I am sitting in second position on a Columbus rehab, $47k in, and the senior did a full appraisal at the start of the draw schedule. My attorney says I can rely on that report for my own underwriting. I have done this four times now with the same borrower and never pulled a separate one. First time I had a deal go sideways I will probably wish I had.
Your attorney's view is a legal question, and I'd confirm that specifically with a real estate attorney licensed in Ohio before treating it as settled.
On the valuation side, here is what the structure actually looks like. The senior lender's appraisal was ordered by the senior lender, for the senior lender. It was written to support their loan, not yours. As a second-position lender, you sit behind the senior in the repayment line. If something goes wrong and the property sells for less than expected, the senior gets paid first. You get whatever is left, which could be nothing.
A simple example: the senior lent $150k, you put in $47k, the appraisal came in at $220k after-repair value (meaning what the property should be worth once the rehab is done). That looks fine on paper. But if the project stalls at 60% complete and the property sells as-is for $160k, the senior recovers their $150k and you recover $10k of your $47k.
The appraisal did not cause that problem, but an independent appraisal ordered by you would have been reviewed with your position in mind, and you could have asked the appraiser specific questions about as-is value at various stages of completion.
The other thing worth knowing: the strategy guide for appraisal covers how a full appraisal differs from a draw-schedule inspection, which is a separate review that checks progress on a rehab, not the same thing as a valuation opinion. You may want to look at the Guide tab for that distinction.
Four deals with the same borrower going smoothly is useful information, but it tells you about the borrower, not about what the collateral would actually recover in a forced sale.
What does your current loan-to-value look like across both positions combined, relative to the appraised after-repair value?
