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

[J Grant]

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.

Sounds like you have it coverd, good job !

 

[juck224]

Sounds like you have it coverd, good job !

Thank you for the help as well, I am probably much newer to this career than almost anyone here, so I truly appreciate the insight from people who have been doing this for much longer than me.

 

[J Grant]

Thank you for the help as well, I am probably much newer to this career than almost anyone here, so I truly appreciate the insight from people who have been doing this for much longer than me.

As you are finding out, we might "feel" a property is worth more or less, but what counts is proving it or supporting it through the data, research, and the comps. Comp selection is key - which does not mean cherry picking comps to make a value, it does mean finding, if they are out there , the comps that indicate X value.

 

[Zoe]

I would not have been opposed to using single family residential if you think the main buyer would be owner occupant. Otherwise you could just explain in SCA and base it all on like GRM. Get good handle on market rent and be solid.

I understand you have two units but if you applied a single family detached and your opinion is most likely buyer will be owner occupant?

Your looking at typical motivations on MV appraisal.

With one buyer, GRM may have been place to hang hat on. You easily could use SFR detached using a solid GRM estimate.

 

[Zoe]

It is almost certain income has to be involved because the real property rights can't be sold separately.

Now, step one on H&B use.

Always remember you appraise real property rights. Your definition of value is MV as defined by fannie I assume.

 

[Zoe]

One more note. Market Value as defined by Fannie is only value definition I know that requires H&B use analysis.


I have no problem with Fannie's definition of MV.

 

[Zoe]

Appraisers appraise many real property rights and don't use fannie definition of MV on their appraisals. The definition of value is different and don't require H&B use analysis.

Market value definition of value does require H&B use analysis.

 

[sputnam]

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.

Yep. Residential appraising is easy where there are perfect comps.

 

[Tom D]

Yes, there are ugly appraisals. And some i would not do. Try to find comps with something similar to support your brilliant value. The thing about 2-4 family is that i don't think anybody including the underwriter really understands them. And remember you value is also based on value per gba, room, unit, etc. If that is all there is then say that this is all there is and the comps i used had similar buyer appeal and marketability, and would be considered as competing with the subject. You didn't say distance. Suburban i would go up to 5 miles, and so would a buyer. You just need to make the underwriter think, yea i understand value is the high end, but it looks reasonable.

I would use the 2 houses on one lot, This new adu nonsense was invented to give a 2 unit property a residential loan. Now they can go either way.

If you have the nicest, biggest, etc subject you can put more emphasis on the grm income approach, is it getting more income than the lower sales. And do the other value units agree with it being higher. The 2-4 has more than 1 method of value.

 

[ZZGAMAZZ]

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).

Curious: Does "historical marrketing/sales as a 2-family" pertain to the motivation/behavior of typical sellers/buyers in this market, or just a repeated series of incorrectly identified improvements?