No Comps Available Problem

6 Replies

I have a triplex I'm lending on in Louisiana. It's in a smallish town but easily makes our 50K MSA minimum.

Our underwriters prefer comps to be the same number of units, within 10 miles and 12 months. 

There simply are no triplexes sold in this town within this time.

An appraisal inspection was done with our usual national appraisal co and the appraiser wanted to use comps 30 miles away and in the city of Baton Rouge. After a great deal of conversation, the appraiser, who at first was willing to explain to our underwriters why he used the comps he did, withdrew his offer to write up the appraisal.

The same appraisal company reached out to 5 other appraisers who declined to take this on.

This is the first time in years of lending and thousands of loans that we have come across this situation. Maybe we have just been lucky till now.

Suggestions welcome.

@Benjamin Hurwitz when I comp out small multi for purchase if I can't find any to use I look at SFH similar in size and neighborhood especially if this is a house that has been converted to a triplex. $ per sf should be similar but the multi will have more income to support the payments. Hope that helps.

Originally posted by @Tim Herman :

@Benjamin Hurwitz when I comp out small multi for purchase if I can't find any to use I look at SFH similar in size and neighborhood especially if this is a house that has been converted to a triplex. $ per sf should be similar but the multi will have more income to support the payments. Hope that helps.

Thanks Tim.

Don't know if this has been converted (probably not) but yes we suggested using similar 1 unit SFR comps with a multiplier of some sort.

But alas no appraisers (used by this company) to date. I guess as we gradually expand the number of states we lend in to all 50 we will and are encountering interesting issues we haven't seen before. 

I really _hate_ to decline a loan over some (ridiculous?) technicality from our side.

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Originally posted by @Amy Verges :

Which town is the triplex in? I’m here in Baton Rouge and can maybe help find an appraiser who’s familiar with investment properties. Can’t  promise anything but I can certainly ask around locally.

 Thanks Amy. Will PM you due to client privacy. 

I generally agree with Tim. If there are no multifamily comps I will look at the SFR around to get a feel for the value. I also make sure to note that the valuation I'm coming up with isn't nearly as precise as it would be with better comps. So there is a larger variance in what the price would be and thereby more risk so I would want a bigger discount. Also, appraisers can't use SFR to compare with multifamily, so the appraisal could be crazy. I've never heard of appraisers simply turning a job down like that and really have no idea what to tell you in this regard.

Update:

OMG! 11 appraisers have now been contacted, no comp restrictions, and no takers.

I'm starting to wonder if this property is haunted or something!