Hard Money - Ground Up Construction - Duplex vs Townhouse confusion

[Timothy Fortin]

Hey Bigger Pockets - I'm looking for some advice on how to provide comps to a hard money lender for 2 townhomes I'm building in New Hanover County, NC.  I've worked with this lender several times before, but always on single family new construction.

I'm building 2 town homes under a single roof, on a single parcel of land. The exit strategy is to sell each townhome individually, since each will have it's own legal description. When researching comps for ARV consideration I was looking at townhomes that sold individually, but shared a wall with a neighboring townhome, all under the same roof.

The issue is that the lender  is looking for comps for a duplex, where 2 units were packaged together and sold together, but no comps exist for that in this neighborhood since all townhomes are being built and sold individually. 

Is this confusion on the lenders part, given that they are headquartered in a different state (Pennsylvania I believe), and is a matter of semantics, or is this standard practice?  Would you try and steer the lender towards considering comps for individual townhomes?  If so, what would be your argument for that?

P.S. If my funding falls through because of this confusion, and you know of a hard money lender that funds townhouse projects like this please pass along a reference for me.

Thanks!

-Tim

[Tyler Hall]

Hey Tim,

Sounds like your lender is underwriting this as a multifamily deal instead of two separate single-family townhomes, which is probably why they’re pushing for duplex comps. The issue is, if your project isn’t structured to be sold as a package, then those comps don’t make sense.

Here’s how I’d push back:
1️⃣ Clarify the legal structure – Since each unit has its own legal description and will be sold separately, they need to treat this like two single-family townhomes instead of a duplex. The fact that they share a wall doesn’t change the fact that they’re independent properties.

2️⃣ Provide local market comps – If no duplex comps exist, that means the market isn’t valuing properties this way. The most relevant comps would be other individually sold townhomes with shared walls. That’s how appraisers will determine value, and that’s what the lender should be looking at.

3️⃣ Challenge their underwriting logic – If you built the exact same two townhomes on separate parcels instead of one lot, would they still insist on using duplex comps? Probably not. If their underwriting doesn’t match how the market treats these properties, then they’re using the wrong framework.

If they won’t budge, see if they’d accept an appraisal from someone with experience in townhome valuations instead of treating this like a multifamily asset. Otherwise, it might be time to work with a lender that understands new construction townhomes.

Let me know what they say.

-Tyler