Contemplating a purchase of a property with a main house and a smaller back house...I would like to create an equity position, but have no idea how the property would be comped?...
Would the appraiser consider each house independently?
I think it depends on whether the second structure is a real living quarter or some converted sheds or garage.
I once asked an agent who did BPOs not real appraisals how she would comp two building on same lot as there are many of them here with mother in law quarters. She said she would just add up the rooms then discount the two buildings. So if one is a 3/2 the other is a 1/1, then she considers it a "disjointed" 4/3, not as good as a true 4/3.
The primary or larger by it's market if residential, the other by income and replacement-depreciation/condition can add value to the primary influenced property.
Also need to know if such "non-compliant" properties are common in that general market area. :)
Much appreciated @Sam Leon and @Bill G.
@Brandon Sturgill What Sam said is right about if the second home is real living. Having legitimate permits is key. Earlier last year I bought a seller financed 2 home property. Both were permitted but I was told if one of the units burned down I would not be allowed to build another home because of the zoning. Another thing is if the property your looking at has a separate electric meter... don't assume it is permitted. As soon as that property changes ownership you could see a call from the city.... speaking form experience.
Appraisers use the income approach and use duplexes comparable incomes. At least that's what they do in Portland. They also say that the properties sometimes will not sell for what they appraise at. Best to buy cheap as 2nd house does not add the value you would think.
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