If you have been reading the blog you know that our market seems to have become busier. It seems like everything out there, priced anywhere near market value has multiple offers. Banks seem much more realistic with pricing and buyers seem much more motivated (and not afraid to offer over asking price).
This is causing problems with appraisers. It seems like prices are all over the map. Some properties are cheap, other properties are expensive. Quality of the inventory has a ton to do with it.
We got multiple offers on this property. One was quite a bit over asking with the buyer asking for 6% back after closing (even when we calculated our net, it still is over asking price). We put the property in escrow and the appraisal came back at $5k less than closing. We negotiated a bit and ended up taking it most of the $5k out of what we were willing to give back to the buyer.
We just got an offer slightly over asking price, but appraisal is going to be a problem on this house. The house is clearly worth what they offered, but most of the inventory is not in the same condition as our property. I had our appraiser take a quick look, and it looks like the appraisal will be $10k low. The buyer’s agent said his appraiser thought he could pull of their offer number.
The problem is, most buyers are new buyers, and need concessions at closing. There is also heavy competition on the well positioned properties in this market. As the market shiftss from down trending to flat this problem will continue to get worse.
A willing buyer, a willing seller, but not bank willing to write the loan because the property does not appraise high enough… anyone investors willing to finance in this down-trending market? I know I’m not!
Add this to the list of things for all you fix and flip investors to be cautious of. Hint if you focus on the lower end of the market (buy properties really cheap and sell cheap), you will have less issues.