Appraising a triplex - no comps?

[mark hurlock]

One way to do this would be to find a competing market. In theory, a competing market is one which shares the same demographic/income profile. It would stand to reason that the two areas would reflect similar buyer-seller motivations and similar market dynamics. In theory, there is no distance restriction for a competing market. .

Good luck!

Sounds reasonable to me.

 

[KHS445]

In the mid-70's I was renting an apartment from a Bank customer who told me that he preferred 3 and 4 unit rentals vs. a duplex. His thinking was if you have a vacancy in a 3 to 4 unit your vacancy is either 33% or 25% and if you have a vacancy in a duplex your vacancy is 50%. Even with a vacancy in a 3 or 4 unit he could still cover the basic carrying costs as he considered the majority of that extra unit income being his profit.

Back to the topic. Review your duplex sales and try to find sales where the individual units are similar in size, bedroom, bathrooms, etc. to your triplex units. Make whatever adjustments you feel are necessary between the individual units. Then look at the difference in the individual unit rents (keeping in mind your adjustments) being received between your subject and the comparable duplexes. If there is much of a difference you may be able to demonstrate a market perceived difference between a duplex and a triplex.

Unless you can determine a external motivation on behalf of the purchaser I would place strong emphasis on the income approach. Be sure to include some sort of rent study to indicate whether your subject's income and expense are in line with the current market. If not adjust appropriately.

Not all that difficult, you just need to take the time to explain the market, explain your methodology and explain you conclusion. You can't make the stuff up and can only use what is available.

 

[ctapraser]

I'm having a dilemma here. I've got a triplex I'm working on and expected to have at least a couple of comps but have none. None within 50 miles in the last 5 years. Mind boggling, really. Same for fourplex sales. Nada. I have a lot of duplex sales. I need some help with the sales approach.

I could value per unit based on adjusted prices. But being a triplex, it's 30% larger. If I adjust for differences in room count or GBA, I feel like it inflates the per unit cost.

I'm tempted to back out of the assignment even though it's almost done. But that also wouldn't help me if I face this issue again.

Help, please!

You could also check expired three family listings. Is this an area with many other 3 family dwellings that do not sell. No 3 family sales in 5 years within an area that has a substantial amount of 3 family dwellings, while two family dwellings are selling, should be telling you something. Could be a market where people do not want to be landlords, just have a second unit to help with the mortgage.


If I had many expired three family listings, supporting a market resistance to 3 familt dwellings, I might consider using two family dwellings with no adjustments?? Just something I would at least consider. Good luck.

 

[Pittsburg_22_m]

Here's what I ultimately ended up doing after trying to exhaust your very helpful suggestions.

I used 5 Duplex sales. The only triplex or fourplex sales in the MLS (and it goes back to 2003) that were remotely comparable sold as packages with other triplex and fourplexes (6-12 units). I found no listings (active, expired, withdrawn) either.

I expanded to the only other MLS system within 50 miles. I also found no triplex or fourplex sales in the last 5-10 years except in package deals. I did find an active listings in that market that was very comparable as far as physical characteristics and included it as a 6th comp. I adjusted the sales approach using a per unit count. The cost approach and income approach both lined up within 5% of it as well.

And of course, I could never forget: explain, explain, explain!

To be honest, I was stunned to have such a difficult time locating a triplex or fourplex. They're not that rare but apparently it's rare they're sold by themselves.

Thanks again!

 

[J Grant]

sounds like you did a fine job!

 

[Mile High Trout]

Here's what I ultimately ended up doing after trying to exhaust your very helpful suggestions.

I used 5 Duplex sales. The only triplex or fourplex sales in the MLS (and it goes back to 2003) that were remotely comparable sold as packages with other triplex and fourplexes (6-12 units). I found no listings (active, expired, withdrawn) either.

I expanded to the only other MLS system within 50 miles.<>

It's time like that, when you need to swing by the county seat or call in, and get records for fsbo's, if you're lucky.

Step one is to observe the area. Visually troll the neighborhood and try to find one. Sometimes just having a similar build is a good supportive point, even if you can't comp against it. Also the counties approach to assessed value can provide ratios against duplexes, that may or may not be helpful, but hopefully will be.

Step two is to comp against dups. Nice job on that one. No big deal, because those sorts of units still appeal to similar buyer category, so they're fair comparables. 2, 3, 4, they're all the same, when it comes to some sort of lateral comparability. None of them are single family, but all of them are potentially mixed use for rental or owner and rental.

I've found personally, that the larger unit amidst smaller units, usually gets a proportional lag or diminished return on the ppsf sort of analysis for both mv and rent income. It depends on the build though. It's easier to comp them all out together when the 3 and 4 unit is really just quirky and perhaps does not have that much additional stature and footprint. Thereby justifying the appraisal position that cost to build was not equal. But if you've got a true sizing difference where they're like row homes, and the 2's are similar, but this one oddball has the extra 3rd same size unit, that's tougher. So you just extrapolate and appraise under the assumption of equality. The subject would therefore be same value as duplexes, plus the additional unit which is a simple extrapolation of average single unit value. So it would be 1.5x value. However, underwriting will probably get their socks knocked off and demand a bracketing unit. Sorry, only the ppsf analysis brackets under the logical premise of equality, and that's as good as it gets. I would not have reached out to another very distant area though. Extract, extrapolate, deduce, and turn it in. I've comped a du, against only sf's, because that's all the 'local market' had to bear.

Nice one.

 

[Doug Wegener]

Forum

Here's what I ultimately ended up doing after trying to exhaust your very helpful suggestions.

I used 5 Duplex sales. The only triplex or fourplex sales in the MLS (and it goes back to 2003) that were remotely comparable sold as packages with other triplex and fourplexes (6-12 units). I found no listings (active, expired, withdrawn) either.

I expanded to the only other MLS system within 50 miles. I also found no triplex or fourplex sales in the last 5-10 years except in package deals. I did find an active listings in that market that was very comparable as far as physical characteristics and included it as a 6th comp. I adjusted the sales approach using a per unit count. The cost approach and income approach both lined up within 5% of it as well.

And of course, I could never forget: explain, explain, explain!

To be honest, I was stunned to have such a difficult time locating a triplex or fourplex. They're not that rare but apparently it's rare they're sold by themselves.

Thanks again!

Isn''t this forum one heck of a valuable resource for difficult assignments? !