When computing ARV, what appraisers do value

Question

Hey!

I know that appraisers look for different criteria depending on the location of the property. That said, what have you noticed about what appraisers value the most when estimating the value of a small multifamily property in the Minneapolis/St. Paul, MN area?

Thanks!

Tucker Walser · Answer

@John Woodrich ok, great. Thanks for clarifying this for me. I need to practice more and know my markets better to better estimate the number

Tucker Walser · Answer

@John Woodrich ok, great. Thanks for clarifying this for me. I need to practice more and know my markets better to better estimate the number

John Woodrich · Answer

@Tucker Walser I am not an appraiser but that amount will vary a lot depending on where you are looking.  For example there is no way to compare price per sqft on Tonka Bay to the price per sqft in North Minneapolis....

I don't take on rehabs with a need to refi, I just make sure i have more than enough margin when we sell.  If you wanted to try and figure out a discount factor you could try studing properties that sold but you will not know the appraised value, will have different finish qualities, etc.  This is more of an art than an exact science.  If you are concerned you could pay an appraiser for their opinion however your bank will be using their opinion.

Tucker Walser · Answer

@John WoodrichGotcha. Ok so when estimating an ARV based off comparable sales, how much value do you put on below sqft if there are not a lot of comps with similar below sqft?

John Woodrich · Answer

@Tucker Walser one thing that has surprised some investors lately is that many appraisers value below ground sqft less than above ground sqft.  This has caused them to be short on their refi.

Tucker Walser · Answer

@John WoodrichThank you!

John Woodrich · Answer

@Tucker Walser small MF (1-4 units) are all valued based on comparable sales.  They find properties similar to yours that have sold in your area then make adjustments for conditions that are better or worse.  They will also look at current properties listed for sale, properties which are active-contingent, and pending sale to make a case for their number.

You ask what they value "Most"- that would be a recent sale of an identical property, close to your property.