2 Houses on 1 Lot, comparable? and more...

[juck224]

Hello all,


I'm working on what initially appeared to be a straightforward assignment, a townhouse-style (side-by-side, 2-story) duplex, but it's become quite complex due to a complete lack of comparable sales.
Specifically, this is in a city where townhouse-style duplexes are pretty rare (and sell for significantly more than typical upper-lower duplexes), and to complicate things further, the subject is both larger and more extensively updated than any similar sale in the city over the past 3 years. I've expanded my search to all nearby competitive municipalities and have developed four comparables that all require upward adjustments. These four comps bracket other key elements (besides GBA) well and the adjustments are well-supported, but I know most clients and reviewers will expect at least one comp that adjusts downward to support the final opinion of value. To try to bracket the upper end of the range, I'm considering using a 2-houses-on-1-lot sale, not because it's ideal, but because it may offer the only realistic opportunity to bracket downward without resorting to sales in non-comparable, urbanized markets 20+ miles away, which would require large and arguably speculative market-based adjustments that I don't believe would improve credibility.


So I have two main questions:

In this situation, is it acceptable to use a "2-houses-on-1-lot" sale as a comparable if it’s the only feasible data point that can be reasonably adjusted downward and provide support for a credible value conclusion, especially when the other sales are all supportive and the market is simply thin? If I use that sale, how should I handle the age adjustment, given that the two dwellings were built roughly 20 years apart (about 100 and 120 years old respectively)? Should I adjust from the the primary structure’s age, or another method?

I know it's not ideal, and I’m confident in my value conclusion based on the data I do have, but I also know this client will not accept a report without at least one comp adjusting downward on the final opinion of value.

Any insight would be greatly appreciated. This is one of the trickiest assignments I've had; it looked simple at first glance, but the market data situation has made it unusually difficult. I’m open to ideas from anyone who’s faced something similar.

Thank you in advance.

 

[Dublin ohio]

Hello all,


I'm working on what initially appeared to be a straightforward assignment, a townhouse-style (side-by-side, 2-story) duplex, but it's become quite complex due to a complete lack of comparable sales.
Specifically, this is in a city where townhouse-style duplexes are pretty rare (and sell for significantly more than typical upper-lower duplexes), and to complicate things further, the subject is both larger and more extensively updated than any similar sale in the city over the past 3 years. I've expanded my search to all nearby competitive municipalities and have developed four comparables that all require upward adjustments. These four comps bracket other key elements (besides GBA) well and the adjustments are well-supported, but I know most clients and reviewers will expect at least one comp that adjusts downward to support the final opinion of value. To try to bracket the upper end of the range, I'm considering using a 2-houses-on-1-lot sale, not because it's ideal, but because it may offer the only realistic opportunity to bracket downward without resorting to sales in non-comparable, urbanized markets 20+ miles away, which would require large and arguably speculative market-based adjustments that I don't believe would improve credibility.


So I have two main questions:

In this situation, is it acceptable to use a "2-houses-on-1-lot" sale as a comparable if it’s the only feasible data point that can be reasonably adjusted downward and provide support for a credible value conclusion, especially when the other sales are all supportive and the market is simply thin? If I use that sale, how should I handle the age adjustment, given that the two dwellings were built roughly 20 years apart (about 100 and 120 years old respectively)? Should I adjust from the the primary structure’s age, or another method?

I know it's not ideal, and I’m confident in my value conclusion based on the data I do have, but I also know this client will not accept a report without at least one comp adjusting downward on the final opinion of value.

Any insight would be greatly appreciated. This is one of the trickiest assignments I've had; it looked simple at first glance, but the market data situation has made it unusually difficult. I’m open to ideas from anyone who’s faced something similar.

Thank you in advance.

Couple of thoughts. What type of houses are the 2 houses on one lot sales. Could they be considered an SFR w/ADU which could complicate a direct comparison. It would be ideal if they were 2 similar 2 story homes because they would exhibit similar functional utility to a townhouse. You could also compare incomes to help support the use of 2 houses on one lot as a comparable

 

[juck224]

Couple of thoughts. What type of houses are the 2 houses on one lot sales. Could they be considered an SFR w/ADU which could complicate a direct comparison. It would be ideal if they were 2 similar 2 story homes because they would exhibit similar functional utility to a townhouse. You could also compare incomes to help support the use of 2 houses on one lot as a comparable

This is actually a great question, and I am glad you brought it up, because in this market, the second house is subordinate in size (half the size of the primary dwelling), and per Fannie Mae's definition, almost looks like it may be more akin to an ADU based on its characteristics, leading me to believe it may not be directly comparable. However, it has been historically marketed and sold as a 2-family, with rental income similar to what you'd see from a townhouse style duplex in this market area (though it is still predominantly owner-occupied).

