Posted by Bill K. (AZ) on March 14, 1999 at 14:35:21:
Donna,
I, myself, haven’t done any L/O’s yet, but I’m working on getting some. I have found that county tax records are NOT a good source of determining FMV. You can use them as a coarse gauge of value, but the tax collector can’t possibly perform accurate analyses on all homes in their county. They don’t have the manpower. In addition, their motivation for placing value is different than that between a willing buyer and seller.
Without an appraisal, it becomes incumbent upon you to know your market. Bottom line: Do you believe that a tenant/buyer will pay you more for the property than you purchased it for?
As an aside, your seller doesn’t sound very motivated. If you decide to purchase for mid-to-upper market analysis, try to get the seller to carry a note for part of the purchase price and see if you can get at least a 2-year lease.
This is my first attempt at a l/o and am unsure whether to do it or not. I am currently at a standoff with the seller about the purchase price. County records list a FMV of 26K, seller wants 35k based on current market analysis of 32 - 38k. No one wants to pay for an appraisal. Any advice as to which estimate is more accurate?
Donna:
How do you exptect to make money on this if you pay anybody’s version of fmv? Stick to your guns on purchase price. It’s thin enough as it is. (I’m assuming your offer was 26k).
I assume the seller’s market analysis was based on comparitive home sales. You can always check yourself if you know of a broker who will do it for you. Just ask them to pull comps on at least 5 comparable homes. If you don’t have this resource, simply log onto www.knowx.com and pay to have the comps pulled. They charge $10 (for 5 properties and $1 for each additional one) and it’s a very thorough analysis. I have been using this to make sure of home values before I do L/Os. If a seller disputes my offer I simply show them the computer printout from knowx.com and ask them to justify his/her price.It works.
You said “No one wants to pay for an appraisal”. That’s good. Appraisals have a purpose, and the purpose is NOT for an investor to determine FMV. I saw a property “officially” appraised at $37000. With no appreciation to speak of, and no real rehab, that same property appraised, “officially”, for $62000 just 6 months later. The difference: “THE APPRAISER”.
In my mind appraisals are only good for “proving” value to lenders in order to determine how much money can be borrowed.
Donna,
It doesn’t sound like your seller is very motivated. Make an offer, with an expiration time, and let them come to you if they sober up to your side of things.
Besides, is there any room in your deal?
In the meantime, try to find another deal to work on.
Hope this helps somewhat…