4 Unit-Residential vs. Commercial

[Tyler Ansell]

I'm trying to purchase a 4 unit property in Tampa, FL. It is listed with a commercial agent, and when I've spoken with them they keep saying commercial, commercial, commercial. The asking price is astronomical and they believe that it will underwrite and appraise for that because of cap rate, income, etc. I agree, a commercial valuation does put it at that price. However, in my understanding cap rate, income production, NOI etc isn't referenced when dealing in 4 units or less. It is a residential property and residential properties are valued based on their comparable sales. A residential appraisal will definitely affect the asking price significantly (~$100k) based on comps I've pulled.

My question is: what hurdles am I likely to face trying to buy a residential property from someone who believes it is commercial and worth nearly 40% more. 

[Chris Mason]

That quite possibly means the listing agent put the crazy value in the seller's head already, perhaps because that was the only way to get the listing.

It can't hurt to write the offer based on comps, but it's entirely possible the seller is only willing to sell if it goes for that "OMG!" number the listing agent put in their head. Which means, in short, no deal.

But, again, it can't hurt to write a fair offer based on comps.