Hello everyone, and

Welcome to another episode of Selling Greenville

Your favorite real estate podcast here in

lovely Greenville, South Carolina,

I'm your host as always Stan Mccune realtor

right here in Greenville, South Carolina,

you can find all of my contact

information in the show notes if you

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I want to go on a bit of a rant about

an egregious appraisal story that I

have and and I have had multiple of

these in the four and a half years I've

been doing the show I've had multiple

great appraisal stories for y'all and

yeah appraisers are a necessary part

of this process and a lot of appraisers

in the Greenville Market are really good

but unfortunately there's a lot of

bad apples as well and sometimes the

bad apples can really throw monkey

wrenches into a

transaction and that something that can

be extremely extremely

frustrating when you're in the middle of

it when you're in the thick of it by the

way if I sound before I get two in the

weeds here if I sound different I feel

different I have like a frog in my

throat I'm probably going to be coughing

swallowing hard doing things like that

throughout this so please be patient

with me I'm trying to get you guys

the weekly content that my weekly

listeners so desire so so please bear

with me as I'm I'm getting it out I

cancelled basically canceled my day

today but not this podcast because

you guys deserve this podcast and by the

way also before I get too deep into the

weeds here I'm not talking about the

elections in this podcast cuz I'm even

though I'm going to be releasing this

after election

Tuesday I am recording this before

election Tuesday so unfortunately if

you guys are coming hoping for election

analysis CU some of you guys know

that I'm big into politics and all that

kind of stuff that's not happening this

episode maybe next week maybe not I

don't know we'll just have to play it by

ear

okay so appraisers LoveHate relationship

with Realtors they need us we need them

they might not think that they need us

but they do and we don't necessarily

think that we need them but we do

they're all were all an important part

of the process but appraisers don't

have a lot of accountability right

they they can essentially do whatever

they want I mean you know I talked to

you guys a few weeks ago about the

crazy mobile home transaction situation

I had that thing still hasn't closed

because of the appraiser that's involved

with that and the insane requirements

that are going above and beyond the HUD

and FHA requirements for vinyl

skirting and and for the the backing to

the skirting he's gone completely in

my opinion completely Rogue in terms of

of what he thinks needs to happen

with regard to to that to that

foundation for that mobile home but I

digress that is not the Appraiser's

problem right I'm not saying that the

appraiser is at fault for that the

Appraiser's got to do what they think is

the right thing based on the guidelines

that they know are there my issue with

appraisers is that they don't have a ton

of accountability and here's the thing

okay here's the actual meat and potatoes

of what I'm trying to get to here I

personally have a property with a loan

coming due on it and even though rates

right now are high I have some

investment opportunities that I really

want to take advantage of and I've been

wanting to take advantage of but you

know I've just kind of been on the fence

with okay you know how much money do

do I utilize for these different

Investments how much do I need to factor

in that I need kind of an emergency fund

because it's probably going to be a lean

next few months of real estate etc

etc and so as I was really thinking

about this I have this property that

already has a note coming due within

the next few

months technically I could have

waited until kind of a year from now

before refinancing it but are rid's

going to come down that dramatically a

year from now it's really hard to say

projections are that they will but I'm

I'm not sure think I think that this is

where the election really does matter

but

regardless I decide you know what I've

got I'm going to have to do this

refinance the next year anyway I've got

all these investment opportunities what

I can do is I can do a Cash out

refinance on the property and then I can

take that money and then reinvest it and

hopefully make more than what my

interest is on the loan now before I get

into the details of that specific story

I do want to discuss the cash out

refinance angle for just a second so

let's start basic okay a Cash out

refinance is like a normal refinance

except the bank pays you at closing an

amount equal to somewhere between 75 to

80% typically of the value of the

property sometimes in certain situations

you might be able to get higher than

that but it's pretty rare it's typically

75 to 80% of the value that's the amount

of cash that the bank pays you at

closing and if you had any debt on the

property prior to your refi finance that

debt is typically required to be paid

off as well as part of the cash out refi

now why would I want to do a Cash out

refinance as opposed to Simply selling

the property right if I'm wanting to get

get cash out of the property right

because selling the property would get

me 100% of the equity rather than these

75 to 80% right if we're talking about a

property that's worth

$500,000 if you're selling it you

just get $500,000 where whereas if

you're doing a cash out refi you get 75

to 80% % of

$500,000 so why would I go the

refinance route rather than just selling

the property well for starters I want to

keep the property right it's been doing

well for me I like the property I like

where it is it's pretty low

maintenance I'm not ready to sell it

the rent it brings in will pay off any

loans I have on it has been doing that

