Anyone have experience challenging an appraisal? Any advice/tips?
I’m under contract to buy a 25 lot mobile home park in Illinois. The agreed upon price currently is roughly ~450K, however, the appraisal value has come back at around ~290K. This big gap will most likely kill this deal. The appraiser went with the “GMI” method, which applies a multiplier to the gross income. With the income capitalization method, appraiser used a 13% cap rate, which came out to 310K. For my analysis, I used 10%. If a 10% cap rate was used, then the appraised value would have been $400K, definitely closer to the agreed upon price.
It just depends on whatever you can negotiate. The buyer pool for a 25 space park in illinois is pretty thin, so you should have a fair bit of leverage (I doubt many buyers are beating down the seller’s door to make competing offers).
If you have a lender involved in the deal, they may be okay with lending based on the appraised price and having the seller take a second loan behind their loan. You could try negotiating a discount from the seller, or trying to get some seller financing.
I would be attempting to negotiate a seller take back as Noel_S suggests. Convincing him to take a large chunk of the mortgage at a low interest rate may get him close enough to his 450K to make him happy.
There is plenty of room to negotiate.
The GRM method is typically used by realtors and appraisers when valuing smaller jobs income properties such as duplexes. The problem with the GRM is it doesn’t account for any physical or location differences. Also, it doesn’t take into account differences in vacancies or expenses. How much MHP experience does the appraiser have?
Do you have any recommendations for appraisers who specializes in mobile home parks and perhaps for Midwest MHP?