Is A Low Appraisal the Biggest Obstacle to Successfully Flipping Houses?

A low ball appraisal is not the biggest obstacle to successfully flipping a house, but a lowball appraisal can be a big intangible expense and hurt your bottom line.

Last year I lost over $75,000 to low-ball appraisals averaged over all the flips I did.

Finding someone to pay at or above asking price was never usually the problem. This is especially true if you’ve done an excellent job on the renovation. Your problem is rarely ever going to be a buyer that appreciates the work you put in and the final product.

What you may have problems with is an appraisal that doesn’t see it the same way.

Here are some of the problems i’ve encountered with appraisals on flip properties.

  • Appraisers comping my newly remodeled houses to dilapidated properties (pulls down value)

  • Comping my house to ones with no updates when there were “like” homes that were remodeled just like mine and sold for higher

  • Going past 180 days (when there were comps in that date range), etc. (markets and prices rapidly change, so going out farther doesn’t capture these changes)

While you can contest an appraisal, anyone with a decent amount of skin in the game can tell you it rarely works.

Surprisingly almost all the lowballs came from VA or FHA appraisers. I’ve never had problems with conventional.

So why do appraisals come in low?

It depends but here are some factors that play a part:

  1. Sometimes appraisers are slow to catch rapid upswings in the market.

    It has gotten a lot better this year and I haven’t had a problem with lowball appraisals (so far, fingers crosses). The market has fundamentally changed from say, 2016 to today and it keeps changing. If an appraiser isn’t intimately familiar with your area, (s)he can miss the value upswings.

  2. You’ve incorrectly priced the house.

    This is more likely to happen with an inexperienced flipper than a seasoned professional. Always price your houses close to the comps and tailor your renovation strategy accordingly. Don’t over improve hoping you can get $30,000 more than the sold houses in your area.

House flipping is complex, it’s hard to pinpoint any one biggest obstacle as there are a lot of moving parts.

A lowball appraisal can be an obstacle for you as a house flipper to successfully turn a profit.

It’s made some of my deals turn healthy to marginal break-evens. But it wouldn’t be the biggest obstacle.

What are some of your experiences with low appraisals? I’d love to hear from you. Drop a comment to share your story!