Listing price has an impact on appraisals. You have power. Use it wisely.
The appraisal of a property decides the details of its refinance. Appraised value is an especially important detail if you have a fix-and-flip you need to turn into a rental.
Here’s what you need to know about how your flip’s listing price impacts its life as a rental.
What Is the Impact of Appraisals?
If you expect to keep a flipped property, stop dropping the listing price NOW. Otherwise, it will impact the value of your home (and your LTV when you go to refinance).
The appraiser has certain guidelines they have to follow while determining the value of your home.
First of all, they have to go by whatever the current market conditions are. What are like-properties selling for in your market?
It doesn’t matter what properties sold for 3-6 months ago in the same place – they look at current conditions.
Your Price Changes the Appraisal
From the appraiser’s perspective, your price keeps dropping because the house won’t sell there. If the house won’t sell at a price, then it’s not worth that value.
If you dropped the price by $30,000, then $40,000, then $50,000, and it still hasn’t sold… the appraiser can’t give you the original value. In fact, they can’t even use your last list price. It’s clear the house didn’t sell for that much, so it must not be worth that much right now. Typically, your appraisal will come in between 1-10% lower than your last listing price.
The impact of appraisals is huge. Everything in a refinance hinges on it. If the appraisal is too low, you’ll get a low LTV. With a low LTV, your rates will be high. If your rates are too high, you’ll have negative cash flow. Your loan options can get totally squashed – all because of a lower list price.
Watch the video here: