Net/Gross Adjustments - greater than 100%; is this possible/acceptable

[shrubberyvaluation]

Use the best available. Do buyers look at gross and net adjustments when they look at alternative properties to buy in your market? If a typical buyer could not get your subject, what would they look at next most likely.

 

[NJAPRAZE]

What does the income approach say. I have done portfolio loans for 2-4 family properties that had ridiculous adjustment ranges for different reasons. The sca although supportive. Basically became an attachment to the income approach.

in this case, 60% appears to be 1 large owner-occ unit; only 1 of 3 remaining units is income-producing; others are vacant -> income approach was cited as not being reliable

 

[Gingerman]

reviewing a very detailed appraisal for an ATYPICAL property... what are your thoughts???

subj is a 10,000 sf [signif above-avg GLA] historical 4-unit multifam dwelling that is also a premium riverfront property w/water view, has above-average amenities, and situated on abv-avg acres/site.

NOTHING like it -- even when search expanded 25 miles (also atyp for a high density area)

Subj has higher appeal as a SFR / estate home & is in a 1-unit SFR zone (2-4's = grandfth use) -> thus, 2-4 fam is indica to be H&BU

The val range for 2-4 fam units (typ sf = 1000-3000 sf) is 100k - 350k -> so subj's estim val clearly is an outlier

To complt SCA, this is what appsr did:
- blended a 16 comps/listings showing mix of "best local multis", at least one multi that was a similar riverfront prop, most comparable "SFRs" in both muni and/or were similar waterfronts, at least 1 SFR that possessed sim GLA
- result is a "range of prob value"

However -- due to significant differences [in size, lot size, location, amenities, etc.] this resulted in some comps having gross/net adjustments 100%-200%; as part of review -- I've researched what comps were avail the OA appsr and generally agree with those selected, as comp data is a) limited and b) due to subect's atypical combo of value impacts

Given the above-- are such [high %] adjustments reasonable?? Has anyone run across a situation/instance like this?

I have had a scenerio where one comp showed close to 70% gross adjustments but this was because I had a fully finished basement and the only thing of similar overall size in the neighborhood was a two story home so the gross adjustments were insane, but the numbers worked themselves out. I did this because everything else was 1, 2 and 3 miles out and I didn't want to ignore the one in the neighborhood. Used it as like comp 5 or something.

 

[James Micozzi]

reviewing a very detailed appraisal for an ATYPICAL property... what are your thoughts???

subj is a 10,000 sf [signif above-avg GLA] historical 4-unit multifam dwelling that is also a premium riverfront property w/water view, has above-average amenities, and situated on abv-avg acres/site.

NOTHING like it -- even when search expanded 25 miles (also atyp for a high density area)

Subj has higher appeal as a SFR / estate home & is in a 1-unit SFR zone (2-4's = grandfth use) -> thus, 2-4 fam is indica to be H&BU

The val range for 2-4 fam units (typ sf = 1000-3000 sf) is 100k - 350k -> so subj's estim val clearly is an outlier

To complt SCA, this is what appsr did:
- blended a 16 comps/listings showing mix of "best local multis", at least one multi that was a similar riverfront prop, most comparable "SFRs" in both muni and/or were similar waterfronts, at least 1 SFR that possessed sim GLA
- result is a "range of prob value"

However -- due to significant differences [in size, lot size, location, amenities, etc.] this resulted in some comps having gross/net adjustments 100%-200%; as part of review -- I've researched what comps were avail the OA appsr and generally agree with those selected, as comp data is a) limited and b) due to subect's atypical combo of value impacts

Given the above-- are such [high %] adjustments reasonable?? Has anyone run across a situation/instance like this?

I do a lot of high end complex properties. You need to get the percentage adjustment thought completely out of your mind when you do these types of properties and there are limited sales.

 

[Fernando]

When doing atyical properties, appraiser needs to have more than 3 comps.
The comp with large adjustment can be used if Comp #5 or #6.
You're welcome.

 

[Terrel L. Shields]

re such [high %] adjustments reasonable?? Has anyone run across a situation/instance like this?

Do it all the time in land and ranches.

I have $1.5 million dollar poultry farms comped to $3.5 million farms with identical barns and same or near so ages, as well as contracts per SF... But one farm had 12 barns, one had 6 barns... all are 55' x 600' with the same contract. Unlike land which generally gets cheaper as size increases, there is no discount since it makes the same dollars per SF and as long as it is financed without problem, the adjustments are based on size and they are huge - same with land. The farm with 40 acres has a land value, and the one with 80 acres ditto although the improvements themselves might be nigh identical.

 

[Flakey]

Happens a lot on REO properties. Fannie Mae could care less about adjustment totals and percentages on these properties.

 

[sputnam]

Yep. It's the same every time. Use the best comparables you can find in SCA. If the best comparables available aren't so good, then the appraiser cetainly should develop and report the Cost Approach and the Income Approach. Then... ...... Reconciliation. The 'weird' ones always require more work and more explaining.

 

[ZZGAMAZZ]

Yes many times on extremely complex-atypical properties where there are no truley comparable sales .
And no it will not fly with a typical GSE type lender or one planning to sell the loan in a secondary market
and normally only a Portfolio Lender- Private party or Cash. But yes it can be reasonable ? I have seen Beverly Hills 15,000 to 20,000 Sq.Ft. Type Mansions with 200% adjustments and done by MAI and SRAs.

As far as reviewing it with an- opinion of value no way in hell- I won't do it because that type of property if appraised by three different appraisers would have three different opinions of value Note: Many inexperienced GSE type loan production appraisers may even under value it by trying to keep their Net and Gross adjustments at substantially lower Net-Gross Percentages trying to force the percentage of adjustments downward. In REAL appraisals not constrained by GSE or Lender Guidelines this is how its done.
I assume the same in Extreme Rural Properties. On a Review my hard Question would be are there really no similar sale's comparables's ? If none are found then I can live with the 100% adjustments .

Big G: I'm dealing with a 39-acre, non-arms-length FSBO of a nasty SFR in Romoland without any sales larger than 5 acres within 1000 days and 49 sq mi. My OV that includes a vacant land analysis and conversations with several local realtors reveals that the "excess land" essentially has little if any additional value. Thoughts???

 

[ZZGAMAZZ]

I do a lot of high end complex properties. You need to get the percentage adjustment thought completely out of your mind when you do these types of properties and there are limited sales.

(Possibly a dumb question) But why would percentage adjustments be different for a high end property? Wouldn't the adjustments be relative to the Opinion of Value regardless of the absolute value of the property?