Final Reconciliation - Triplex

[Doug Wegener]

Triplex.

Sales comparison approach came in at $205,000

Income approach $209,0000

Cost approach : $217000

My final value $209,000.

My reasoning is that because this is an investment property most weight should go to the income approach. Chief appraiser says since it is a residential property most weight should go to the sales comparison approach.

This is not a hill I am going to die on, but I would like to know what you think. Most weight to income or sales comparison approach on a Triplex.

In my opinion, investors are buying income and that deserves the most weight.

 

[Randolph Kinney]

In my opinion, investors are buying income and that deserves the most weight.

Fannie lends on sales comparison approach.

However, I have appraised 4-plexes based upon income for non-Fannie Mae work. The investor is buying for income and ROI.

 

[HF Mudd]

Is the subject market predominantly owner-occupied (i.e.: one owner's unit and 2 tenant's units) or tenant occupied (3 tenant's units)?

 

[CindyR]

i just did the same thing for one I submitted for VA. We'll see what I hear. this was a fourplex and VA requires vet to occupy one unit so there are really only three rents. I bet I am in trouble.

 

[Michigan CG]

Chief appraiser is an idiot. When I am looking to buy a property it is solely based on income.

 

[glenn walker]

Even though its a triplex ** Fannie & Freddie and major banks consider 1-4 units as residential and not true income property. Often the buyer lives in 1 unit and rents the others. Also financing on these is lot more friendly than 5 units or more. In summary the reviewer is correct Fannie will not purchase a 1-4 if they see comments stating the most weight was placed on the income approach. Just change your verbiag in your reconciliation and be done it's not going to change your value.

 

[Doug Wegener]

Is the subject market predominantly owner-occupied (i.e.: one owner's unit and 2 tenant's units) or tenant occupied (3 tenant's units)?

Tenant

 

[J Grant]

Yes for the most part investors are buying duplex/triplex/fourplex properties for income. However, what they are willing to pay is seen in the PRICES of these properties, no matter if income approach supports a higher or lower figure. Whether we agree or not, res lending , (of which financing 1-4 units is part of, ) wants to see SALES prices more than income . This is because their interest is in the property as collateral they may have to sell one day rather than how much it generates from rents, since lenders are not in the property rental business.

A lender is our client, not the investor buyer. To an investor buyer, the income might be more important. To a lender, the sales prices are more important. The lender may have to sell the property one day in case of a default and they won't be renting out as an owner. That is why they want more reliance on the sales comparison approach.

 

[NachoPerito]

Buyer's care most about income.

Therefore, you care most about the income approach.

 

[CANative]

The problem is in your reconciliation section. "Because it's an income property" is not an adequate explanation. Talk about the quality and quantity of the data analyzed.