This morning I had a client contact me about buying a duplex I’d shown him years ago, that never sold.
I immediately knew which property he was referencing. After all, it was one of those rare duplexes that broke the barriers of what a rental property could and should be, and entered the realm of something you’d see in Dwell magazine.
With historically low interest rates helping make the property more affordable, my client was suddenly willing to pay the amount the duplex owner had wanted to sell it at three years ago. Low interest rates mean lower payments, which suddenly means the property will now cash flow.
In the process of tracking down the seller, I realized there was one problem. There hasn’t been a single duplex in that area that sold for anywhere near what this property can and will sell for.
And without comparable sold properties, we’re going to have trouble getting an appraisal to value the property as highly as we do.
Without an appraisal substantiating the value of the duplex, the bank won’t give the buyer a loan.
So what can we do about that?
While an appraiser is hired by the lender to render an independent opinion of value, most are open to receiving information from the listing agent that substantiates the value of a property.
For example, I was able recently to tell an appraiser how a comp for a duplex I was selling had been decorated in early old lady, had a broken deck and no air conditioning. Meanwhile, the property he was providing a valuation of not only had central air, but was fully updated and even had granite counter tops.
The listing agent may also be able to justify price to an appraiser by comparing the gross annual rent of one income property to another. For example, if the duplex in question has much larger rent than most of the income properties in the neighborhood, it may warrant a higher price.
In the case of the exceptional duplex, the Realtor may also be able to talk with the appraiser about how truly unique it is; showing him or her interior pictures of comparable properties, and pointing out the differences in each.
Unfortunately, if the appraiser is unwilling to bend, there are only three options left: the seller can lower his price to match the appraisal, the buyer can come up with the cash to bridge the gap between appraised value and purchase price, or the seller may choose to sell the property on a contract for deed.
Unfortunately, until prices improve, those are our options.