Comparing a Triplex to an SFR + ADU + ADU

[barnettapp1]

Hi all,

I'm looking for advice as I am currently appraising a triplex for a lender with a severe lack of Active/pending comparables. I am faced with considering utilizing an SFR with 2 ADUs as a comparable and am wondering what considerations I need to address in the potential comparison. Of course the zoning for the SFR is different (R1 vs R4 for the subject). Aside from that the SFR is currently marketed in the MLS under the Small Income search criteria and is emphasized for its income generating potential which of course we know is a primary motivating factor in the purchase of small income properties like the subject.

I don't have an argument why a buyer would not likely consider the purchase of an SFR plus 2 units as similar to a legal triplex, given all other elements (condition, room count, GBA and lot size, rents etc) are similar, espiecially given the lack of active legal triplexes for sale. The SFR plus 2 ADUs is priced within range of closed sale comparable triplexes. I appreciate any thoughts or input

 

[Fernando]

Does the lender require you to have active/pending listings? If so, at most two is enough.
You do know you can get a duplex or a fourplex as a listing.

 

[barnettapp1]

Yes the lender requires at least one active/pending listing. And yes the severe lack of comparables I refer to include all 2-4 unit small income properties. There just arent any there and I've stretched the search parameters out 3 miles in a relateively denser suburban market area.

 

[George Hatch]

Whereabouts? And what's your subject like?

My concern would be about the unit mix when there's an SFR+ADUs vs your subject.

I would not be shy about looking back 12 months or extending out further than 3mi, but I also wouldn't compare 2un properties to a 3un. Better to go with 4un vs your subject if you have enough 4un properties.

If 3-4 unit properties are atypical for your market area then that's a theme you want to address early on in your report. Do that on pg 1 of your report when summarizing the composition of the neighborhood and in relating your subject to its environment. Then your readers won't get surprised with what you had to do when they get to the Sales Comparison. The nature of the subject prompted for the further extension of your search criteria as a matter of last resort. Not in an attempt to dork the value.

WRT a lender asking for listings that don't exist, I'd consider contacting the lender directly. Both to give them a heads-up that you're facing an atypical appraisal problem so they know to look for this one coming to them, and to solicit their preferred solution. They might tell you to follow through with what amounts to a useless comparable listing or they might waive their requirement for this one.

 

[barnettapp1]

Whereabouts?

Property is in Burbank

 

[gregb]

Whereabouts?

OP is from San Diego.

 

[Fernando]

Property is in Burbank

I don't know Burbank but can you find any 2-4 unit listings in the city of Burbank? You don't need to constrain yourself in miles.

 

[barnettapp1]

OP is from San Diego.

I lived in the San Fernando Valley for 30 years and began my appraisal practice in Los Angeles I am very competent with the subject's area.

 

[Fernando]

OP is from San Diego.

Good catch.

 

[gregb]

Eight active or pending 2-4 listings in Burbank-

00-25509551 Active $2,000,000 ******** ********SR-25142550 Active $1,399,000 ******** ********GD-25157570 Active $4,999,999 ******** ********00-25615183 Active Under Contract $1,575,000 ******** ********IV-25053571 Active Under Contract $2,349,000 ******** ********GD-26001075 Active $1,100,000 ******** ********00-26633817 Active $1,999,999 ******** ********SR-25273185 Active $1,095,000 ******** ********