All Forum Posts by: Joseph J DiFranco

Thank you to everyone for your replies, very helpful!

@ Mike McCarthy Thanks for sharing your perspective on this.  Now on to the value issue....

Hello all.  I'm appraising a three flat in chicago with an illegal garden unit.  Owner says an old water bill/document shows 3 units but city says two units.  Any thoughts as to the likelihood of getting the city to call it a three unit again?  How common is it for investors to purchase property with an illegal unit, but continue renting.  Or do most go for duplexing the unit.  This property is Humboldt Park/West Wicker Park area of Chicago.

Also, just seems goofy, as the buyer is paying cash for the deal, but after closing, will be obtaining financing.  Is this fishy or common practice?  I never see this, so any commentary is appreciated.  Also seems weird, as the property appears to have sold above market value.

Any thoughts greatly appreciated!

Reiterating Will Fraser, no go on the appraisal.  

Hello Eric.  If the property is new or maybe less than five years old, an appraiser may use the "Cost Approach", whereby and land and building values are estimated to derive the value.  "Using comps" will always be in play and is usually the only method applied for single family homes over five years old.  In my markets, value is improved first by any obvious necessary repairs or deficiencies.  After that, its generally kitchens, baths, flooring, paint.  In some apartment markets, it may be beneficial to add a bedroom where possible.  Let me know if you have further questions, good luck!

Hi Marco.  The way I see most four units done, its more about the sales comparison approach/condition.  There is a second method, where the appraiser will look at the gross income of the subject property and apply a "gross rent multipler" to convert the income into a value indication.  The multiplier is usually derived from the sales comps that were analyzed.  Personally, I try to pay attention to both methods, even for a two unit property.  The appraiser can place all emphasis on just one approach to value, or give weight to both.  Let me know if you have further questions or would like a referral to a local lender.  Best of luck!

You've done well with pre and post pics and the contract. Still, are there comps to support value? If you have mls access, pull some good comps and hand off to the appraiser.

Yo Alan, regarding comps, when they are scarce, an appraiser will gradually expand the search radius and pull data from the most similar, competing neighborhoods. Maybe you can too.

However, given that this is your first venture, I highly recommend you protect yourself and spend the money on an appraisal from a trusted, local appraiser.  You can use the appraisal institute website under find an appraiser and get one from the same county.  You could also go to your bank or the most local bank and ask for three names.  Do it!   

I like what @Nicole Heasley said about fit.  If you want the education to lead to income, you'll need to work under a supervisor to gain experience.  Check with your state department of professional regulation to get the correct number of hours necessary.  Sometimes getting a supervisor/mentor is the toughest part, but I don't know your market.  While working for someone else, you will have to split the appraisal fee with them and they would likely start you out at a low percentage due to the time needed to train you.  You might want to find out how much the average fee is locally.  You might start by making 40% of that per job, again, depends on your market.  Alternatively, it occurs to me that as a real estate agent, you could save quite a bit of money on commissions.  Feel free to message me if you have more questions.