3 Appraisals, 1 Day

March 10, 2010 · 5 comments

So much for taking off on a mini-vacation yesterday…

Turns out that all three properties that we have under contract to sell had an appraisal yesterday, and two of them were last-minute, meaning we didn’t have much time to prepare and we had to stick around to meet with the appraisers…

We knew the appraisal for the sale of The Neighbor House was going to happen yesterday morning at 9:30am (we scheduled it last week), so my project manager was scheduled to take care of that one. This is pretty much a wholesale deal and the property is practically move-in ready, so there isn’t too much concern about this one not appraising, especially given the comps in this area.

We received a call from the buyer’s mortgage broker for The Poor House the other night. She mentioned that — given it was an FHA sale — we’d need to get a second appraisal. We pretty much expected a second appraisal from the beginning, but when the appraisal wasn’t mentioned earlier, we assumed the underwriter wasn’t requiring it. Turns out they just didn’t catch it until now, so they quickly ordered the second appraisal and told us the appraiser would be in touch.

At 10am yesterday morning, he called an said he’d be at the property at noon. He asked a few questions, finished quickly, and let me that he’d already pulled comps and that he didn’t expect any issues. So, that’s good news.

The less good news is that the mortgage broker mentioned that the underwriter was grumbling about the fact that we’re selling the property so much above our purchase price, so I spent a couple hours putting together a full breakdown of all our costs and analysis of our likely profit. Hopefully when he sees that much of that $100K between purchase and sale price went to rehab and other expenses, it won’t be an issue.

We also got a call from the first appraiser on The Poor House yesterday, who told us that his appraisal was being questioned by the bank, and that he had to revise his list of comps. Luckily, there is a brand new (very good) comp for that house that just showed up last week, so he isn’t expecting any issues with the revision. Looks like this is going to be one of those difficult sales, right up to the closing…

The third appraisal we had yesterday was on The Probate House. The broker mentioned a few days ago that he ordered the appraisal, and the appraiser called us yesterday morning as well. He said he’d be at the house around 11am, right between the other two appraisals. So, my project manager ran up to that house as quickly as he could and met with that appraiser. Long story short, we expect that house to appraise without any issues (it’s priced at least 15% below market), but we’ll also have to get a second appraisal on that one as well, given it’s also FHA.

All-in-all, it appears we had three successful appraisals yesterday, and if that’s the case, it was a very good day…

5 responses to “3 Appraisals, 1 Day”

  1. Karen says:

    What would J Scott do?

    Hi J! You’ve given me so much great information already, and I have read everything on your blog, but I’m still stuck in park and not able to get my first flip going. Here’s my situation:

    I work full-time so I have a steady income. My plan is to do 2 flips this year, 4 next year still working at my full-time job, and then quit my job by year 3 and do flipping full time.

    I pre-qualified for up to $72,000 traditional mortgage (that’s me putting down 20% so the loan part would be $57,600). I have enough cash to cover down payment, holding costs, rehab costs up to a point, etc. I have made about 6 offers so far with no contracts. That doesn’t include the many offers I was about to make but found out right before that the house was already off the market (this is within a day or two of it coming on the market!). I know at least a couple of times, I have been the first offer in, but then a cash offer comes in and takes it. All of these have been REO’s that are new on the market, or have had recent large price drops, so there is a lot of competition for them. I’m working with an agent who is very responsive and gets offers in quickly but that doesn’t seem to matter. I have tried increasing earnest money too.

    I have also tried going to a smaller bank to get a line of credit to be able to use as cash but with no experience and almost no collateral, they, understandably, have turned me down. Although, the loan manager was very impressed with “my” business plan (which is really yours that I have adapted) and with my presentation, so he said after I have done a couple of flips and if I have a CD in half the amount I want to borrow, we can talk.

    My question is, what can I do differently to get an offer accepted now? You have mentioned that a lot of the houses you make offers on are ones that have been on the market for a long time so banks are willing to lower the price. My agent has told me that this market (Tampa, FL) is so competitive that any houses worth trying that with would have already been taken. I’m working on getting my real estate license now, so maybe the answer is to get my own access to the MLS and make my own offers? How much of a price drop can I really expect to get when I am using traditional financing?

    Any advice you have for me is very appreciated! And hopefully this will help others in my situation too.

    Thanks, Karen

  2. Karen says:

    P.S. I know I have mentioned some of the above in a previous post and you said to hang in there, but I have been trying to and getting frustrated. I thought if I elaborated a bit, you might have some other words of wisdom. Sorry if I’m being a bit of a pest. But persistence is the name of the game in this business, right?!

  3. J Scott says:

    Hi Karen –

    This may not be the answer you want to hear, but but REOs is a numbers game, and 6 offers really isn’t that many. I know a lot of successful REO investors who will get about 1-in-30 or even 1-in-50 offers accepted!

    The key is that you need to make a lot of offers, and eventually you’ll get one accepted. In fact, the way it generally works for me is that I won’t get any offers accepted for a week or two, and then get 3 acceptances at one time…

    The key is not to give up. You’re not doing anything wrong…there is just a lot of competition. If real estate were easy, everyone would be doing it.

    Hang in there (there I go saying it again :))…and trust me, it will happen…

  4. Mark-in-FL says:

    Consider doing the MH thing, but doing a nicer one and moving in. You’ll have much more disposable income and can buy a few more MHs in short order. From there, the sky is the limit.


  5. Karen says:

    Hi Mark,

    Thanks for the suggestion but that would require me to sell my house. For one thing, I love my house, and for another it’s not the right time to be able to get the most out of it. But I can afford to purchase quite a few MH’s, which I am considering doing if, once I get my RE license and can make my own offers, I still can’t get an offer accepted. I would try buying 5-10 MH’s and give it a year to accumulate more funds. Then I would be in a position to make a cash offer on a SFH for flipping.

    Thanks J Scott for the words of encouragement. It really does help! Once I get my license I’ll be able to make my own offers and can then make a ton of them. Right now, I think I’m wearing out my agent and he doesn’t seem too amenable to making low offers either. Speaking of that, do you have any sense of how low I can go, keeping in mind that I’m financing and not paying cash? I know I can offer as low as I want but would I be unreasonable to offer say $45,000 on a bank owned with a list price of $70,000 if the house has been on the market for a couple of months with no price decreases?


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