I can’t tell you how many house flip sales I’ve seen go south because of a low appraisal valuation. Here’s what happens: You know what the comps are selling for, and your buyers know what they’re willing to pay for your flip house. They make an offer, and you accept. Then their mortgage lender insists on a home appraisal before approving their loan. The appraiser comes back with a valuation lower than the offer or your selling price, and the mortgage lender won’t approve anything higher than that valuation for the property.
You’re left wondering whether you should lower your asking price or wait and see if you can get another buyer who can get approved for a higher amount. If you lower your price, you’ll be really cutting into your profits. On the other hand, if you wait for another buyer, you risk letting the property go stale, forcing you to bring down your asking price even more. It’s a terrible situation, so is there any way to avoid it? I’ve learned a few tips over the years that have helped me.
Pay Attention to Curb Appeal
First impressions matter to appraisers as much as they do to buyers. Before the appraisal, take a good look at the outside of the house. If the lawn has gotten a bit overgrown since you put the house on the market or there are any other things you can do to spruce up the exterior without killing your budget, do them.
Have Measurements Available for the Appraiser
Appraisals are somewhat subjective, but appraisers do rely on measurements as part of the metric by which they determine a home’s value. Measure each room of the house and have a list of measurements ready for the appraiser when they arrive. They may or may not do their own measurements as well, but if you give them the list, they’ll be sure not to miss anything. That way, you won’t accidentally get a two-bedroom appraisal on a three-bedroom house.
Talk to the Appraiser about Upgrades
Your work will largely speak for itself, but your appraiser won’t be able to tell if you’ve had a new roof put on or if you’ve replaced all the plumbing and rewired the house. Mention every upgrade and feature you can think of as you walk through the house with your appraiser. You never know what might make a difference.
Find Out if They’re Local and Talk About Comps
If your appraiser isn’t local, they may not be familiar with the area and the houses in it. They may be comparing this house to a similar one in an area without an incredible school district or a park in the neighborhood. So, ask the appraiser if they’re local, and then—especially if they are not—tell them about the neighborhood’s amenities and how much comps are listing for in the area. This will help you sway them a bit on some of the more subjective parts of appraising a house’s value.
If You Get a Low Valuation
Finally, if you get a low valuation from an appraiser, be sure to look at their appraisal in detail. Are all of the statistics they listed about the house and the area accurate? Did they leave any features off? Are the numbers correct for bedrooms and bathrooms? If you can show your appraiser that something was wrong or inaccurate about the appraisal, you can probably get a better valuation.
These tips won’t always get you a better appraisal on a flip house, but they’ve helped me out more than once. Good luck!