A MultiFamily Question on Adjustments

[Mztk1]

I'm not sure what you are trying to say, so I'll paraphrase what I think it is:
"A" is rented for $1200 which is at market and the same as the subject.

What I am trying to say is simple and that is actual, or contract, rent (1200 of the comp) is not always market rent.

If I have "discovered" through the market that a location is worth $100 and than I find a house that does not have the location but rents for the same amount as identical houses that do, than chances are that house is NOT at market rent.

The amount at which contract rent exceeds market rent is known as excess rent. Just because a house rents for X, it doesn't mean X is market rent - especially when you have data that says it should be rented at X-100. Either the rent is wrong, or the data is wrong, but whichever it is, Sandy is right, you need to do more research and figure it out.

 

[Mztk1]

Does the appraiser ignore what the market data indicates (no difference in rents means no difference in location) and make a location adjustment anyway?
If asked why was an adjustment made in lieu of the contrary data, how should the appraiser respond?

Let me ask you this, Is an adjustment supported by the sales data? I don't care what they are rented for in the SCA, if my comp A after all other adjustments is adjusting to $120,000, and comps B and C adjust to $130,000 but have the same location as the subject, than yes, absolutely, I make that location adjustment. In that instance, what it tells me is "a" is likely rented above market and I exclude from a market rent analysis.

 

[SANDY]

Denis- What if the appraiser thinks that comparable A's location is inferior but the sales price does not seem to reflect that but the rental data does.
Or let's say that the data is the opposite-A's location is inferior and the sales prices indicate it, but the rental data you have does not reflect it.
IN either case Denis you have some additional analysis ahead of you to try to determine wasssssss up with dat!!!!

You seem to automatically accept the income data as perfect all the time as if it has some magical power compared to sales price data.

Jonsey- Darn you would have to put up a quote of mine with all those typos!! Only excuse I can offer for the typos, is that it gets tiring trying to herd cats.

Denis- Your thought process is not without merit. One always has to be on the look-out for what the market perceives as value influencing features and for data of any type that demonstrates it. But our judgements and our available data may or may be reflecting what the overall market is thinking so we must be constantly on guard against flawed data, flawed judgement and personal bias!! That is one of the biggest problems I have with some of the so-called seasoned appraisers here-their arrogance is not only un-called for its not justified by the quality of their posts. Ignorance can be overcome but ignorance combined with arrogance is very very devastating!! Quantity of posts is like poundage in some commercial appraisals(there is poundage in SFR's too). Be careful of what you think you know, because before you know it, you won't know anything!

 

[hastalavista]

Let me ask you this, Is an adjustment supported by the sales data?

The only data available in the example is what I gave.

What I am trying to say is simple and that is actual, or contract, rent (1200 of the comp) is not always market rent.

I give up :new_smile-l: .
I gave some pretty specifics in my example... like both properties rent at market (a given): not excess rent but market rent. And that locations have been determined to have a rent premium (given).
You go back and say that isn't always the case.
It isn't always the case. It is the case in my example- that's why I'm using it!
But that's OK, Jim. Let's stop this. I withdraw the question (since it gets changed before it gets answered :laugh: ).

 

[Mztk1]

The only data available in the example is what I gave.



I give up :new_smile-l: .
I gave some pretty specifics in my example... like both properties rent at market (a given): not excess rent but market rent. And that locations have been determined to have a rent premium (given).
You go back and say that isn't always the case.
It isn't always the case. It is the case in my example- that's why I'm using it!
But that's OK, Jim. Let's stop this. I withdraw the question (since it gets changed before it gets answered :laugh: ).

But your "givens" contradict themselves, Denis. You ask what we would do. Sandy says I'd go look at the data again because something isn't right. So would I. Sandy is right. Something is off. Maybe the market changed and a time adjustment is necessary. But if I KNOW there is an effect for location, and my comp rents differently from what I know to be factual, than either the rent is wrong, or my facts are wrong. You have an inherent conundrum in your problem. We cannot offer solutions to it, only offer conjecture.

 

[hastalavista]

But your "givens" contradict themselves, Denis. You ask what we would do. Sandy says I'd go look at the data again because something isn't right. So would I. Sandy is right. Something is off. Maybe the market changed and a time adjustment is necessary. But if I KNOW there is an effect for location, and my comp rents differently from what I know to be factual, than either the rent is wrong, or my facts are wrong. You have an inherent conundrum in your problem. We cannot offer solutions to it, only offer conjecture.

I don't suppose your determination that the location is superior could be wrong too?

(edit to add: If your facts are wrong, they weren't facts to begin with, no?)

 

[PropertyEconomics]

Denis ... stop m2: . Only the thick headed survive that.

 

[Mztk1]

I don't suppose your determination that the location is superior could be wrong too?

(edit to add: If your facts are wrong, they weren't facts to begin with, no?)

If you go back to post 613 I think it was and read choice #4, you'll see that was a consideration. The fact is, something is wrong, and before I submit the report, I aim to figure it out.

 

[PropertyEconomics]

Ok- question of the day is to PE. So what did you end up doing in response to the underwriter?

I vote in advance for- PE folded like a cardboard box and made line item adjustments. If he didn't I hope his scope of work at least reflected the use of income related data in both approaches despite the fact that he had adequate sales comarison data or he is done--dun!

I wait with baited breath for your answer PE. Hope he is not afraid to answer.

Jim-are you getting private messages from PE telling you what an idiot you are like I did. That boy is ****ed off that he got caught.

Acutally Sandy ... I responded to the undwriter by showing her how the adjustments would be the same ... and the fact that four sales in 18 months in a town of 7,500 people would not allow for extraction of every single difference. After explaining the adjustments, the market (explained fully within the report) and my reasoning ... the underwriter accepted the report AS IS .... Apparently she understands that income producing properties are purchased for their ability to produce income. Something you seem to have a hard time grasping, although that is not uncommon for trainees.
I didnt get caught at anything. You should be careful of what you accuse others of. There is nothing wrong with my adjustments. They are well supported and reasonable .... Im just as sure that you cant figure out why the income and the market approaches ended up differently either ... can you?
I suggest you stop accusing others and worry about your own *** ... and for what is worth you said you were an idiot publically not me ...

 

[Mztk1]

Jim-are you getting private messages from PE telling you what an idiot you are like I did. That boy is ****ed off that he got caught.

I don't think he is "caught" at anything. Methodology is an appraiser's preference. I doubt I would do it the way PE did, but I can't say he is wrong. I, like you, do not like to mix two approaches when I don't have to. I like you see what he did as two income approaches, but he called one the sales comparison approach. But perhaps unlike him, in a residential 2 to 4 family property, I most often prefer the sales comparison approach, where he - in the case of this four family at least - definately prefers the income approach. I don't know the house, I don't know his market. Maybe his way was the best of all possible ways considering the circumstances. I do know PE is a bright guy, as arrogant and thick-headed as me at times, yes; but very knowledgable and capable. I'm sure he simply defended himself with the underwriter, who then may have ordered a review on it, and, because it seems obvious he cares about being honest and well thought out in his reports, it probably came back as "okay".

As for name calling in private messages to each other: Never - or at least not yet. So far, we've kept that to the public areas only.