How to Increase Appraisal Values and Pass Inspections on the First Visit

Posted on: September 15, 2009

Categories: How To Sell, Profit

Author: buyfixandprofit

The #1 rule is to actually be there!  If you, as the real estate investor, cannot make it to the appraisal, then send your partner, construction manager, or reschedule if permissible.  A bad appraisal or a failed inspection can be the difference between a transaction closing or falling apart or weeks of delays being incurred while waiting for another home inspection from the section 8 inspector.  A section 8 tenant will not always wait around for a failing property to pass its inspection when there are a handful of other rehabbed homes readily available for rent.  Similarly, a bad appraisal may scare off potential buyers or reduce the amount funds available for an investor’s cash out refi.

Bring Favorable Comps to the Appraisal

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Rehabbed Foreclosures

Whether the property needs to appraise high or low, find the three most favorable comps that support your price and bring them with you.  Make sure these are reasonable comps that can support your case and present them to the appraiser during the walk through.  New government regulation has changed the way appraisers are chosen and in some cases the appraiser may live and work two to three hours away from the house they have been assigned to appraise.  Real estate investors, especially rehabbers, know that neighborhoods can change drastically within a short distance in any direction.  Your appraiser will not know this, so it is your job to make this clear.

Find the Non-MLS Comps for your Appraiser

The goal here is not to try and pull a fast one on the appraiser, but to present all the pertinent data that presents your case in the best, or worst, light.  Appraisers, like most individuals, will choose the path of least resistance to generate their report.  This means that all comps will come from the MLS and typically will not include the tedious review of non-MLS real estate transactions.  In this day and age, all of this data can be obtained on-line with some diligent research.  If there are sales here that strongly support your case that cannot be found on the MLS, gather as much pertinent information as possible, including pictures, and present this the appraiser.  On some borderline valuations, this could mean the difference between eating at McDonalds versus the best steak house in town.

List of Repairs Needed or Repairs Performed

leaky roof 150x150 How to Increase Appraisal Values and Pass Inspections on the First VisitIf goal is to get the highest appraisal possible after rehabbing a foreclosed home, bring the details of all the repairs performed to the appraisal.  Gently guide the appraiser through the house detailing everything that was upgraded and repaired.  This is huge – don’t let the appraiser guess as to what work was performed.  On the flip side, if this is a short sale BPO, make sure to have detailed estimates of ALL the work necessary to make the house saleable.  Use phone book GC rates for the repair estimates, but don’t get carried away.  Again make sure to gently explain how much work is needed and how soft the market is.

Smell Counts

When shooting for the best appraisal possible, prepare the house as if it was being shown to prospective buyers or tenants.  Make sure all the shades are open, all the lights are on, the place smells good, and the air temperature is comfortable.  Now when shooting for a low appraisal, do just the opposite.  Make sure the place stinks, don’t open the shades, and don’t make it comfortable.

A Dead Battery can Cause a 2-4 Week Delay

As far as home inspections are concerned or more likely section 8 inspections, all of the above ideas apply for showing the home in its best possible light.  Section 8 inspectors can fail a house for a loose toilet, a non-working smoke detector, or any other minor repair.  One small item like this requires a re-inspection that can be another 2-4 weeks away depending on the city.  This could mean a lost tenant, greater chances for break-ins while the house sits vacant and greater holding costs.

Make Repairs on the Spot

Always have your construction manager or handy man present during the section 8 inspection.  Any items that can be fixed during the inspection will be marked off as compliant prior to the inspector leaving.  This could be fixing a wobbly toilet, installing a handrail, or adjusting a window so it properly opens and closes.  There will be very little that cannot be fixed on the spot during a section 8 inspection especially after a quality rehab.  It is much more cost effective to have a couple guys present to perform repairs rather than schedule a re-inspection.  Also, there may a minor item that can be explained away when someone is present with the inspector.

Finally, don’t underestimate the power of a little personal charm combined with low pressure sale tactics.  This can subconsciously steer the appraiser in your favor.  Through discussions with many investors, rehabbers, and mortgage brokers, the simple approach outlined in this article can raise a 50-50 situation to a 95% chance of obtaining a favorable outcome.

So the take here away is: never let anyone evaluate your investment property without someone being there to steer them in the right direction.

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