Appraisal on 1-4 unit property

[Jonathan Farber]

Hey all, having an appraisal done on a 4 unit.  I've always been told these are based on comps but the appraiser was asking about the current rents.  So it made me wonder, is this appraisal going to be based on comps or rents?  Thanks!

[Alex Bekeza]

@Jonathan Farber Your lender most likely ordered a 1025 Appraisal Form which is commonly used for 2-4 units.  It's going to express a value by 3 approaches:

1.  Sales Comparison Approach

2.  Income Approach

3.  Cost to Rebuild Approach

However, like others have already expressed here, generally the vast majority of the weight will be given to the sales comparison approach to determine the actual value on anything 4 units or less. 

I recently had a 4 unit appraisal that gave $860,000 for sales comp approach 2.  $935,000 for income approach and 3.  $881,00 for cost approach.  Sure enough, final appraised value was $860,000 exactly. 

As soon as the magical 5th unit comes into play, the income approach becomes much more important in the valuation.