All Forum Posts by: Eric Fegan

What property sizes are you looking for and what type of properties? If you are looking for 2-4 units or even up to 10 units of older product in Covington you have lots of options. If looking for 10+ unit projects their is almost no inventory in northern Ky right now and the lack of inventory makes every offering very competitive. Any decent 20 to 100 unit building will have multiple offers within the first week and we have made full price offers that were not accepted

USPAP- Uniform Standards of Professional Appraisal Practice- our industry standard does not require a site inspection, building interior or exterior inspection, etc. The appraiser and client set the scope of work per USPAP. Situations may dictate that a site cannot be inspected, etc. The scope of work section of the report will disclose whether or not the site was visited and when. Appraisers are only required to identify the property- ideally by address, parcel number, aerial map, legal description, or all of the above.

You should not have a difference in value if a realtor is involved or not. Sometimes a realtor will have firsthand knowledge and more in depth of transactions than an appraiser. If an agent only shares data that indicates a higher value then you could see an minor increase due to the information available. My advice is that if you know the market- both geographically and by product type- then you don't need an appraisal. If you don't know the market or question the value, pay for an appraisal. In my market, seller financing often comes with an above market price tag because it allows a buyer that couldn't buy any other way get into the property.

The "hit the number" pressure is not nearly as bad as the residential side of the business.  From my personal experience as a commercial appraiser in my small part of the world, value pressure is very rare while on the residential side of the business the pressure is constant with nearly every assignment.

We consistently appraise properties both above and before the contract price because the contract price is not the value of the property (although it is one data point that an appraiser has to work with).

I have a different perspective as a commercial real estate appraiser with an MAI designation.  It took years of education, experience, a CPA like two day exam, and a college dissertation type demonstration of knowledge sample report to obtain an MAI.  Within the MAI education program we are taught to support, research, and verify all data within the report.

In practice, that doesn't always happen and we all make mistakes (or get lazy)

A stabilized multifamily appraisal should be pretty straight forward with market rents, market expenses, and market derived cap rates.  If the appraiser is pulling all the data from the market (as required) the variance in reasonable value opinions should be low assuming the market has sufficient data.

If a MF property is not stabilized then the variance of values could be very high because the appraiser has to rely upon assumptions.  

A commercial appraisal is similar to residential in that the three approaches to value: Sales Comparison, Income, and Cost are all considered. I don't know your market or the age of the property but most likely the Income Approach and Sales Comparison Approach would be developed. Cost Approach might not be applicable if the building is older. For SCA appraiser will consider sales of similar size buildings- maybe 5 to 12 units within the neighborhood or city and then make typical adjustments. Unit of comparison could be per door (unit), per Sf, or total property, etc. Not sure if the balance of value between MF and the commercial building but if I couldn't find similar sales I would probably use a combination of both MF and commercial comps- assuming a retail or office space. Income Approach- appraiser will reconstruct the operating statement from market data and then will develop and opinion of the NOI and overall cap rate. All of this data should be supported from the market. Make sure to hire a certified general appraiser because a residential appraiser can only appraise up to 4 residential units.

This looks like a good opportunity for some nerdy appraisal input.  

Cap Rate is short for Capitalization Rate which can be many different types of rates.  The most common Cap Rate would be the overall capitalization rate that ignores debt or equity and only calculates the return for the overall property.  This is the rate that would typically be quoted by brokers.

NOI/Property Value= Overall Capitalization Rate

The cap rate is an rate of return for ONE period in time.

ROI- Return on Investment is geared toward IRR- Internal Rate of Return of dollars invested. Again this can be the overall IRR, equity, debt, land, building, etc. Most investors are concerned about the IRR of equity. This is a multi period calculation that makes assumptions for LTV, loan costs, purchase costs, expense and income projections over time, the holding period of the investment, sale price of the investment at the end of the holding period, depreciation rates, and future tax rates

ROI or IRR is a multi period calculation full of assumptions but allows you to estimate your potential return on equity or equity IRR before making the investment.

IRR should be higher than Cap Rate due to positive leverage and the tax benefits of real esate.

I hope this helps.

Most commercial specialize by property type there are around 5 apartment specialists that operate in nky or Cincinnati. It is important to work with someone that understands the property type and that invests in the property type

Citizens bank of northern ky is great as well. We work with them extensively.

I will be there