Appropriate Discount for Multiple Properties

[Terrel L. Shields]

I wouldn't unless some are similar and might use same comps.

I believe an investor wouldn't discount any. Quantity has a quality of its own. But the solution is to find another sale of multiple properties and see if they look discounted.

 

[jay trotta]

What discounts do you receive from; plumber, carpenter, Dentist, attorney?

Quality of work, time invested on each, etc - unless they are really simple - waterfront in general are a different product; side by side can sell for significantly different prices.

 

[J Grant]

It's always been my take that the amount of discount is inversely related to the amount of product on the market. IOW - if these will be the only 3 waterfront properties on the market, they will be competing strongly against each other, and may require some discount. If there is ample product on the market, I wouldn't think 3 properties would effectively induce any kind of discount requirement.

It may not be so much about assuming a discount, as it is about understanding that it is highly unlikely that the same buyer for3 waterfront properties and 2 additional houses, all sold together for a total of 5 homes bulk, is in any way the same owner buyer for one of the individual properties

I a single house purchase, a buyer can get financing, this type of bulk sale is usually cash or a specialty loan. Even if they pay cash, a buyer for one of the SFR waterfront homes might pay 550k, in a bulk sale the package might be 2 million $( or whatever it is )

Generally, an investment buyer which is the likely buyer for a bulk purchase expects some kind of return, including if they buy in bulk with the view of then splitting the properties up and putting the houses back on the market as 5 individual homes.

 

[alebrewer]

It may not be so much about assuming a discount, as it is about understanding that it is highly unlikely that the same buyer for3 waterfront properties and 2 additional houses, all sold together for a total of 5 homes bulk, is in any way the same owner buyer for one of the individual properties

I a single house purchase, a buyer can get financing, this type of bulk sale is usually cash or a specialty loan. Even if they pay cash, a buyer for one of the SFR waterfront homes might pay 550k, in a bulk sale the package might be 2 million $( or whatever it is )

Generally, an investment buyer which is the likely buyer for a bulk purchase expects some kind of return, including if they buy in bulk with the view of then splitting the properties up and putting the houses back on the market as 5 individual homes.

Ah. I missed the part about having to be sold together. I'd expect that is not typical market behavior, in which case, it would be difficult to quantify.

 

[sputnam]

Why do they "have to be sold together?"
It sounds more like it a client-imposed assignment condition that they be sold together as a bulk sale, correct?

And there is also the problem of they are being presently used for air bnb use, but do most typical buyers look to buy air bnb rental friendly properties? Or would most buyers buy these houses in bulk, then look to split them up to get more profit individually? Or buy them to rent them out on an annual basis? It is possible that all three of those uses could appeal to the buyer pool, who would like be comprised of investors, and investors usually expect a discount.

How much of of a discount...would take a lot of research, talking to RE agents familiar with the market etc.
It might help to develop a separate value for each property if sold individually to help get to the bulk sale discount.

If the Client wants bulk sale value, that's your assignment. Take up the challenge (if you are competent or are willing to become competent)... or... decline the assignment. If you do take the challenge, support your opinions and conclusions. How you do that will depend on the nature of information that is available to you.

 

[J Grant]

If the Client wants bulk sale value, that's your assignment. Take up the challenge (if you are competent or are willing to become competent)... or... decline the assignment.

At the heart of every complex appraisal problem there lies a simple solution.

Simple is not the same thing as easy. But once we define the appraisal problem, then it is just putting in the time, research and grunt work, assuming competence of course.

If an appraiser can not find the solution to a particular problem, that makes them incompetent for that particular assignment, even if they are experienced and competent for other assignments.

 

[JTip]

Yes.

Whatever YOUR market says.

 

[sputnam]

At the heart of every complex appraisal problem there lies a simple solution.

Simple is not the same thing as easy. But once we define the appraisal problem, then it is just putting in the time, research and grunt work, assuming competence of course.

If an appraiser can not find the solution to a particular problem, that makes them incompetent for that particular assignment, even if they are experienced and competent for other assignments.

Exactly right. At least in real property appraising, the prinicples of appraising and the steps in the appraisal process are exactly the same no matter what the property is. If the appraiser truly understands those principles, any appraisal problem can be solved. Remember, USPAP does not require perfection or accuracy. It's your professional opinion. One that you are supposed to develop and report in compliance with USPAP.

 

[J Grant]

Exactly right. At least in real property appraising, the prinicples of appraising and the steps in the appraisal process are exactly the same no matter what the property is. If the appraiser truly understands those principles, any appraisal problem can be solved. Remember, USPAP does not require perfection or accuracy. It's your professional opinion. One that you are supposed to develop and report in compliance with USPAP.

Good post, I just would like to add, it is not simply our professional opinion. It is our professional opinion supported by the appraisal and by what happens in the market.
I take it your statement assumed that, but it is important to point it out because there is a world of difference between a credibly supported opinion and just.....an opinion. We have to remove the rationale of well it's just an opinion as a safe harbor because an appraisal review also has steps in the process to demonstrate if the opinion was credibly supported or not

 

[J Grant]

Exactly right. At least in real property appraising, the prinicples of appraising and the steps in the appraisal process are exactly the same no matter what the property is. If the appraiser truly understands those principles, any appraisal problem can be solved. Remember, USPAP does not require perfection or accuracy. It's your professional opinion. One that you are supposed to develop and report in compliance with USPAP.

With all its flaws, there is a reason why appraisal standards are applicable all over the world and work for a $50,000 property or a $5,000,000 property.
What I see in these posts are two main variants in a complex property problem:

1) There is a gap between what a client wants for their loan vs the proper way to credibly do the assignment in the appraisal, HBU etc. The appraiser needs to do it the proper way and educate the client on why it must be done that way. It can mean that an assignment might get canceled. The appraisers who try to game the system to get it past loan approval are the appraisers who can have problems later.

2) The appraiser flounders around and goes down rabbit holes and is unable to put it together and identify the appraisal problem and thus has no idea how to solve it. They come up with multiple pointless and weird scenarios about splitting properties up, making a HC, wanting to make the report subject to a condition not even relevant to the assignment, or worrying about might happen in 50 years or if the property burns down. They keep coming up with this and that and the other, yet are blind as to what is the appraisal problem is, which would tell them how to solve it including identifying the typically motivated buyer for the property..