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Multifamily or just a portfolio of single family?

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Ken B

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There is a small debate in my office regarding license level required to appraise a portfolio of 20 finished end units in a 200+ high rise building.

Properties are remaining units in a condo conversion. Most units have leases in place with less than 12 months remaining on lease. Bank is looking for a value of the portfolio.

The building is not being appraised, just a lump sum value for the remaining 20 end units.

CG or CR license required?
 

Tony in Ohio

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I think it depends.

I would say CR if each unit is separately parceled and apprised independently. The sum of the values would be reported separately, say on a cover letter that clearly states it is a summation and does not reflect the value if properties are sold as a package.

This is assuming the units have a highest and best use as owner occupied units and there is a decent enough market to absorb them in a reasonable time frame.

If the intended user is looking for the value and characteristics of the group to be kept as a block, than it would need to be appraised by a CG.
 

hastalavista

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There is a small debate in my office regarding license level required to appraise a portfolio of 20 finished end units in a 200+ high rise building.

Properties are remaining units in a condo conversion. Most units have leases in place with less than 12 months remaining on lease. Bank is looking for a value of the portfolio.

The building is not being appraised, just a lump sum value for the remaining 20 end units.

CG or CR license required?
(my bold)

I think this requires a CG since this is (I assume) an FRT.

Portfolio Value to me means the bank wants (for lack of a better term) a bulk value, or what the entire portfolio would bring if brought on the market at once.
Who is going to buy a "bulk purchase" like this? Certainly not an owner-occupant and unless the subject's market is very hot, it won't be 20-individual buyers who will be lining up (as was the case in some markets when these developments were new). It would be an investor.
I would therefore assume that some kind of income analysis would be needed... and that may include different rental analyses (similar to a rent-roll review) and perhaps even a sell-out projection (similar to a new development).

As an investor, I'm either going to purchase and rent these out, or purchase and rent them out while selling some over a certain period (maybe 1 every 90-days so I don't flood the market). If that is the case, I'm going to have a holding period which needs to be analyzed (DCF?).

Others will be quick to correct me if I'm wrong, but I think this is an income analysis problem requiring DCF and therefore a CG license if it is an FRT (or, valued over $250k).
Of course if you can find enough similar bulk sales, maybe you can get away with the sales comparison approach only? :new_smile-l:
 
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David Wimpelberg

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I would follow Denis' advice.

Of course if you can find enough similar bulk sales, maybe you can get away with the sales comparison approach only?
Chances are you aren't going to find a bulk sale of 20 units. But hopefully one would be able to find some type of bulk sale to have market support for a discount rate.
 

Ken B

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Thanks for the responses. The question is not how to appraise the properties, I have that under control.

The question pertained to the license level required to appraise the properties. It seems to me there is an inconsistency in stating that, if bulk sales are available, a CR can do the appraisal, but if DCF analysis is appropriate (which, I think, is true), a CG is required appraise or assume a supervisory appraiser role.

The property is what it is...a portfolio of 20 finished end units in a condo conversion. Each unit could be appraised individually by a CR, no question. Does appraising them in bulk as a portfolio of properties require a CG?

The underlying reason for the question regards submitting this appraisal for experience credit towards the CG license and professional designation. I don't need this file being requested in an experience audit with the reviewer then deciding it does not qualify as commercial experience. Yeah, I know the simple answer is "Don't submit it." But that does not really answer the question.
 

Mike Kennedy

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Perspective suggestion:

if 10 of the units were held in one portfolio and 10 in another.... ???

unless the 20 comprised an entire subdivision..(not the case).... are they not individual units which happen to be in a Single Portfolio?
 
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PropertyEconomics

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I think appraising them in bulk, would suggest a bulk discount, lack of sales of similar portfolio properties would result in a complex assignment, I think it should be done by a CG and that it should count toward CG credit. The real answer lies with the head of your appraisal board .. make the call and ask.
 

Mike Kennedy

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P.E. bulk discount on appraisal fees perhaps. .......
 

PropertyEconomics

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New Mexico
P.E. bulk discount on appraisal fees perhaps. .......


And that is why a CG could do it. Its not a simple assignment and the fee should be commensurate with the job. This is a narrative report and the implications are pretty vast if one doesnt know how to do it. I could even see perhaps a discounted cash flow model coming from this.
 

hastalavista

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The more I think about this assignment, it sounds similar to a situation where an existing developer would sell their remaining finished but unsold units to another investor to manage the final sell-out.

I vote commercial unless the client changes the assignment to want 20 individual market values.

Have fun! :new_smile-l:
 
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