1-4 Family Appraisals

[Tim Hicks (Texas)]

When appraising 1-4 family properties I choose to stick with like kind properties. In other words, I will only use duplex sales comps on duplex appraisals, triplex for triplex, fourplex for fourplex. I will occasionally use rental comps of different multi-family properties if I have more similar individual units to demonstrate the rental market.

My question is: Have you ever been asked to use a triplex or fouplex sales comp on a duplex property, or actually used triplex or fourplex sale in the market grid? I have never done it because I consider it GIGO. Now, if you actually deducted the amount equivalent to the number of units of difference, then it might make since, but nobody would want you to make that large adjustment. Now, the GRM for the different style property might be useful, but it just seems inappropriate to me to use a different style 1-4 family in the sales comparison approach.

I ask this because, after 13+ years of appraising by my own terms, I have been challenged on a re-consideration of value to utilize a triplex property on a duplex appraisal. It seems that the loan officer contacted another appraisal company and they told the loan officer that this triplex was a better comp and they would have utilized it.

It seems that Skippy & Skippy Appraisal Company is going out of their way to discredit my appraisal. Never mind that their triplex comp is owner financed and water front and my duplex is on a interior lot. If you multiply their triplex by 2/3 you get the same value I have. The GRM is the same, but Skippy and Skippy can get $25,000 more than I did. Never mind, that I have a duplex sale from the same street, same size, same age that sold for the same as my appraised value. It seems Skippy & Skippy appraised the one on my street for way more than the sales price and told the loan officer that the sale was a distress sale. However, I spoke to the RE agent, who happened to be the listing and selling agent, who told me point blank that the duplex comp was not a distress sale, they based their list price on a Skippy & Skippy appraisal and the sales price was simply the best offer they got.

Why is it that Skippy & Skippy must be always right, just because they are higher? It seems I get to spend more time defending my value, just because I refuse to do what Skippy & Skippy do.

 

[Chris Harrison]

Yes,

I appraised a four-plex in a small town (under 20K res) and the most recent sale of a four-plex was 2 years ago. The market (town) only had 4 built in the last 25 years and most income properties were tri-plex and duplex. The adjustments were large but the lender was more interested in "date of sale" and income approach.

Chris

 

[Wally Jones]

Tim,

To answer your question, yes, I've been asked to consider using a triplex as a comparable for a duplex. No, I didn't use it because there were plenty of duplexes available.

My only point of reference is my market. There is not a large inventory of multi-family homes in the market area and they are for the most part located in "pockets" of urban and suburban areas. At times, I've had to go further away from the subject in distance and time than the lender would prefer, but it has never seemed necessary or logical to compare a mix of unit types. It seems like it would take some convoluted math exercises to figure the relative difference in a duplex, triplex or fourplex. I don't think it could be analyzed on a straight line formula such as pure square foot difference, bedroom number difference, etc. In our area, they're just different animals and need to be treated as such.

As far as your appraisal being compared to your friend Skippy's, you already know how you feel about your work. And that's all that should matter. If you've looked at what your client has requested, a reconsideration of value, and determined that your original analysis was sound, then that's sufficient. I try to visualize myself in front of the state board defending my work and if I feel I can do it with no problems, I'm satisfied. See if Skippy feels the same way.

 

[Restrain]

Tim:

Turn Skippy and Skippy into the state. They made an appraisal and it's bogus. Write it up and send it to the investigators. It'll be a couple of years (no money, don'ca know) but they'll write them a letter and it'll get their attention.

Roger

 

[Thomas Fiehler]

Tim-In my market area, the GRM for a 2 family is different than a 3 family which is different from a 4 family. Always use GRM's from similar properties, but it is also necessary to analyze expenses. If owner pays utilities, than the GRM would be lower (usually) since rents are raised to allow for this. I realize that theory says to never adjust the GRM, but I will adjust income for differences in utilities and state it in the comment section. B)

 

[Ann O'Rourke]

I have always used 2,3, and 4 unit properties (and sometimes 5 or 6 units when appraising a fourplex) as comps when appraising 2-4 unit properties, since I started appraising in 1976. Because the poorly done form forces me, I make very large unit adjustments. Hopefully Fannie Mae will come out with a new 2-4 unit form, similar to the old 2-page form. I try to use duplex comps when appraising a duplex because of the owner occupant issue, which comes and goes over time, but this is not always possible. Over 2 units I appraise as income properties unless it is a very good candidate for owner occupancy, such as a large owners unit and 1 or 2 small units.

I look at the market for the subject property, not what underwriters say. Sometimes it is investor, sometimes owner. In my market it changes over time and varies by location.

Has anyone ever had a call from an underwriter on a 2-4 unit appraisal? I haven't.

I do lots of 2-4 unit appraisals. Most are converted Victorians in my city. I also do lots of 5+ unit properties.

 

[Wally Jones]

As you said, Tim, this has already been educational. Looks like the main consideration is your local market and what's available.

Ann's 2-4 family market is primarily converted Victorians. Mine is mostly units originally constructed as a 2, 3 or 4 unit building. Five units and beyond are usually beyond my current competency as they are larger apartment buildings and fall into the commercial realm.

Ann, I didn't used to get underwriter callbacks on much of anything. However, it seems in the last year I have spent an inordinate amount of time answering all sorts of questions and sending addendums with explanations. My latest duplex (last week) is a good example. The underwriter wanted another comparable sale within one-half mile of the subject. Two I had used were from the same block as the subject, the third was from 1.6 mile away. When I explained none were available, last sale that was nearer was three years ago, etc., he reluctantly said okay. Later in the day, he called to say since I couldn't find a closer comp, and one of the comps was over a mile away, then I had to change the location to suburban, even though the subject was in sight of City Hall. Sigh. He was disappointed on that one, too.

(Good to see your post considering your busy schedule!)