for years in fact for for the Cash

out refinance loan that's a requirement

it needs to be able to service itself

at least for this specific loan product

that I'm getting and at the end of

the day if the appraisals came back

insanely High and the income from the

properties couldn't pay off the debt

then I wouldn't be able to to get to do

the the full 75 to 80% right it's got to

be able whatever even if let's just say

I got an outlier appraisal that was

worth that said the property was worth

way more than it really was or let's say

that it wasn't cash flowing as well as

it should be that can also impact what

sort of you know how much of a loan that

I'm able to take out on these properties

but regardless that's that's kind of

an aside but the main thing is like I

said I want to keep the property I don't

want to sell it so I want to keep it I

just want to take advantage of the

equity that I have right and and by the

way this is a big talking point right

now not in real estate but in other

parts of of the of of investing and

markets is the idea of taxing people on

unrealized gains in their property right

and and this is why partially why I'm

against that now they said that you know

vice president Harris and others have

said that they don't want to do that on

people like myself normies they only

want to do it on super wealthy people

but ultimately taxes typically that are

imposed on wealthy people do usually

come down to to us normies and I

don't want to be taxed on my unreal

Iz gains on properties like this this is

exactly what you need to be able to do

in order to take advantage of the tax

structure because if you're not you're

just taxed out of a Oblivion basically

is is what the government tries to do

for those that aren't Savvy they they

really try to take advantage of the

people that don't have accountants that

don't have tax professionals that don't

know what they're doing and that's

why people hate wealthy people so much

and why people keep wanting to tax

wealthy people more and more because

wealthy people have all these

sources at their disposal to basically

gain the the tax structure well we all

have those

resources available to us in one way

or another it's just a matter of finding

the right people around you that know

how to how to take advantage of the tax

code for you specifically and that

leads right into kind of the next part

of this that makes this strategy a slam

dunk is that when you do a Cash out

refinance the money you receive from it

is debt not income at least currently

right as I'm recording this in November

2024 if this changes in the future don't

hold me to it but currently when you do

a Cash out refinance it's considered

that you're not receiving income you're

actually receiving

debt yes you have a bunch of money now

in your bank account but it is not

taxable like income is okay on the flip

side if you sell a property like this a

rental property and then you know

basically have to report that to the RS

which you do and to the Department of

Revenue and South Carolina you then have

to pay Capital Gains which for a

property like this could be around 25%

of the sales price between both state

and and federal capital gains well

nobody wants to pay taxes and

obviously there are times when it

makes sense to sell a property and pay

capital gains I've done it many times

but if you want to keep the property

like I do that's obviously not a

route that you want to go in and I

should mention as well you know just in

case people are are confused or or

just want me to clarify that you can

sell a property and defer your capital

gains by then immediately doing what's

called a 1031 exchange and purchasing

another

property but that doesn't get you your

money it just gets you another property

so that only makes sense if you're just

really just you're just wanting to get

rid of a property for some reason but

you don't want to pay Capital Gains you

also don't need the the cash on hand you

just want to replace it with another

property that's really the only way and

for me that that makes sense in this

case I want to keep the property and I

want the cash okay so the Cash out

refinance was the best R okay so back to

the story at hand the property I'm

refinancing is a unique property

specifically it's two duplexes on two

separate Parcels but the parcels are

adjacent to each other on a corner

and the two duplexes so four units

total two duplexes two structures they

share a parking lot between them right

so even though they're two separate

Parcels they butt up against each other

and they share a parking lot it's

actually they're actually on a corner so

they're actually on two separate streets

but because it's a corner they're

right next to each other and each duplex

is identical they look exactly the same

when I bought them back in 2020 I did a

full remodel on them interior remodel

exterior remodel new siding new roofs

all of that new windows everything even

got in trouble with the county because I

tried to do the roof without permitting

which was an an honest mistake I I

thought that the roofer had had

pulled permits so that was like a whole

thing but but even since then even

since 2020 I've done additional work to

them as well as tenants have come in and

out we've we've up updated even more

things since then now after pricing

out with a few lenders you know how what

the terms were and different things with

regard to to the Cash out refinance I

went with one and we move mov forward

with ordering appraisals the way they

had to do this was they had to do

appraisals on each property so two

separate appraisals and they had to be

done by different appraisers okay with

the end result being basically two

separate loans one for each duplex so

the appraisal well the first appraisal

came

in in my head I was ballparking for them

this was a part of my initial discussion

