Appraisal Articles 2018 Free Appraisal Articles for Appraisers and the Public
Small multi-family appraisals, on duplexes, 3-unit and 4-unit properties are usually completed on forms with standard Fannie Mae (1025), Freddie Mac (72) and HUD-92264 forms being the most widely accepted. Forms are widely accepted because they direct appraisers to collect and analyze information that a lender needs to make a loan. While forms exist for larger multi-family properties appraisers often favor a narrative format. Large-scale HUD projects and other government agencies however have specific forms and require stringent adherence to rules for completing them. Appraisers who have gone down this road know just how demanding the forms are and how difficult it is to collected to populate them.
While the sales approach often provides a reliable indication of market value for multi-family properties, often focused on a price per apartment unit of comparison basis, appraisers often favor the income approach. Why? Because multiple family properties are usually bought and sold by investors who expect a market return on their investment. Who invests $ 1,000,000 in a 20-unit building and doesn’t expect to receive a market return on their money? Investment returns in the market change over time and of course for any specific property they are based on risk.
Apartment and condo complex appraisals are usually multiple building assignments. So appraisers may be physically looking at several multi-story structures. Some complexes have elevators and some do not. For many years in Clark County buildings were almost entirely constructed with a number of 2-story structures to avoid the cost of elevators. Unit types / amenities influence income Unit types in any given complex can vary and affect the income profile of an apartment complex. While offering 3-bedroom apartments may provide more income per unit the demand for apartments is solidly in the 2-bedroom category. My research indicates that 3-bedroom units in an apartment complex often provide a lower income per square foot (SF) than 2-bedroom units, and 1-bedroom apartment consistently provide the highest return per SF. The apartment mix is a variable that can make a difference to appraisers since it can influence the exiting income from an apartment complex and its future income