You got a great deal on the house from a motivated seller through your creative marketing strategies. Your team did an incredible job of renovating, landscaping, and staging the home and it looks absolutely amazing. The Realtor took beautiful pictures, and along with the description, painted an amazing picture of your most recent masterpiece. You get a full price offer within just a few days of it being listed and all is right with the world. That is, until the appraisal comes in $10,000 under contract price and cuts your profit in half.
As an active investor, you always want do what you can to maximize the return on your money, time and effort invested into any project. Understanding the appraisal process is a crucial step in ensuring that you get top dollar for your investment, and that you get it sold quickly so you can move on to the next deal. Unfortunately, too many investors take their eye off the ball as they get close to the finish line, and it can cost them dearly.
Let’s take a look at 5 great tips to ensure that you don’t make the same mistake, and that you get the maximum possible valuation for your property.
1. Make sure the house looks GOOD! This might seem like common sense, but once a property is under contract with a buyer, it’s amazing how many investors will begin to neglect the property. Make sure any minor repairs that may have been overlooked during the renovation get taken care of BEFORE the appraiser arrives. Just because the buyer may not have noticed or cared doesn’t mean the appraiser won’t.
2. Make sure the YARD looks good! – Again, something you’d think would be common sense, but investors oftentimes mentally “check out” once the house is under contract, but that’s a dangerous attitude to take. Appraisers are affected emotionally just as much as buyers are, and if they come to a home with an overgrown lawn, and weeds overtaking the once beautiful landscaping…don’t be surprised if it shows up in the form of a lower appraisal.
3. Keep it STAGED! – I am a huge fan of staging, and we have all of our renovation properties staged professionally. Even though we have to pay a monthly rental rate on the furniture after a certain point, we ALWAYS leave our staging in the house until AFTER the appraisal. We ALL feel better in a clean, staged home…and appraisers are no different.
He or she will also be taking photos of the home, which will be included in the report that goes to the underwriter for the buyer’s lender. A staged home will always look better than a bunch of empty rooms, and makes the appraisal much more likely to be accepted by that underwriter.
4. Make sure that the appraiser chosen for your flip is from the local area – The practice of choosing an appraiser from outside the area became much more prevalent over the last few years, and while it doesn’t make a lot of sense, it’s unfortunately not that uncommon. If you find out the appraiser is from a neighboring town, and therefore less knowledgeable about the local real estate values, don’t be afraid to try and dispute it and request a local appraiser.
5. Meet the appraiser at the property- In the same way that we meet the appraiser or BPO agent at the property during short sale negotiations to make sure the valuation doesn’t come in too high, we also want to meet the appraiser at the property during the resale valuation in order to make sure he has accurate data regarding the after repair value of the home. Be sure to bring along any comparable sales that you used during your pricing decision, so that the appraiser has as much data to support the price. MOST appraisers (unfortunately not all) want to help you out, and to appraise the property at or above the contract price. So, if you help provide them with accurate data, they are more than likely going to use it.
If you follow these tips, you increase your chances of a successful valuation exponentially. And when the appraisal process goes smoothly, you are one step closer to closing the deal, realizing your profits, & moving your capital into the next investment.
Do you have any strategies that you have used in the past to get a higher appraised value? Share your thoughts and opinions below, and let’s keep the conversation going!
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