with my loan officer I was ballparking

for them to come in maybe in the 215 to

225 22 25,000 range for each duplex

right these are small duplexes one

bedroom one bathroom per unit and it's

in a transitional area so the land value

isn't that great and so they're not

the you know we're not talking about

like $500,000 duplexes we're talking

about you know low to mid 200s but

obviously I wanted to get the highest

possible cash out right that's the whole

idea when you're doing a cash out you

want the cash right it's only you know

for every

$10,000 that you're that you're bringing

out of your cash out it's not that much

more added to the cost the monthly cost

of the

loan so I wanted to get the most cash

out but also I'm I'm realistic right

I'm not the type of person that I'm

going to go to my loan officer and be

like oh yeah these are worth 300,000

each when there's just no way that

they're worth 300,000 each so I

thought those numbers 215 to 225 per

duplex were realistic so total

between the two of them 430 to 450 I

thought those values made sense

especially given that appraisers tend to

be conservative on values when someone

is doing a cash out so I also wanted to

make sure that I was conservative and I

and I say that's conservative because

it's hard to get a duplex in the low

200s right now right if if those were

out there and just readily accessible I

I have a lot of clients that would be

buying them up but there's just not a

whole lot of that out in the market

right now okay so what happened well I

got the first appraisal in and it came

back at

$275,000 I was elated I mean I could not

believe it never in my wildest streams

that I expected to come back that high I

couldn't even sell it for that much on

the open market I mean let's just be

real but remember that appraisals don't

tell you what a property is worth in the

current market they assign a value based

on what the market has been basically

for the past year Loosely speaking in

that general area so sometimes

appraisals are just all about timing

right you can get lucky or unlucky on an

appraisal based on what has just sold

for in the past few months or what

hasn't sold in the past few months even

though appraisers are technically

supposed to account for that okay but

there's definitely a luck element

involved well in this case I was

fortunate that we had some good comps

that the appraiser was willing to use

and actually that was one of the reasons

why I came up with that 215 to 225 value

is that there was a very very recent cop

back in October that sold for 218 and

so I really felt like I was enraged 275

blew me away couldn't believe it but

then the second appraisal came in now

remember these are two identical

properties right next to each other and

they're both bringing in the same cash

flow now I knew the second one wasn't

going to be as high as the first one I

mean that first one that was like a once

in a-lifetime high appraisal right but

what I got for the second appraisal

still stunned me the second one came in

at 100

$95,000 an

$80,000 difference excuse me an $80,000

difference between two identical

properties right next to each other now

I can understand you know sometimes that

could happen let's say that we're

talking about like two $2 million

properties you might see an two

appraisals on two $2 million properties

that are identical come in $80,000 apart

that would be normal because 80,000 is a

smaller percentage of 2 million than it

is of 200,000 right so for there to be

an

80,000 difference for two identical

properties that are priced in the 200s

even though that one came in a 195

should have been in the 200s that you

just don't see that I mean that was like

again that was like a once- in

a-lifetime kind of experience for me as

a realtor I've never seen anything like

that and I hope that I never see

anything like that again

so I talked to my loan officer about it

and he reminded me that even though the

one appraisal was lower than expected

the other one was so much higher than

expected that I was still basically in

range with what I was hoping to pull

out Cashwise between the two properties

right because I was looking for you know

the total value for the two properties

to come in into the 430 to 450 range and

here we were between those two

appraisals coming in at what 490

am I am I doing that math no no no

470 hold on I I can never do math while

I'm trying to do a podcast yeah 470

you'd be surprised how your brain just

shuts off when you're when you're trying

to create content like this it's how

people on the news media if if is can

sometimes freeze up there on stage I

completely empathize with them because I

experience that when I do this

podcast sometimes so I was at 470 so

that's still exceeding what I originally

came in expecting but not trying to be

greedy but I'm in this for maximum cash

out and I saw the opportunity to get

more money by trying to get that low

appraisal to be higher and I am calling

it a low appraisal if you're if you're

an appraiser listening to this that was

a low appraisal in no world is that

property worth

195,000 I'm

sorry now there was

a another really dumb aspect to all

of this unrelated to the appraiser and

and the appraisal but impacted by the

appraiser and the

appraisal so I had told you before that

typically for a Cash out refinance

you're getting 75 to 80% loan to value

LTV and in this case because these

were rentals I couldn't do 80% I

couldn't find a lender I'm sure if I had

really really worked hard I probably

could have found a lender to do 80% LTV

but I really like to stick with my group

of lend that I know that I know are

going to get the job done and so I

didn't want to just start you know

internet researching you know trying to

find this random one-off lender that

would probably screw me in the end I

