Cash Out Refi: Unique Property w/ Loan Issue
Hi All,
The investment I'm looking to purchase has a single family home in the front (4 bd 2 bath) and a duplex (2 x 2bd 1 bath) in the back. Two buildings on one property. This type of property is unique to South Dakota. I just got off the phone with an appraiser based out of Sioux Falls who does appraisals around SE South Dakota. He said he's seen this type of property from time to time and every time the owner goes to get a loan on the property through conventional means (Fannie/Freddie) it's dead on arrival. He said it's nearly impossible to find a sale within the last 12 months on a property of similar specs (no comparables = no loan). In the end he's seen banks have to hold the loan in house because they were unable to sell it.
Is there a way around this issue?
Could the property be looked at as a triplex?
Could the appraiser look for comparables for the front house (4 bd 2 bath) and comparables for a duplex (2 x 2 bd, 1 bath) then add those together to get an appraised total?
Thanks,
Eric
Hi @Eric R. Dehner, unfortunately, for conventional financing, there is no real workaround.
If there are comps near the property that you can find that the appraiser cannot, you can provide those and you may be able to get approved.
However, if there are no similar comps, it will be very tough to get it approved through Fannie/Freddie.
The property cannot be looked at as a triplex because all three units do not share a roof. Similarly, a SFH with an ADU cannot be considered a duplex.
The appraiser cannot look at each separately and add the values either as that is against standards and would still be unsellable to Fannie/Freddie.
You can look at getting a portfolio loan from local banks/credit unions. You can also look into the non-QM route.
They might be able to get a workaround.
Hope this helps! Let me know if I can be of any assistance.
Thanks Andrew! Good info here. Really appreciate it. I'll keep you posted on the outcome
Quote from @Eric R. Dehner:
Hi All,
The investment I'm looking to purchase has a single family home in the front (4 bd 2 bath) and a duplex (2 x 2bd 1 bath) in the back. Two buildings on one property. This type of property is unique to South Dakota. I just got off the phone with an appraiser based out of Sioux Falls who does appraisals around SE South Dakota. He said he's seen this type of property from time to time and every time the owner goes to get a loan on the property through conventional means (Fannie/Freddie) it's dead on arrival. He said it's nearly impossible to find a sale within the last 12 months on a property of similar specs (no comparables = no loan). In the end he's seen banks have to hold the loan in house because they were unable to sell it.
Is there a way around this issue?
Could the property be looked at as a triplex?
Could the appraiser look for comparables for the front house (4 bd 2 bath) and comparables for a duplex (2 x 2 bd, 1 bath) then add those together to get an appraised total?
Thanks,
Eric
I have a property in San Diego county that seems to match your description exactly. An attached duplex and a SFH on one parcel. I have financed it 3 times without issue and each time the appraiser comped it against other triplexes that mostly were attached. Are there triplexes to comp against near yet candidate property?
Checkout 130 and 132 S Beech, escondido and 138 s beech, escondido. This is my property that seems to match your description (do not ask me what happened to 134 and 136, they do not exist and never existed)
https://www.zillow.com/homes/1...
https://www.zillow.com/homes/138-s-beech_rb/2100464468_zpid/?
Are you using a rockstar mortgage broker? A rockstar mortgage broker has many relationships/contacts and finds a way to finance virtually everything as well as does numerous little things that go beyond expectations.
Good luck
@Shaun Weekes
With all the units you own in Indiana have you every come across something like this?
In my experience (California), a tri-plex does not need to share a roof, however you do need to make sure that zoning allows for "multi-unit" or "3 unit" homes. The two biggest pieces I see are:
1. Similar properties to use on the appraisal
2. Zoning
Its treated as a 3-plex. Fannie/Freddie will approve it. The appraiser isn't up to speed on how that works or is using the incorrect appraisal form for this property type. Request a different appraiser.
Cheers!
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Quote from @Eric R. Dehner:
@Shaun Weekes
With all the units you own in Indiana have you every come across something like this?
Not in Indiana but I've seen this often in So Cal.
Ok, the zoning is going to be your biggest factor here. If it's zoned as a 3 unit, it doesn't matter if all 3 units share a wall or if they're all separate. PM me the address. Regarding the appraisal even if no comps are recent, a good appraiser will find out what the average appreciation has been since the last sale and base the value on those numbers. On top of that since it's an investment property the market rents will be calculated using the Gross Rent Multiplier formula. Between these 2 methods a solid value is determined.
I hope this helps and have a good one.
