All Forum Posts by: Jay Groleau

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $139,000
Cash invested: $72,500
Sale price: $232,000

This was a condo that had been on the market for a while. It was a hoarder situation, and I was able to negotiate to a number that made sense. I used hard money to finance the purchase as well as the rehab. I borrowed the down payment as well. I paid a very high interest rate on the hard money as well as the down payment, but the numbers still worked and I made a profit.

@David Faulkner

Sorry for the delay in getting back to you!

Pulling comps is about the most important thing we do when it comes to single-family homes, or individual condo units. Other approaches to value are important when dealing with different kinds of properties, but the sales comparison approach is typically the most reliable when appraising a single-family home.

To be honest, the most important things to remember are the common sense things everyone talks about – location, the type of house, quality of construction, age, condition, size, etc. You want sales that are as recent as possible, as proximate to the subject as possible, and with as many similar characteristics as the subject as possible.

When you dealing with a typical single family home, finding sales with common characteristics is relatively easy. It's when you get into a situation where the property you're trying to value is a little unusual whether it's the house itself, the location, if it's in a remote location with there are few sales annually, etc.

When valuing a home that you have an interest in, it's important not to be emotional, and to be realistic about your property, or about an investment you're going to make.

Lastly, what I tell agents who ask me for advice in either pricing a property to put on the market, or to assess the property that has been sitting on the market for too long, is to look for properties that tell you what you are property is NOT worth. Don't just pull sales that you think look like your property. When you have a value in mind, look at comps that sold for that amount, and be objective when comparing your property to those. If you think your property is worth $1,000,000, pull comps that sold for that amount and ask yourself "is my property as good (nice, large, great location, etc) as those?"

Please forgive any grammar mistakes - I am using voice recognition software which doesn't always recognize my voice.

Thanks! 

Hi Ericka,

@Charles Parrish is right. If you get a private appraisal and discover that you can in fact refinance, your lender will need an appraisal from one of their own appraisers. Further, depending on the the lender, they won't be able to use that appraisal, even if it is from one of their own appraisers. Appraisers are on rotation at essentially every lending institution, and they can't direct orders to certain appraisers. 

If that's confusing, and you'd like a better explanation let me know or give me a call. 

Of course I'm biased as an appraiser, but it is essentially useless. Sometimes it is right on, and others, way off. You don't necessarily need to get an appraisal on a property, but you need to be able to figure out the  value yourself, or work/partner with someone who can. 

As an appraiser, I frequently find myself in a tough situation - I believe the value of a property is there (contract price) but the comps and market data show that it isn't. I am also a broker, so I understand the buy/sell side as well. The difference between an appraisal and an agent's CMA essentially comes down to what needs to go into each, and the criteria we each need to satisfy.

Not that they need to, but agents don't HAVE to follow criteria, while appraisers need relevant sale data, real proof; a feeling isn't enough. We need to keep our adjustments within certain guidelines (15% net and 25% gross). FNMA recently retired these guidelines, but most lenders still use them. Whenever possible the sales need to be in close proximity to the subject, and they need to be recent sales, similar in age, quality, condition, GLA, style, etc. 

I can't tell you how many times agents show me their CMA at the appraisal inspection, and the only thing their comparable sales have in common with the property they're trying to sell is the sales price.

And yes @Chris Mason and @Kelly O'Quinn it is refreshing when an agent is educated in the appraisal process. It legitimizes their argument for what they think the property is worth. 

I am looking purchase a 3 unit property in Kittery, ME. It's an REO that needs work. I was going to purchase it using an FHA 203k loan, but the closing process takes too long and the seller won't accept the offer for that fact. I'd like to purchase the property with borrowed cash and refinance immediately. This would be a 90-100 day loan. I have been appraising here for 15 years, and know the value of the property, both now and as repaired. Let me know if you are interested.

Thanks in advance!

Jay 

I am looking purchase a 3 unit property in Kittery, ME. It's an REO that needs work. I was going to purchase it using an FHA 203k loan, but the closing process takes too long and the seller won't accept the offer for that fact. I'd like to purchase the property with borrowed cash and refinance immediately. This would be a 90-100 day loan. I have been appraising here for 15 years, and know the value of the property, both now and as repaired. Let me know if you are interested.

Thanks in advance!

Jay 

I am a certified appraiser. USPAP says that an appraiser can't appraiser a property in which they have any current or future interest.

A property owner has asked me to appraise their property to determine a price for listing their property for sale. I have researched the property online, and would like to buy it. I haven't inspected it yet, but the area is up-and-coming and this property has a lot of potential. 

I am just wondering how to approach the seller. My plan is to inspect the property, and let him know that I would be interested in buying the property. It would be a conflict of interest to appraise the property with the intention of buying it, so I really can't appraise it at all. Obviously we could hire another appraiser to do an appraisal to come up with a sales price, or I could just make him an offer before the process starts.

Any insight from someone who has been in a similar situation would be greatly appreciated!

Best,

Jay

Hey @Erick T.

Thanks for clarifying. I am not a member so will be paying $20 myself