A Tale of an Abysmal Appraisal
I can just hear you all inwardly groaning on this topic. Most likely we all have an appraisal horror story. That no so-great phone call saying the home or building did not appraise for the sales price. You can feel you stomach drop when you hear this right?
The phone calls commence to the Sellers, the Buyers, the other agent, etc. Re-negotiations begin and far too often, the deal is dead. Not to mention, Sellers are forced to either accept a lower price or go back to the drawing board with the home put back onto the market.
This appraisal tale has a happy ending. I listed a very unique, historic property. Right on the town square in a city that has been consistently on the uptick for years. Great economy, one of the top Texas towns for tourism, and a demand for businesses wanting to be on the historic square. I spent a great deal of time researching rental rates and sales of other buildings on the square prior to listing this particular building.
Any of you who work in commercial properties especially unique commercial properties understands the challenge when finding comparables. Knowing the history of current businesses, owners, tenants, etc. all provide vital information for us. Knowing we as agents have a challenge in pricing, we certainly understand the challenge for an appraiser as well.
What we were not prepared for was the absolute WORST appraisal I have ever seen! The appraisal came in $150,000 BELOW our agreed upon sales price. I knew something was amiss. This didn't even make sense. Perhaps the appraiser left out the building out back that went with the property?
In discussions with the current owners, the said, "Hmmm, that name on the appraisal sounds familiar. We had it appraised 8 years ago when we refinanced." Luckily they found the copy and low and behold, the same appriaser! Also to our astonishment, this appraisal done EIGHT years ago was for the EXACT amount the current one came in with. Now that is astonishing.
The bank contacted the gentleman (appraiser) and hoped that there had been a mistake. Surely he would have clued in that in 8 years in a thriving area a building like this would have appreciated some! "Nope, he said, that is what I appraised it for again!" Wow, these buyers were charged $2,700 for what appeared to be a rubber-stamped appraisal.
Thankfully, my clients and the buyers agreed to meet face-to-face to discuss options. All agreed something didn't smell right. We came away from that meeting with my Seller's agreeing to pay for a new appraisal and the buyers chose a new bank. If the new appraisal came in low, we would re-negotiate. If it came in higher than our agreed price, they would sell at the contract price.
Well guess what folks??? The new appraisal came back this week and GUESS WHAT? Yep, it appraised $10,000 HIGHER than our contract price! Woo hoo! An amazing $160,000 difference from the first appraisal.
Here is the lesson in this story. Those of us who sell unique, historic properties understand these are difficult to price. However, we do know our stuff! Our lesson was in persevering, thinking outside of the box and including all parties in the solution.
My Seller's are beyond happy and the buyer's are as well since now they are confident they are purchasing a building with equity already in it! The abysmal appraisal is now history and all parties can move forward. They are happy.
When in doubt, seek it out! We do know our business so stay confident, fight the good fight, and push forward when something seems truly off. Thank you to those appraisers out there who work hard to keep our industry on our toes and who do their work diligently and carefully.
So rock on everyone! Hang in there and look for creative solutions when you are faced with this type of scenario. It ain't over till it's over!