FORECLOSURES In an area that only has two or three properties that have been foreclosed on, although unfortunate, can be easy to work around with. However, in an area lined with a num- ber of foreclosures, you can expect a decline in almost every property’s value. HOWTO CHALLENGEALOWAPPRAISAL You can try to contact the appraiser, but they are not under any obligation to listen to your plea, or to review additional comps. Here are a few things you can do to help your cause: DO YOUR OWN RESEARCH Request a copy of the appraisal form and look for any red flags. Since you’re the owner, there’s a chance that the appraiser overlooked something in your property that only you are familiar with. They may have written down wrong values or miscalculated the square footage. Ask for a second opinion and give the report a thorough review. If possible, you may want to wait for pending sales to close, so the appraiser has better comparatives to support your home’s value. CONDUCT A COMPARATIVE MARKET ANALYSIS An appraiser determines the value of a property by com- paring homes in the area. If you find out that they con - ducted a market analysis that includes properties outside your neighborhood, this could affect, and even lead to a low appraisal of your property. Try to use comps that are closer to your property than those that were used by the appraiser. REFUTE AND REQUEST A SECOND APPRAISAL With a strong argument at hand, try to ask for another appraisal. Appraisals are ordered by the lender, so if you can make a convincing argument, the lender might agree to have another appraiser assess your home. You may have to pay for the second appraisal, but it could be worth it, if the value comes back higher. Don’t just settle for a low price despite all the hard work you put into your investment property! •
CONDITION OFYOUR HOUSE Often, property owners over-value their house be- cause they attach sentimental value to it or because they want higher profit. Even when a seller has com- pleted some updates, they may not be to the level of the higher-priced comparables. It helps if you know what features and updates the comparables present. Knowing how your house compares to the competition will help you set realistic expectations. In an active and competitive market, the homes may be selling quickly, and appraisals could be lagging behind market prices. A good comparable could be pending at your price point, but because it has not closed yet, the sales price is not available to the appraiser. COLD MARKETS In a slow market, the effect could be that there are not enough sold comparable homes to support your price. If homes in your area with identical quality and features sold a long time ago, the lack of any recent comps acting as a point of comparison would make it harder to come up with the current market value of your property. MARKET CONDITIONS HOT MARKETS APPRAISERS It is common for appraisers to be licensed in more than one county or location. The problem here is that some appraisers may not be aware of the unique characteristics of each neighborhood. They might lack local market knowledge. Another challenge is when the appraiser is generally new to the profession or hasn’t performed enough appraisals to give them the needed experience and expertise on a specific type of real estate.
OTHER FACTORS DISTRESSED PROPERTIES
Homeowners that are motivated only by the desire to get rid of their property quickly, for whatever reason, will most likely give in to low offers from buyers. This can negatively affect you, because these lower sales prices can lower the comparable home prices in the area your investments are. If there are several of these lower-priced sold homes, the appraiser will most likely be affected in determining your property’s value.
Michael Jordan is the founder and President of Strategy Properties in Michigan. Michael started his first company at the age of 19, while still a student-athlete on a full scholarship to play basketball at the University of Detroit Mercy. Following two years of NCAA tournament play, Michael transferred to the University
of Michigan to pursue a degree in Business Management. He founded Strategy Properties, Inc. in 2003 (under the name Jordan Ventures, Inc.) with a primary focus on the construction of new homes throughout Wayne County, Michigan. Since then, Strategy Properties has become a key provider of rental homes in Detroit and Southeast Michigan.
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