Watch out for under-appraisals
For the last two weeks I have been in a pretty upbeat mood. I had finally got my rehab project at 3969 Humphrey under contract and a smooth closing looked to be all but a sure thing.
Now, the contract has fallen through and the property is back on the market (a steal at $127,750 if you are looking for a house 😉 ) . So what happened? The appraisal came in last night. It came in at $101,000! For my gut-rehabbed house! All I can say is that the appraiser in question doesn’t know the area. Every single comp pulled was from south of Utah. Streets like McDonald and Fairview. Anyone that knows Tower Grove South knows that the area south of Utah is almost a different neighborhood. More appropriate comps on streets like Utah, Humphrey and Wyoming were ignored in favor of the lower values streets to the south.
If that wasn’t bad enough, the appraiser adjusted the comp prices downward because I only have a parking pad instead of a garage. That is all well and good, except adjustments are a two-way street. I replaced all the electric, plumbing, HVAC, windows and flooring my rehab. Was that the case for the comps? No. But the appraiser did not make positive adjustments on my behalf. It was clear that the man did not know the area and is totally unfamiliar with the concept that rehabbed properties are worth more than properties with 50 year old systems. According to this appraisers logic, the $20,000+ put in to update the systems was a financial waste.
I am frustrated, but I am not worried. There are quite a few other interested parties coming forward that can see the realities of the property. That can appreciate it’s REAL value. But take my lesson to heart. Don’t just assume the appraisal on your transaction will go smoothly. Common sense does not always rule. Assume that the appraiser doesn’t know the area and make sure you do a little homework and prep some comps of your own prior to the appraisal. Send these over to the appraiser to help point them in the right direction. Some of the more headstrong in the appraisal trade might take offense to this, but with ludicrous appraisals popping up from time to time, it is clear that some are in need this kind of direction.