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Rehab done, tenant in, appraisal 21k under my comps

Small three bed, bought at 118k, put 34k in, all in about 158k with holding. I underwrote the after-repair value at 205k off three sales within half a mile that all closed in the last five months.

Appraiser came back at 184k. His comps included one house that sold in winter with an unfinished basement and one that's technically in the same subdivision but on the wrong side of a busy road. At 75 percent of 184k the cash-out is 138k, so 20k of mine stays in the house instead of the 2k I planned on.

The tenant is fine, rent is 1,825, payment on 138k plus taxes and insurance leaves me a couple hundred a month. So it's not a disaster, it's just that my next purchase was funded by the money that's now sitting in this one.

I'm told I can dispute with a rebuttal packet or wait and try a different lender who orders a different appraiser. I don't know what a rebuttal actually accomplishes in practice or whether I'm just paying for a second appraisal to get the same number. Anyone been through the dispute and had it move?

Answer

4nicole_adeyemiPassivePRO5

I've done two rebuttals on land and improved property and one moved, one didn't. What moved it was not arguing that the appraiser was wrong. It was handing him sales he plainly hadn't seen, with the data attached.

So: pull the two comps you think he got wrong and write one line each on why they aren't like your house. Unfinished basement, arterial road frontage, whatever it is, and say it flatly. Then give him three sales you think are better, with MLS sheets or recorder data, dates, distances, and the specific adjustments you'd make. If your market is one of the states where sale prices aren't public record you'll be leaning on agent-sourced data, which is fine but say where it came from.

Also include your scope of work with costs and dated photos before and after. Appraisers routinely undervalue rehab they can't see, mechanicals, wiring, subfloor. If 12k of your 34k is behind drywall he priced a cosmetic refresh.

What a rebuttal gets you is a reconsideration of value, which the lender routes back to the same appraiser. He can decline. In my experience the movement is small when it happens, mine went up 9k on 190k, not 21k. So don't plan around it.

The second appraisal through another lender is the bigger lever, but you eat the fee and the time, and appraisers in a market often use the same comp set. Ask the second lender in writing what their loan-to-value ceiling is before you order anything, because a lower rate at 70 percent doesn't help you here. Twenty thousand trapped isn't fatal. Slow is different from broken.

Rehab done, tenant in, appraisal 21k under my comps

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