As you approach a potential real estate investment, your initial evaluation is critical to a successful flip. And not just from the physical inspection. Yes, a key component concerns how much and how long it will take to get the property in a marketable condition but you the property must alsodeclining market appraise in the range you will ultimately sell the property for.

When you invest in an appraisal to evaluate a property yet to be completed, the appraiser prepares an appraisal report based upon the listed requires being completed. The value will be $250,000, “Subject to…” the itemized rehabilitation punch list being finished. If the value comes in at your desired price, then your prospective purchase can move forward. But there is a series of boxes on the appraisal which you can’t ignore, but many often do. Is the property located in a “Declining Market?”

A declining market noted by an appraiser is important to you, especially so if you’re going to finance the purchase. While a real estate agent can give you an idea on where to price your property it is the real estate appraiser that is asked to provide data that indicates a declining market or a recovering one. Technically, what is a declining market?

A property may be located in a declining market if the appraiser cannot find supporting comparable sales of similar homes within the previous six months and for those properties, the prices have declined over the past 12 months. If the property is deemed in a declining market, your lender will increase the required amount of down payment. And in fact, if there are no comps to be found at all, it’s likely the lender will decline your loan request. Not because of anything regarding your financials, but the surrounding market. The lender approves a loan based upon what the property is worth today but also looks down the road a bit. If the road looks rocky according to the appraiser, you may want to take a second or even a third look at your prospective purchase.