Multi family appraisals

[Sung Park]

Newbie question. Can someone explain how multifamily properties are appraised? Let's say for example, a property is a duplex with 2bd/1ba in each unit and there were no duplexes sold in that area in the past year. How do you go about determining the fair market price of this duplex? I'd like to understand how I calculate the fair price of a multi unit property. SFRs compatibles totally make sense, but multiunits I have no idea how you start.

[James C.]

Kyle,

2 units will be appraised on comparables, or discounted replacement cost. They will not be appraised on cash flow (or lack thereof).

Best options (basically, what an appraiser would do more or less and not in order!)

1) Expand search area for comps, and adjust for location

2) Find comps older than one year and adjust for market timing/differences

3) Find larger/smaller 2 unit comps and adjust for size

4) Find larger/smaller 3 units and adjust for units and size

That would then be reconciled with:

Replacement value, adjusted for age (wear & tear, plus any functional obsolescence). This is tough in old buildings, more accurate in newer ones.

As mentioned the income approach would most likely not be used, or if used, very little reliance would be placed on it.

Ideally, you should be able to do the same as an appraiser would do. Theoretically, one might have an appraiser in their list of professionals, and that would be a good person to talk to if you are in a jam.

Good Luck!

JIm