wanted to stick with my group right and

within my group the lenders that I

really trusted for something like this

could only do 75% LTV without the rate

being astronomical I could have gone to

80 but the rate would have gone way

up but when these second appraisal came

in at 195,000

that actually pushed me into a worse

mortgage rate because ironically the

loan had to be $150,000 or less in order

to get the rate that I had originally

been quoted and so being under

$200,000 and at 75% LTV that meant that

my loan was going to be less than

150,000 which meant that I was also in

addition to not pulling out the cash

that I wanted that I was hoping for that

property I'm also in a higher mortgage

rate bracket that I would have been if

he had just appraised at 200,000 versus

195,000 or I had to then drop down to

70% LTV to get the rate to be lower so

all of this really really annoyed me

it's really db bad appraisal like

everyone knows that this is a bad

appraisal except the the appraiser that

wrote it so talked to the loan officer

and we decided to submit a rebuttal on

the low appraisal and so how I

started this was I started by looking at

the higher appraiser appraisal and

comparing that to the lower ones and

just saying okay what are the

differences between the two and there

are multiple things that stood out right

away first off the lower appraisal had

four sold comps and two unsold comps now

why would there be unsold comps in here

well what I've been told and and I don't

understand why appraisers do this

personally but the unsold comps so

these are properties that are on the

market one is under contract one's not

the unsold

comps are essentially used to justify

the value but the unsold comps were the

highest were were much higher than what

my appraisal came in at so that

didn't even make sense but the higher

appraisal had the same four sold comps

but had two other sold ones as well that

were much higher and that really

impacted that value coming in at 275 and

here's the thing that that really

annoyed me when I started digging into

this one of the the the most expensive

sold comp that the higher appraisal had

in it that the lower one didn't was

literally next door to one of the unsold

comps that the lower appraisal had in it

to justify the value so long story short

the appraiser for the lower appraisal

used an unsold

comp that was right next to a sold comp

and he didn't use the sold comp that

doesn't make any sense right because

you're looking for sold comps you're not

looking for unsold comps unsold comps

don't tell you anything right and he

made of course made adjustments to the

unsold comps assuming you know that

they're going to sell for much less than

what they were on the market for so all

of this hurt me and it didn't make any

sense you literally you had a sold comp

right there use it if you can use the

unsold comp to justify the other comps

that you used for sure you can use the

sold one and yes it it fit everything

the other appraiser had used it there

was no reason to not use

it by the way the higher appraiser in

this story is known to be difficult to

work with by many people in the industry

I'm not going to name names here I don't

like to do that but th this whole

thing as you could as you can tell I was

really really ticked off about it and

in my opinion the lower appraisal didn't

make a adjustments right they're

supposed to make adjustments based on

value and and based not based on value

based on condition and based on other

things so you know for instance if an

appraiser is having difficulty finding

one-bedroom duplexes they might pull in

some two-bedroom duplex comps and

then make an adjustment say you know

okay well it had being two bedrooms

versus one that would make it $50,000

more valuable so I'm going to make an

adjustment and and reduce the value of

that for the purposes of this

comparable analysis by 50,000 that's

that's the sort of stuff that that

appraisers do and and in my opinion

the adjustments that the appraiser did

for the lower appraisal basically none

of those adjustments were in my favor or

in favor of the property despite my

property being on par with or nicer than

the comps that he used so it just didn't

make sense now unfortunately these are

really hard arguments to make with

appraisers right they don't argue based

on adjustments I've never W an argument

based on

saying just in a vacuum that these

adjustments are bad you have to get U

Uber or Ultra I tried to say Uber and

Ultra at the same time you got to be

ultra and Uber specific when you're

rebutting and challenging an

appraisal and you know as I

mentioned before the two comps that the

other appraiser had use were much

higher in terms of value but they

weren't particularly close to my

property now again I already said that

one of those two was right next to one

of the unsold comps that the lower

appraisal use so I guess he wasn't

concerned specifically about the

distance but again I was concerned

that if I just rebutted it with those

two with those two comps and you know

making a few comments on the adjustments

I didn't think that that was going to be

enough and neither did my loan officer

he thought we needed more he was like

you know 70% of the time these rebuttal

don't work we really need to to dig a

little bit more so I started digging

more closely first I started to try to

find more comps that maybe they missed

and I just struck out now I wasn't just

looking in the multiple listing service

I was looking at public records I was

looking at all sorts of things and you

know the Market's been slow there's not

a whole lot of comps particularly for

duplexes not a ton of them that sell in

in any given year and so I just

struck out so then I decided to dig into

the comps that the appraiser did use and

I specifically wanted to focus on the

two comps that seem to really drag down

