Appraisals and lease options - Posted by Kyla

Real Estate Investing
#1

Posted by Jim IL on March 04, 2001 at 19:56:31:

Kyla,
I don’t tell potential buyers what the appraised value of the home is.
IF they ask, which they normally do not, I simply say, “Well, I’ve not had it appraised, but when I ran the comparible sales in the area for the last few months, we came up with the price we have on it. I know from being in the business that homes are valued at what people are willing to pay for them, so comparible recent sales in the area is a better guide as to value of a home.”

You may tell them also that they are getting an “option to purchase” which means several things.

  1. the price is locked in TODAY!
  2. any appreciation which causes the value to exceed the option price gives them equity when they buy.
  3. IF the home appraises for less, they do NOT have to buy, it is after all ONLY AN OPTION!

Frankly, if you are dealing with a potential buyer who wants more info other than “how much upfront? and how much per month?” , then you are probably dealing with the wrong buyer.

I also like to tell people that appraisals are not always accurate and this is why I personally do not rely on them.
Appraisals are largely based on the sale price, coupled with recent home sales, and the condition of the home.
Example:
One of my tenant/buyers cashed me out last year by getting there own loan.
The appraisal done by their lender came in at about $2k over the sale price.
I noticed last month that the home was for sale, and it sold a couple of weeks ago.
I looked up the sale and it went for $12k more than they paid.
The sale was conventional, so the appraisal must have come in for that amount at least.
(Unless the new buyer had CASH to compensate, which is unlikely IMHO.)

HTH,
Jim IL

#2

Appraisals and lease options - Posted by Kyla

Posted by Kyla on March 04, 2001 at 18:37:00:

I currently have a sandwich lease option deal. Yesterday as I was showing a potential tennant buyer the house, he asked me, “How much was the appraisal of the the property? I knew the answer to his question so I told him 130k. He did not like the fact that I was going to sell it for 143k. I told him, I"m letting you into this property only with about 3k down and with easy qualifying terms which gives me the right to make a profit.” I did not know what else to tell him other than that. What else can you tell the potential tennant buyer the appraisel of the property if they ask other than the truth?

Kyla

#3

Re: Appraisals and lease options - Posted by ken in sc

Posted by ken in sc on March 05, 2001 at 14:58:37:

This is why on an earlier discussion I said that I don’t sell houses for more than they are worth today. If you have to sell for $13,000 more than it is worth in order to make a profit, then you paid too much or are being greedy for too much profit. This is my opinion and it sets me apart from others in the business, both on this board and in my town. But I have been successful in finding enough deals to keep me busy where I can make 10 - 20K per deal selling at the going rate. Not low now, don’t get me wrong. If the comps say 90,000 to 100,000 I sell for 100,000. But I have to agree with your buyer. Who wants to pay 13,000 more that what the comps say?

When they ask me that question Kyla, I show them the comps that prove the 100,000 price that I am asking. Then they feel good and I feel good.

#4

SW SW SW SW - Posted by PatrickMD

Posted by PatrickMD on March 05, 2001 at 07:30:28:

NEXT!