Making a big offer on a property that will be a very tough appraisal

Howdy r/RealEstate - I’ve been in the market as a first-time buyer for 2+ months in a medium cost-of-living US city. Like many on this sub, I’ve been having a difficult time.

In my case, the primary challenge — more so than getting offers accepted — has been finding homes that I even want to offer on in the first place. I’m a big fan of modern/contemporary homes, which are available in my city but are generally 4k+ sqft and out of my price range. I’m a single guy and really don’t need more than 2k sqft, so the challenge has been to find a smaller modern/contemporary SFH that’s within my budget. And that has proved to be really tough.

Today I finally found the unicorn listing that actually fits my criteria. It’s an 1800 sqft custom-built contemporary home that is absolutely beautiful , is on a great lot, and is comfortably within my price range. My agent and I both expect it to be an insane bidding war, so I’m planning to be very aggressive with the offer.

The main question is exactly how aggressive, which brings me to the appraisal. The listing agent on this home sold it to the current sellers ~4 years ago, and from what she told my agent, the appraiser could not find a single legitimate comp within 5 miles (though it sounds like it appraised anyways). The SFH’s in the area that are similar in size are older and more traditional and generally have lower-end finishes, whereas those that are closer to this home stylistically are much, much bigger.

So what I’m trying to understand is how appraisers think about unique properties like this. The home is priced at 600k, and I’m considering going as high as 680k with 25k towards appraisal gap. My agent tends to say things like “everything is appraising at contract price right now”, but I have no idea how true that is or whether it actually applies to my situation. I do believe that the true value of the home is somewhere in the 700’s, but you’d have to get outside of comp-centric thinking and connect some dots to get there.

Here are some reasons I think the market value of the home is 700k+. My question is whether an appraiser will take any of these into account.

1. Several teardowns/lots on this home’s street and surrounding streets have sold between 325-375k in the past several years, with most of those sales occurring in 2018 and 2019. Add a little appreciation and consider the fact that this home’s lot is actually bigger than any of those, and the lot alone is probably worth 400-450k. So if you imagine buying the lot and custom building this home today at $200/sqft, you’d be looking at 750-800k to reproduce this property
2. There are townhomes within a mile of this home selling in the 700’s and 800’s. To me these are better comps than most nearby SFH’s when it comes to architectural style and finishes. In general the townhomes are a bit bigger (2000-2800 sqft vs. 1800 sqft) and newer, but again, the lot on this home is worth a bunch and the townhomes do not have that.
3. This home itself sold for 500k 4 years ago. Supposedly it had 7 offers, and it sold for 25k over list in a much more sane market. I’m certain it will have an absurd number of offers this time around as well. Maybe this one doesn’t imply 700k, but given the way the market has gone up, I think it implies at least 650k.

On the flip side, here are the things that concern me about the appraisal:

1. There are SFH's within a mile in the 1200-1500 sqft range selling in the mid 300's. However, these homes are not nearly as nice and are on much smaller lots.
2. There are SFH's within a mile in the 3000-3500 sqft range selling in the 700's. These homes are nice but not as nice as the home I'm interested in, and are again on much smaller lots. They're newer construction but are more traditional and don't resemble the subject property much at all.

So there you go. I’m sure this is much more information than anyone wanted, but if there’s anything you appraisers/agents/redditors can tell me to help me make a more informed decision, I would greatly appreciate it.

submitted by /u/-bob-sacamano
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source https://www.reddit.com/r/RealEstate/comments/n2aymq/making_a_big_offer_on_a_property_that_will_be_a/