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Just saw an appraisal come back 15% under contract price on a deal I was looking at
I was underwriting a small strip center in Phoenix last week and the appraisal came in way low. The seller won't budge and now the lender is walking. Made me realize how much people rely on that contract price instead of checking what similar properties actually sold for per square foot. Anyone have a trick for getting a better read on appraisals before you're in too deep?
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willow6723d ago
That trick about checking sold comps per square foot only works if you're looking at the right comps though. I've seen people grab comps from the same zip code but they're totally different property types or condition levels, which throws everything off. What actually helped me was getting friendly with a local appraiser a few years back who told me they weight recent closed sales from similar age and quality way heavier than anything else. So for your strip center example in Phoenix, you'd want to find another center built in the same decade with similar occupancy, not just any retail property in the area. It's a pain but digging through public records for actual sale prices from the last 6 months beats relying on what the seller's agent says.
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blairm352d ago
Damn that stings, I've been there. Had a deal on a small office building fall apart exactly the same way last year, appraiser came in 12% under and seller just laughed. The per square foot thing is tricky because you're right, grabbing the wrong comps makes you look like an amateur. What I started doing was pulling county assessor records myself before I even talk to a lender, focusing on properties with the same year built and roof type. For Phoenix especially you gotta watch out for newer construction nearby that makes older strip centers look outdated on paper. That tip about getting friendly with a local appraiser is pure gold though, I might actually try that.
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