Do You Prefer Lenders That Require an Appraisal on Investment Properties?

Question

I'm curious where everyone stands on this.

When financing an investment property—buy & hold or fix & flip—do you actually prefer a traditional appraisal, or would you rather work with a lender that can use an alternative valuation method when possible?

I can see both sides.

Reasons to want an appraisal:

• Third-party opinion of value
• More confidence that you're not overpaying
• Can help validate your ARV on a flip

Reasons to avoid one:

• Saves time before closing
• Eliminates the appraisal fee
• One less hurdle that could delay the transaction
• Avoids situations where a conservative appraisal changes the economics of the deal

For those who have done multiple investment deals:

• Have appraisals ever saved you from a bad purchase?
• Or have they mostly been an extra expense and delay?
• If you had the choice on every deal, which route would you take and why?

Interested to hear everyone's experiences.

John Salcedo · Answer

One of my lenders requires a full appraisal for hard money loans.   I appreciate confirming our ARV before we begin rehab.   If the appraisal comes in lower than our ARV we adjust the rehab a bit.    If the appraisal comes in above our ARV we know which appraiser we will be using during the re-fi.

Omar Hernandez · Answer

Hey Ravi, good question. For me personally, I'd lean toward skipping the appraisal when possible. Time isn't really the issue — it's that a conservative appraisal can undercut numbers that were already conservative going in, and that changes the deal economics after the fact rather than before.

I just went through this on a DSCR refinance — we used a conservative in-house estimate going in, but the appraisal came back lower because the appraiser couldn't find comps nearby and ended up pulling from about 5 miles out. Not exactly reflective of the immediate market, but that's how it landed.

So if you've got non-appraisal DSCR options (AVM-based, desktop, or otherwise), I'd be interested in hearing more about what you offer — happy to connect and see how it could fit into what I'm doing.

— Omar H.