 

[juck224]

I am figuring I have another option in this, and was also wondering if anyone would help me consider this, I have a similar townhouse style duplex comparable from a nearby City, it is smaller and lacks a garage (subject has 2-car garage), but it is an unseasoned new construction (rare for this area). The condition alone would provide downward bracketing, the subject is ~50 years old and updated throughout as previously mentioned, and then to bracket GBA I can use another sale from within the subject's immediate market segment that sold approximately 2.5 years ago, I am wondering if this may be the best route to go. Again I appreciate any help in advance.

 

[Dublin ohio]

I am figuring I have another option in this, and was also wondering if anyone would help me consider this, I have a similar townhouse style duplex comparable from a nearby City, it is smaller and lacks a garage (subject has 2-car garage), but it is an unseasoned new construction (rare for this area). The condition alone would provide downward bracketing, the subject is ~50 years old and updated throughout as previously mentioned, and then to bracket GBA I can use another sale from within the subject's immediate market segment that sold approximately 2.5 years ago, I am wondering if this may be the best route to go. Again I appreciate any help in advance.

Sounds like any sales that help are fugly. But you got what you got. The sales comparison might be "ugly" but think income instead of focusing 100% on the sca. Support the use of the fugly sales with the income approach. Most of my adjustments for 2-4 family properties are income based

 

[juck224]

Sounds like any sales that help are fugly. But you got what you got. The sales comparison might be "ugly" but think income instead of focusing 100% on the sca. Support the use of the fugly sales with the income approach. Most of my adjustments for 2-4 family properties are income based

You're absolutely right, this is a very heavily owner-occupied market segment, especially with this style of duplex; however, I had somewhat less ugly rental data, and that is ultimately going to help me. With the sales I have adjusted so far, despite being ugly, they have converged very tightly with well supported adjustments, so I am not so concerned with my own confidence, moreso the scrutiny I am going to get from this lender who is notoriously strict. Luckily, I am a pretty good storyteller if anything,

 

[CGinMN]

Has the subject previously sold in updated condition, whereby you can compare the historical sale to up-down duplexes to develop an adjustment for the side by side premium? I would be hesitant about including 2 detached houses on one lot unless buyers would consider it an alternative. The GSEs don’t require bracketing and upward adjustments to all your comps is also acceptable. Maybe this lender has a bracketing overlay to require it, but if not I would focus instead on what is deemed to be most competitive to the subject, which I would assume is attached duplex properties.

Regardless it sounds like you have a handle on it, and your report will be better than most. Some assignments are ugly and there’s just no way around it.

 

[Mark K]

Use the ugly comps. When you don't have good comps, use a lot of 'ugly' comps and a credible number usually comes out in the end. Just tell a good story for the UW. You can't always bracket a sale.

 

[J Grant]

Even if it is updated and townhouse style, it ;s upper limit in price still might be lower than you seem to think it should be, because at some point it might be an over improvement.

It is a duplex ( two units ) is the rental history showing it rents for more due to townhouse style and updating ? That is support for being worth more $.

I would use an updated triplex (three-unit) and deduct for the third unit as an additional comp rather than two houses on one lot .

 

[juck224]

Even if it is updated and townhouse style, it ;s upper limit in price still might be lower than you seem to think it should be, because at some point it might be an over improvement.

It is a duplex ( two units ) is the rental history showing it rents for more due to townhouse style and updating ? That is support for being worth more $.

I would use an updated triplex (three-unit) and deduct for the third unit as an additional comp rather than two houses on one lot .

I was able to scrape up enough comps, with two recent sales in the neighborhood, one in a nearby city, one slightly older sale in the subject's city, and one older sale in the neighborhood, without having to use any three-units or two-houses-on-one-lot comps. I actually somewhat agree—I was thinking this may be over-improved—but there are a few blocks of these townhouse-style comparables with limited recent sales data. I performed a search farther back, up to five years, to analyze sales data, and they consistently show the highest sale prices in the whole city for two-unit properties when they do sell, with large increases year-over-year based on the limited sales data. The main issue is there are no recent sales of these as large as my subject nor as updated, but using an updated one from a nearby city, an updated older sale, and an older sale (two years old) that bracketed the GBA, and then two recent sales that adjusted up due to smaller size and inferior condition, my subject is just at the high end of the value range for two-units in the city based on the sales data—mostly due to the constricted housing stock of these townhouse-style duplexes in this city (which is predominantly owner-occupied), where, when they do sell, they are significantly higher than standard two-story/upper-lower duplexes, and resale history of these sales (which is limited) shows large increases year-over-year. So I think using the older and farther sales as support, along with more recent sales in the neighborhood, provides good support for the value, albeit still at the high end of the neighborhood range for duplexes.