property and number of comparable properties. A CMA is an evaluation of a home's value based on available local market data including:
• How much homes similar to yours have sold for recently.
• How long these homes were on the market before they sold.
• How fast you can expect to sell your home at your desired asking price.
• What your "competition" would be should you decide to put your home on the market right away.
But the answer to this questions is to use whatever you have available to use at each point in the process. Before you make an offer and need to have a good, but not expensive, indication of what the property is worth a CMA will serve this propose very nicely without spending any money. Most realtors will be happy to run a CMA assuming they are part of the deal and will get paid at closing. But keep in mind a CMA is just a "quick and dirty" analysis is worth and not to be related on without your review and analysis of the report. In other words, do not accept any computer generated report without doing your homework.
Once you have made an offer and it has been accepted, you may want to spend the typical $300 to $400 for an official appraisal. Even when dealing with private lenders you need to be able to show them that their loan will be secured by a property that is greater than the amount they are loaning to you. Typically private lenders do not want to go over 75% loan to value. An appraisal will also help you in determining how much money you may borrow from a first mortgage lender and how much you may borrow from a second mortgage lender.
To learn more about private lending please go see my eBook title "Private Lending Secrets for Real Estate Investors by going here ==> http://www.private-lending-secrets.com/
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