Form 1025

[nstanbru]

I was planning to open a new thread but will post my doubt here I am appraising a 3 unit property and all the comparable sales found are 2 units Is it acceprabl not to fill the breakdown per units since they are different as well as per rooms and bedrooms also if they differ? and of course explain it

My adjustments are always income based. So, if there are absolutly no 3 unit comps in an expanded area and time search, I would include some 4 unit sales also. Having only 2 unit sales to compare with a 3 unit, will have a tendency to skew the adjustment factors. Maybe use 3 duplex sales and 3 four-plex sales.

 

[Terrel L. Shields]

My adjustments are always income based.

I might caveat that but agree income difference is critical in MF housing

 

[nstanbru]

I might caveat that

We're in agreement on that.

 

[App601]

I'm not fully understanding the second part of your question? But I'll take a stab at it....

I think you are looking at two sets of elements of comparison: Unit count and unit configuration (bed/baths within each unit).
If my subject's units are different in configuration vs. the comparables, and those differences warrant adjustments in the market, how do I account for those differences in my analysis?
The other issue is the contributory value of the 3rd unit: I've seen many appraisers make the mistake of dividing the price by three and using that as an adjustment. But is that valid? For the 2-unit comps, $/unit has 50% of the site value embedded within it. For the 3-unit subject, $/unit has 33% of the site value embedded within it.

So, my answer is one can certainly use 2-unit comparables for a 3-unit subject, but (a) the level of analysis and support within the report for the adjustments is going to be significant and (b) if the intended use is for mortgage financing, be prepared for many questions.

Good luck!

My point is simple and I will explain it with an example Lets say the DSCA yields $125,000 for 2 units. I normally adjust gross GLA irrespective of the number of units plus +/- bathrooms from each unit So if the final opinion of value is $150,000 that will give $75,000/unit

Now my subject has 3 units Should I leave the computation per unit blank ? Or should I place $225,000 and say that the opinion of value ;per unit is not considered due to differeces from subject?

 

[gregb]

My point is simple and I will explain it with an example Lets say the DSCA yields $125,000 for 2 units. I normally adjust gross GLA irrespective of the number of units plus +/- bathrooms from each unit So if the final opinion of value is $150,000 that will give $75,000/unit

Now my subject has 3 units Should I leave the computation per unit blank ? Or should I place $225,000 and say that the opinion of value ;per unit is not considered due to differeces from subject?

Do you have a three or four unit comparable?

 

[Ken Masla]

Actual rent is used...no explanation. Final reconciliation says income approach not applicable because the typical buyer (of this 3unit in a student housing area) is not likely to purchase for income purposes.

Is the property near a frat row or very close to it?

Also, depending on the market, the income might not be a motivating factor, Rich asian/saudi family buys up property for their kids to attend college. Sometimes any property they can get their hands on, including a 2-4 unit home.

Sometimes, neighborhood boundaries for market areas near universities are like a 2 block radius. So within that small market, it is possible that the extremely wealthy have taken over. In this case, income is NOT a motivating factor.

Income approach might be unreliable close to certain universities where it is typical for the owners to add un-permitted bedrooms/bathrooms and converted the homes into boarding houses without permits.

Things get really weird near Universities where rich people's kids attend.

Probably a lazy appraiser, but there are exceptions.

 

[hastalavista]

My point is simple and I will explain it with an example Lets say the DSCA yields $125,000 for 2 units. I normally adjust gross GLA irrespective of the number of units plus +/- bathrooms from each unit So if the final opinion of value is $150,000 that will give $75,000/unit

Now my subject has 3 units Should I leave the computation per unit blank ? Or should I place $225,000 and say that the opinion of value ;per unit is not considered due to differeces from subject?

The appraiser need to make sure s/he is comparing apples to apples.
Assume that the lot size of the duplex and the subject (3-unit) are the same.
Assume that the zoning allows for 3-units on both and assume the H&BU of the sites, as vacant, are the same.
The duplex is $150k, or $75k per unit. If the two units are identical (or sufficiently similar to one another) then the per-unit indicator reflects each unit's configuration (bed/bath count and unit size) as well as a pro-rata share of the site value (50% of the site value for each unit).
Now, let's assume the subject's 3-units are identical to one-another and reasonably similar to the unit-configuration of the duplex (such that any adjustments for size/configuration are not really materially).
While the duplex sold at $75k per unit, the triplex is most likely not worth $75k per unit. Because in the per-unit value of the duplex, 100% of its site is accounted for. If the appraiser adjusts the subject up $75k for its 3rd unit, the analysis has inflated the value by adding an additional site-value component to the subject.

Land Value + Contributory Value of the Improvements = Market Value
Land is worth $90k for both the 2-unit and 3-unit site.

Duplex: Contributory value of the Improvements = $60k. Total value for two unit property = $150k. The unit adjustment for improvements is $30k, not $75k.
Triplex: Site value is $90k. Adjusting $75k per unit to value the property means: Value ($225k) - Land ($90k) = Improvements ($135k). But the contributory value of the units for the duplex is $30k/unit. 3 x $30k = $90k. In this simple example, if the appraiser does not address the land-value component in the $/unit, the appraiser is adding an additional $45k to the subject.

Real life isn't as simple as the example. But real life needs to be analyzed similar to the example. Otherwise, relying on a $/unit adjustment could lead us down a wrong path.

Your bigger question (I think) was if I make a per-unit adjustment do I need to screw around with the individual configuration adjustment. I would say, "yes"; compare what exists on a one-to-one basis, and evaluate the additional unit based on its contributory value; but that "contributory value" of the 3rd unit may not be a simple price-per-unit of the duplex properties.

 

[App601]

I found a 3 unit comparable that I am planning to use as a 4th comparable sale just for the purpose of obtaining a credible multiplier and maybe foe the unitary value to obtain the value per number of units However being an FHA case my opinion of value will still be based on the most similar comparable from the 1-3 two unit comparable sales. Bear in mind that this is the DSCA AND I will be adjusting it as it were a single family.

Dennis

I think that adjusting per number of units is not a simple task Maybe the best way is by the capitalization of the potential rent difference But what if the most similar 2 unit comparable rent is $750/unit x 2 units and for a 3 unit sale found is $450/unit

Which has a higher potential gross income? Obviously the 2 unit

But if the 3 unit larger comparable has a potential gross income of $600/unit then it is worth more

Of all the 1025s I have made I have never adjusted for number of units


Finnaly I have another simple question If you have a 3 unit property and 1 unit is rented and 2 units are vacant I check both tenant and vacant in occupant Wintotal gives me an error message
What should I check?

 

[nstanbru]

Finnaly I have another simple question If you have a 3 unit property and 1 unit is rented and 2 units are vacant I check both tenant and vacant in occupant Wintotal gives me an error message
What should I check?

As long as the program just gives an error message but doesn't prevent one from checking both, I would still check both and explain in the narrative portion.