Final Reconciliation - Triplex

[CANative]

Client meaningful intended use, and clients can determine assignment condition. With res lending, when the certs say most reliance on sales comparison approach, that is an assignment condition, appraiser is free to reject assignment if they disagree and feel they can't derive an opinion of market value based on the assignment condition.

Where does the form or the selling guide say any of that?

 

[Mr Rex]

Like I said, some folks don't ever read what they sign.

4. I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison and income approaches to value. I have adequate market data to develop reliable sales comparison and income approaches to value for this appraisal assignment. I further certify that I considered the cost approach to value but did not develop it, unless otherwise indicated in this report.

 

[CANative]

They're confusing the Fannie Mae missive about the CA or IA not being the sole approach relied upon.

 

[hastalavista]

The sales prices are the best indicator of MV for these properties, since the MV definition references the most probable price a buyer would pay. The fact is, no matter how much a buyer cares about income, what they are willing to pay to get that income is seen in the sales price of the properties.

Ahhh..... You have 4 income properties that sold, each has 3-units. Your subject has 3-units.
H&BU analysis has determined that the most likely buyer for the subject is an investor. All of the 4 income properties that are used as comparables sold to investors. In this class of property, the market considers income and uses a GRM as the relevant value indicator.

Comparable #1's monthly (total) rent is $3,000 and it sold for $600,000
Comparable #2s monthly rent is $2,750 and it sold for $565,000.
Comparable #3's monthly rent is $2,850 and it sold for $570,000.
Comparable #4's monthly rent is $3,050 and it sold for $615,000.

The subject's market rents are $3,250.

What is the reasonable price range the market would pay for the subject?

 

[J Grant]

will answer later, behind in work!

 

[hastalavista]

will answer later, behind in work!

You and I both!

 

[glenn walker]

Well Nacho *** Try doing a single family home and placing the most weight on the income or cost approach ** especially if your closed sales comparable are less than your cost approach.

 

[J Grant]

I worked the GRM ( based on avg rent of $2900, not subject market rent of $3200), got $584, 600 income approach.Reasonable range...how should I know? I am just the appraiser lol...

I got a 19.6 avg GRM giving me an income approach much higher than the sales...an income approach of $682,000. Can that be right? Did i mess up on developing the GRM...I derived my GRM from the 4 market rents of the comps did not included the subject rent.

Let's say we use Nacho's who got $656,000 income approach from his GRM, why would an investor pay $656000 for a property if he could buy one for $600,000? I mean, how can we answer this without knowing what the listing prices of triplexes are.

The comps sold for between $570,000 and $615,000 . If a triplex can be purchased for within that price range on effective date, why would a buyer pay $656,000?

Yes the income approach yielded higher but the actual sale price of the comps are lower. Aa MV purpose appraisal the question is what is the most probable price a buyer would PAY for the property.

Principle of substitution; if there are two listings of triplexes that command similar market rents and one is listed at 625k and the other at 615k (for example ), why would the subject triplex be worth 656k ? What well typically motivated buyer would pay more for a property than an equivalent substitute assuming they yield similar income?

 

[NachoPerito]

Ahhh..... You have 4 income properties that sold, each has 3-units. Your subject has 3-units.
H&BU analysis has determined that the most likely buyer for the subject is an investor. All of the 4 income properties that are used as comparables sold to investors. In this class of property, the market considers income and uses a GRM as the relevant value indicator.

Comparable #1's monthly (total) rent is $3,000 and it sold for $600,000
Comparable #2s monthly rent is $2,750 and it sold for $565,000.
Comparable #3's monthly rent is $2,850 and it sold for $570,000.
Comparable #4's monthly rent is $3,050 and it sold for $615,000.

The subject's market rents are $3,250.

What is the reasonable price range the market would pay for the subject?

Lets assume the rents for comps 1-4 are not lagging rents and are at market. The subject is slightly superior to these comps for one reason or another, which may or may not be adjusted for in the Sales Comparison Adjustment grid depending on if the appraiser is a wizard.

The GRM is tight at 200 to 205 for the four comps. 202 is reasonable, which suggests a value of $656,500 for the subject property.

 

[Pittsburgh Pete]

Triplex.

Sales comparison approach came in at $205,000

Income approach $209,0000

Cost approach : $217000

My final value $209,000.

My reasoning is that because this is an investment property most weight should go to the income approach. Chief appraiser says since it is a residential property most weight should go to the sales comparison approach.

This is not a hill I am going to die on, but I would like to know what you think. Most weight to income or sales comparison approach on a Triplex.

In my opinion, investors are buying income and that deserves the most weight.

Of course it's purchased on the basis of income. And isn't that fact reflected most directly in the comparable sales in the Sales Comparison Approach? Weren't the comparables purchased for their income generating capabilities?

It all boils down to the "quality" of the data used in each approach. Rely on that which is most reliable.