Thank you for all your feedback to our Appraisers are Killing Sales Post! We welcome the discussion and look forward to new responses. Here was our initial post that many of your followed!
http://activerain.com/blogsview/2588573/appraisers-are-killing-sales-
So now I must ask: how can you say with such certainly that what someone paid for a home dictates what it is worth when it is completely fixed up?
It shouldn’t matter if an investor purchased a property for a dollar, does the repairs and renovations, and resells it for $300,000. If $300,000 is the value of the property, that’s what it should sell for. What someone paid for it is irrelevant.
The problems we are having are not properties that we simply put carpet and paint in, these are properties that we have done a substantial amount of work to and have been completely redone or regutted. We are talking, electric, plumbing, roof, windows, granite counters with new solid wood cabinets, etc ... We do quality upgrades that take a substantial amount of time, money, and effort. We have the highest quality contractors. Our upgrades are things that homebuyers are WILLING to pay for and want a move-in ready home.
In addition, we are not asking above top dollar pricing. When our clients buy a home to fix and flip, we already have done the back end work to make sure the property will sell for a profit. We have done a full CMA and are not simply making up high prices to put on the market. Overpriced homes don’t sell, but well priced quality homes don’t. Our investors are want to sell homes quickly and in this competitive market, that is not feasible if a home is overpriced.
The problem with these appraisals is that appraisers (not all) are putting in the first 5 houses they pull up no matter the condition or situation. Reading the initial blog post, you will see perhaps why appraisers are making such big mistakes. They are under the gun, working for less money than ever with less time than ever and required to work over broader regions that they lack the knowledge of. The market has changed and there are far more distressed properties on the market right now. Appraisers may lack the experience and knowledge to evaluate quality upgrades and appraise properly.
I just had a appraisal come in low where the appraiser had 4 of the 5 comparables were distressed and NOT updated properties. Yes, the properties had the same bed, baths, and around the same sq feet. But they were lacking over $50k in upgrades. When we disputed the appraisal (which luckily got corrected and the value of the appraisal went up 25k) I pulled ALL remodeled properties in a mile radius of the house. There was not one comparable that was fixed up in a mile radius that was sold under $335k. Ours was pending at $320k (we were the lowest pending fixed up house for sale, so the statements above that reference us overpricing property, is again, irrelevant). This is not a fluke story, this a monthly problem for us.
Appraisers should appraise houses that are apples to apples. They can’t continue to compare remodeled houses to fixer bank owned and give minimum credit to the value of the property. If a property has had over a $70k remodel, bumping the value “+10,000” from the purchase price isn’t going to cut it. If we can’t get this problem sorted out, we are in for a long painful real estate market.
Here's an example of what we do at Heaton Dainard LLC.
This is a property we found for one of our clients, a local real estate investor. We guided him through every step of the process by helping him find a highly discounted property in the area he was targeting, securing financing that could be used for the rehab and purchase, referring our network of trusted contractors that we knew would be able to stay in his timeline and budget and make rehab decisions that are necessary and homebuyers really care about and made sure he had a top agent that has enough experience doing CMAs to price the home right the first time so it would be attractive and sell quickly.
Now look at the initial property and then look at the renovated pics. Can you see the value in our renovations? Can you see why the after house would be more attractive and command much more the "before" house did?
https://picasaweb.google.com/investnowllc2/BallardNW67th
Let me know what you think!
Thanks for the feedback and keep it coming.
Warm regards,
James Dainard
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