Harpreet’s perspective
Real questions. Real properties. Real numbers.
You bought the property for $700,000. Everyone is happy. Then the appraisal arrives: $670,000. Well. Now the calculator needs to come back out.
A lender may rely on an appraisal or other valuation method when determining the property's acceptable value for financing purposes. And the appraiser doesn't have to agree with your purchase price, renovation budget or emotional attachment to the kitchen.
Understand the Financing Impact
If the value comes in lower than expected, we need to understand what that means for the mortgage. Do we need additional down payment? Can the valuation be reviewed if there is legitimate supporting information? Does another financing strategy need to be considered? Does the transaction still make sense?
Renovation Cost Is Not Market Value
For investors and BRRRR projects, this becomes even more important. You may have spent $120,000 renovating a property. That doesn't automatically mean the market value increased by $120,000—or more. Renovation cost and market value are not the same thing.
Leave Room
That's why I don't like investment strategies where everything depends on one exact future appraisal number. Leave room. Have a backup plan. And remember: the appraiser doesn't know what number your spreadsheet needs to make you happy.