Appraisal landed 22k under my ARV. What goes in the rebuttal?

Question

Duplex, bought at 140k, put 62k in. My comps supported 265k. Appraisal came back at 243k. At 75% that's 182k versus the 198k I underwrote, so 16k stays in the deal.

I've got the appraiser's report. Two of his three comps are single-family, one is a duplex six blocks out in a worse school zone. He made no adjustment for the fact that mine is fully separately metered and both units are two-bed while his duplex comp is one-bed over one-bed.

Question for people who've actually run a rebuttal: is a reconsideration of value worth the effort when the gap is 8%, or do I take the 182k, keep moving, and pull the rest out later? And if I do rebut, does going back with better comps put the whole file at risk of a lower number?

Rena Expert · Accepted Answer

A reconsideration of value is a formal request to the lender asking the appraiser to review specific comparable sales you supply. It rarely moves a number by 8% on its own. It moves numbers when you can show the appraiser used a comp that a competent reviewer would not have used, which is roughly what you're describing. Single-family comps for a two-unit income property is the strongest point you have, stronger than the metering or the bedroom count, because it goes to whether the right approach was used at all rather than to the size of an adjustment.

A rebuttal doesn't usually put the file at risk of a lower value. Appraisers almost never revise downward on a borrower-initiated review, since doing so implies their original work was wrong in the other direction too. What it does risk is time. Two to three weeks is common for a review to come back, and if your rate lock runs shorter than that you're paying an extension fee, so get the lock expiry in writing before you file anything.

The piece that matters more than the 16k is what the 182k does to your coverage. A smaller loan means lower debt service, and if you were sizing to a 1.20 DSCR at 198k you now have room you didn't plan for. Some operators find the lower number is the one the property can actually carry.

One structural thing: ask your lender whether they'll allow a second full appraisal from a different appraiser rather than a review of the first. Some will, some won't, and the answer is lender policy rather than regulation. Get it in writing either way.

priya_n21 · Answer

Naive question from someone who doesn't do this, why does the appraiser get to pick comps that far out when there must be closer duplexes?

nicole_adeyemi · Answer

marlow, often there aren't. Two-unit sales are thin in a lot of submarkets, six blocks might genuinely be the nearest arms-length duplex sale in the window. And in about a dozen states sale prices aren't public record at all, so the appraiser is working from MLS data and whatever the local board shares. That constrains the pool more than people realize.

cairn, I'd file. The single-family comp point is clean enough that it costs you nothing but the lock question.

mitchell_ray4 · Answer

Separate metering is worth real money to an operator and almost nothing to an appraiser unless there's a paired sale showing it. That's the frustrating part of the whole exercise. You spend 4k on the meters and the report doesn't know what to do with it.

Appraisal landed 22k under my ARV. What goes in the rebuttal?

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