House #5: Appraised

April 14, 2009 · 12 comments

It’s been over a week since we had the appraisal done on The DIY House. Based on what I wrote in that post last week, I’ve been very skeptical that the house would appraise for the selling price, despite the fact that it still appears to be priced well below market.

I found out last Wednesday that the appraisal was going straight from the appraiser to the underwriter, and was completely bypassing the mortgage broker. Apparently, this is common for VA loans, and the broker doesn’t get the appraisal report under a couple days after it’s gone through underwriting. Well, after almost a week of waiting and wondering, we finally got news from the other agent that the house appraised for at least the selling price. We still don’t know exactly how much it appraised for, but I really don’t care.

This is great news, and means that there aren’t any additional major obstacles (that I know of) standing between today and our closing date. Assuming things go as planned, we should close on the sale of The DIY House some time next week!

Two sales in one month would be wonderful, especially after receiving my tax bill today…let’s just say that pretty much all the profit from one of these houses is going straight to Uncle Sam tomorrow…


12 responses to “House #5: Appraised”

  1. Ingrid says:

    Well, that’s a relief on the appraisal part.

    Sorry about the taxes. My uncle once said that he loved to pay taxes, because that way he knew he was making money. I guess that’s one way to look at it.

    Do you have a copy of John Hyre’s KISS Guide to Bookkeeping? You can get it at his site: I plan on buying it for myself when I get up and running. Might be able to save your self some $$ in taxes for next year.

  2. ezra says:

    Don’t think of it as going to Uncle Sam. Think of it as going to Uncle Obama! He’s going to spread your wealth. You should be happy! Way to give something back J!!!

  3. hakrjak says:

    I know what you mean man — I’m paying too much in taxes for my flips also, it seems…. I think it’s only going to get worse too, because I just read an article about how Obama is going to “Simplify” our tax code by getting rid of all the “Loopholes”…. Well last I checked, there are no real loopholes in the US Tax code, so to me that means he’s going to start throing out deductions that we depend on for our businesses…. This is going to be a fun 4 years!!!

  4. hakrjak says:

    p.s. —

    What did your actual tax rate % come out to be for the year? I’m curious, since your only income was from flipping this year right? Should have been about 20% I’m guessing? All short term capital gains?

    My accountant is telling me that based on how we file it, there should be almost no different between paying short and long term capital gains, but I’m skeptical until we file at the end of 09…


    – Hakrjak

  5. J Scott says:

    Hak –

    I actually took a loss against all my real estate income for 2008. I’m guessing this is because we had a bunch of start-up expenses.

    We also had a good bit of income from the beginning of 2008 (before we left our jobs), and that put us at about 31% effective tax rate for non-RE income.

  6. hakrjak says:

    31%? Boy that is high — You must have had a lot of income outside of RE…. Here’s something to compare it to — Last year I made about $50k net flipping, and about $70k gross from the dayjob. I paid about $10k in federal tax, and about $1.5k in state. I can provide the name of my lady if you want to shop her… I believe she’ll do a free analysis of your last years taxes and see if she could have saved you more, etc.


    – Hakrjak

  7. J Scott says:

    Thanks for the offer, Hak…

    Unfortunately (or fortunately), I think we paid about as little as possible. It was AMT that got us, and there isn’t much way around AMT these days…

    We had a lot of income from the beginning of the year, including some big bonuses and cashing in a lot of stock options. The big tax bill wasn’t unexpected, but still not fun.

  8. Jingle says:

    J Scott, Do you know if the VA is calling on additional appraisals in the manner that FHA seems to ordering these days? I have never done a VA sale though I have purchased a couple of houses from them through the years. They were surprisingly easy and prompt to work with…. I’ve been really burned by appraisals in the last few months. They are generally coming back 2-3K short of my sales price. I has never killed a deal, but try explaining the reduction in sales price to a investor……thank goodness for high margins…..


  9. J Scott says:

    Hey Jingle –

    This is the first property we’ve ever done with VA, so I have no other information that this one…

    But, on this one, there was only a single appraisal, despite the fact that I had purchased the property only 2 months earlier, and I was selling it for over 2.5 times my original purchase price.

    Had this been FHA, I wouldn’t have been allowed to sell it for 3 months after I had owned it, and it would have been subject to at least two appraisals (since it was selling for more than twice the purchase twice).

    So, at least in those regards, VA is easier than FHA.

    Also, the VA appraiser, while he told me that he thought it might have problems appraising for our sale price, apparently was able to make it work. After I looked at the recent comps (there weren’t any non-foreclosures), I was really concerned it wouldn’t appraise for enough, so this was a pleasant surprise.

    The only other two things that stood out with this appraisal were:

    1) The appraiser never took any pictures of the house, and was in-and-out in about 15 minutes;

    2) The appraiser completely bypassed the mortgage broker for the appraisal, and dealt directly with the underwriter.

  10. Jingle says:

    That’s good news. I always thought that most appraisers are trying to meet the price in the past. Sort of shooting for the target that the seller sets. This last 6 months has been very sobering for me with appraisals.
    Great blog by the way.


  11. Mike says:

    Hey J,

    How come you don’t take advantage of the 1031 tax exchange when you are flipping your properties?

  12. J Scott says:

    Mike –

    In order to do a 1031 exchange, you need to own the property for at least one year. We generally resell our properties after holding them for just a couple months, so a 1031 exchange really isn’t an option for us…

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