Would You Still Do the Deal If the Lender’s ARV Was $30K Lower Than Yours?

Question

I’ve been thinking about how easy it is to treat ARV like it’s a fact. Say your comps put the property at $300K after the rehab, but the lender’s appraiser comes back at $270K. Nothing about the purchase price or repair scope changed. But now you’re bringing more cash, pulling less out at refinance, or watching the profit disappear.At that point, do you trust your own comps and shop for another lender—or treat the appraisal as a warning that your numbers were too optimistic?

For anyone who’s dealt with this, did a second appraisal fix the problem, or just delay an uncomfortable truth?

Erik Estrada · Answer

If you disputed it with reasonable comps and the appraiser still did not budge, then likely you may need to order another appraisal and switch lenders to validate your stance.

If you don't have any rebuttal, then it's likely a lack of preparation, too much optimism, and not being realistic with the deal, which tends to be the case.

I think it's pretty rare to see any huge changes in value if you order another appraisal. It only really happens in areas where there are very few comps or there is a lack of qualified appraisers

Chris Seveney · Answer

I would say answer is "it depends", I will take a hard look at their appraisal and my comps and use it for further review and analysis.
I had on recently where their was an appraisal of $1M for a property and when I reviewed it with an agent and my comps the comps used to get to that number were about 1/2 mile away but in a very different neighborhood that was much more exclusive and the real value was around 700k. That's a big delta and an instance where I think appraisal was too high - so it can go both ways

Mike Grudzien · Answer

Yes, this would be a wake up call.  They can't both be right.  You need to find out what's right.

Denise Supplee · Answer

I'd look at it as a good opportunity to take another look at the numbers rather than assume either side is right. Appraisals can vary, but I'd also want to be sure I wasn't counting on the highest possible value to make the deal work. I've always been more comfortable with a deal that still makes sense, even if everything doesn't go exactly as planned.

Would You Still Do the Deal If the Lender’s ARV Was $30K Lower Than Yours?

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