I think that may be my best course of action. If I can get the appraiser to fix his mathematical errors then I'd be happy with the appraisal. I don't attempt to refute any other perceived errors other than the quantitative ones.
The 4 comps they used ran from $53,000-$103,000 per unit with an average of $72,786 which is over $10,000 more than what they said my property was worth. The cap rate varied from 6.3%-13.5% for the 4 comps. "The average cap rate for the mid atlantic region for apartment real estate for fourth quarter 2013 was 5.77%" according to PWC real estate investor surveys (quote from appraisal).
Even if you think they did overappraise my property, they should still be accountable for their math errors.
A- All units are not created equal. Price/unit can get real misleading unless all of the comparables have the same unit mix as your property: same ratio of 1bd to 2bd units, etc. In real life that almost never happens with the smaller apartment properties, which is why appraisers usually don't pay a lot of attention to price/unit. Some of the brokers do, but that's because they don't know any better and they haven't thought it through.
A more consistent unit of comparison for apartments is price/rentable room (what renters will actually pay for). Some appraisers also break the sales down by price/bedroom, because after all, that's how apartments are marketed to the renters - based on their bedroom count, not their overall size.
For example, if your property has the one oversized 3bd unit (since you converted it) and (6) 1bd units the room count looks like this:
3bd unit = 5 rentable rooms when including the kitchen and living room areas. Renters don't pay a much for formal dining rooms, family rooms, etc. as they do for the essential rooms.
1bd unit = 3 rentable rooms.
So 5 rooms for your unit plus 18 rooms for the other 6 units would equal 21 rentable rooms. If the property was appraised for $420,000 that means the appraiser reconciled to the equivalent of $20,000/room.
So when there are comps between $53,000 - $100,000 that could include properties with studio units and 3bd units and the appraiser might still have reconciled to $20,000/room.
FYI, of the 4 active listings that show up in Loopnet right now (again, I have no idea how comparable any of them are to your property) the asking prices seem to indicate to a range of about $17,000 - $20,000 per room. These listings seem to be heavy in 1bd units.
B - It doesn't matter what the average cap rate for apartments in the region is according to an investor survey and I'm really not sure why the appraiser mentioned it in this assignment other than the possibility that it's part of their standard apartment boilerplate that they use for their other apartment appraisal assignments.
Investor surveys tend to focus more in investment grade properties - which with apartments are the medium and large sized projects. The smaller locally oriented projects tend to fall through the cracks in those surveys, and in any case they also tend to be older and have wonky unit mixes and other attributes.
What matters in this appraisal is what these sales and others like it are doing in these sales transactions. That's *direct* evidence of what these competing buyers are expecting by way of returns, whereas a 3rd party survey is, by definition, indirect and therefore a fair bit less indicative.
If you've got facts *about this property* that are incorrect in the appraisal then those facts should be corrected, and if it affects the value then that should be reconsidered as well.
But in terms of the analysis I'm not convinced the nuts and bolts of this valuation are significantly askew, particularly in light of what the active listings for such properties that show up indicate about their respective markets. I mean, if all this appraiser does are commercial and apartment projects in the region that means they're looking at a ton of data every week - it's literally all they do. You may only be seeing 4 sales in the appraisal report but most appraisers will be looking at a lot more data than that during their assignment and even the sales they don't use contribute to the context for the sales they do present in the report.