the value that he assigned to my

property the most so I start to look

specifically at I well I took the first

one and I'm like all right let me look

at this and let me compare it to my

property and

let's just see what I come up with

right excuse

me throat throat's starting to get rough

here all right gotten it out for you

guys hope you appreciate it so I

pulled up the first the first comp in

the multiple listing service and and

nothing really jped out too crazy to

me but as I'm looking at it you know I'm

looking at where it is on the map you

know just trying to account for okay

what's location I noticed on the map

that there was a little blue line behind

the

duplex well that's interesting I thought

that usually means that there's a creek

there right that's normally in this

mapping software that's tied into the

multiple listing service which might

actually be Google Maps I can't remember

exactly but but basically that little

blue line typically means a creek and

where there's a creek there is usually a

flood plane so I pulled up a flood map

for that comp and it shined

100% blue flood plane everywhere every

inch of that property was in a flood

plane and let me tell you if you're from

out of South Carolina and you're in an

area like maybe Coastal Florida or

wherever maybe even Coastal Carolina

area you might not realize this but in

Greenville being in a flood plane and

this is way has been the case for

forever this has nothing to do with

Helen in case you're wondering being in

a flood plane really really hurts your

property value in Greenville people want

to be in a flood plane they want nothing

to do with

it and it hurts the value of any

property but you know what even though

my duplexes weren't in flood planes the

appraiser didn't make any adjustments to

Value based on this lower comp being in

a flood plane so obviously I'm super

excited when I see this I'm like this is

a very simple easy argument to make to

the appraiser that the land value of

these properties is not comparable there

should be a big difference really at

this point I really just want him to get

I want to get him over 200,000 so at the

very least I can get that better

mortgage rate that I wanted all right

good so simple argument to make simple

typically helps now let's look at the

next low comp let's see what this one

has so I pulled up the next one and even

though it was on a different street it

wasn't a street I was familiar with

it was on a different street but it was

actually just a few Doors Down from the

comp that I had just looked at that was

in a flood plane and guess what I saw

that beautiful same blue line going

right across the back of the property

behind that comp that I had seen with

the other one that was in the flood

plane so I pulled up the flood bat for

that one and sure enough it shined blue

like the ocean the most beautiful most

beautiful blue that I have ever seen in

my life I was so pumped the two the only

two low comps that he had to justify an

appraise value below 200,000 were both

in floodplains so out of the four comps

that the appraiser used that were

actually sold two of them were in flood

planes and he made no adjustments on the

basis of them being in the floodplain

so I sent all this info to the loan

officer and he submitted the rebuttal

and wouldn't you know it within a few

days I had a new appraisal in my inbox

for

$220,000 now that's still a ridiculous

$55,000 lower than the other appraisal

but that other appraisal I was that's

like like I said I I just wasn't going

to get a duplicate of that I wish I

could have had that appraiser do both

properties but that's fine I've got

no problem with that right because now

instead of my me basing my 75% loan

value off of two properties worth 215 to

225,000 like I originally went into this

process expecting now I'm able to B B it

off of 75% of

2475 each right because if you add those

values together divide by two the the

220 plus the 275 you you get almost

500,000 and then between the two of

them each of them will be

functionally 2475 even though that's for

the purposes of the loan that's not how

it works but and for the purposes of my

brain that's how my brain works that

so that's obviously a massive difference

and it put me in the best possible

mortgage rate bracket for both of those

properties at that 75% LTV number and

here's the crazy

part based on all these numbers I

figured out that if I sold these

properties based on how I believe the

market is right now and then paid those

capital gains taxes I would basically

have the same cash in hand as I received

doing this Cash out

refinance but the only difference is

that I won't have to pay any taxes on

the debt that I'm taking out and I get

to keep this property I don't have to

sell it I get to keep it it's going to

keep going up in value the rents are

going to keep going up it's a beautiful

thing and I get to take advantage of the

equity now and then reinvest that and

and hopefully make good financial

decisions that result in that money

working for me in more ways so I've got

the property already working for me now

the property is producing additional

money that now I can reinvest and do

other things hopefully exciting things

with that so so long story short

appraisers are

frustrating and they need more

accountability but every great once in a

while an observant realtor can help an

unobservant appraiser do their job

better and that is what happened this

past week so thank you guys for

listening I hope you enjoyed it let me

know if you have any questions my

contact info in the show notes need a

realtor in this area or just want to

talk shop happy to do that please reach

out please reach out to Piper Insurance

Group as well for your home Auto and

Umbrella insurance needs please like

rate review subscribe to the show we

will talk again next time