Avatar's Blog
» Closing Documents - Quick Sale Appraisal
Ah - the quick sale appraisal. So many borrowers and brokers note, "But we already have an appraisal. I just got one!" Hard money lenders need to send out their own appointed appraiser to determine the quick sale value of the subject property. It's not that the appraisal you have is not good. It's just that it is a retail value appraisal. It assumes that the seller of the property has time to wait for the 'right' borrower to come along and purchase the property.
In the event that a loan goes sour, the subject property, being collateral, will be sold off to recoup the principal and interest owed on the loan. In that event, the hard money lender needs to sell the property relatively quickly. They are at the disadvantage of not being able to keep their capital tied up in a non-performing loan property. They must sell wihtin a few months at the most and move on to perform the business of their core competency, which is lending, not real estate ownership or management.
The appointed appraiser will walk the subject property, review existing appraisals, look at comps in the area, review recent sales in the area, consider the number of uses the building might have which gives an indication of the number of potential buyers for the property, consider increasing, steady or decreasing land and property values, etc. The result will determine what the property would sell for quickly - this is known as the 'quick sale value' of property and is used for the basis of the hard money loan.
