Loan officer is loaning a large amount to a developer of four (4)duplexes. He got a appraisal on duplex #1. Now, since they are identical structures he is going to multiply the appraisal by 4 in order to arrive at a appraisal on all 4 duplexes. Does anyone see a problem with this? I am maintaining that the appraisal guidelines do not allow for this, and he needs an apprisal on all 4 duplexes.

Using one appraisal should not be a problem if the properties are have the same characteristics (sp?) i.e.:

square footage of house
quality
lease income
location/additionl
comparable lot sizes

I would think that the same appraisal characteristics could be used for all four, but the address would have to be modified, along with parcel number and any other pertinent information exclusive to the individual property.

Are these duplexes all grouped together on the same parcel, or separate ones in a row, or scattered about? This may influence your decision.

If they are all grouped together, perhaps a single commercial appraisal that looks at the properties as a group may be appropriate. If they are scattered about, I would prefer separate appraisals. The one next door to the gas station will not value the same to the one next to the park two blocks away.

Just as an aside, make sure you get either a flood certification that includes all 4 legal descriptions or 4 seperate if needed. The one appraisal may be OK but a flood on #1 that has the appraisal can't be used for the other 3 even if they are all in a row.

Sorry for the time lag on this. I wouldn't bother putting my two cents in on this but I think you need to know this.

If the transaction amount is $250,000 or less, you have a residential appraisal requirement, in which case you need an appraisal for each legally described unit. That might be eight units of four two-unit buildings or four two-unit buildings, depending on the highest and best use and how the properties are legally described. Highest and best use of the property might make things different, but I'm assuming here that HBU is residential single-family or multi-family.

I'm thinking it isn't too likely that the transaction amount is $250,000 or less, so you are dealing with a commercial real estate loan...income real estate if the developer is hanging on to the units and becoming landlord, or subdivision if the developer intends to sell the units after completion.

If he's turning into a landlord, you need an "as is" value which is derived via capitalization of a stabilized income stream or present value of a cash flow. You might also need an "as complete" and "as complete and stabilized" values. I'm a little fuzzy right now and too tired to look it up, but those last two values might be bank policy driven rather than regulatory agency driven. In this scenario someone might be able to argue that the "multiply by 4" value is the same as a properly derived value, but it's not acceptable appraisal practice to get to the value this way.

If the developer is going to sell off eight units, either in bulk or in any combo of one or more, it is considered a commercial real estate subdivision loan in which repayment of the loan is dependent on the sale of the units. Again, I'm fuzzy on what you are required by the regulators in terms of values and what you might be required dependant on bank policy, and the state of the site/s might make a difference. The following list is (I think) fairly comprehensive of any subdivision/multi-unit scenario, so you could pick and choose depending on the project.

- as vacant, unapproved and unimproved
- as vacant, approved but unimproved
- as complete (infrastructure only)
- as complete (infrastructure and vertical)
- as complete and stabilized (if lease-up required)
- value of each type of model/unit
- gross sale proceeds
- net sale proceeds (present value of the sell out) - this value should reflect the value as of the effective date of the appraisal, and theoretically, if it is before any approvals or improvements are in place, it should equal raw land value.

If you need me to find the regs to support this, let me know. Too tired tonight but can dig when I have recouped :-)

My 2 cents:
Is the transaction a Federally Regulated Transaction?
That determines appraisal requirements vs. evaluations & exceptions.
If it is a Fed Reg Transaction, you need to have the real estate appraised pursuant to your banking regulations.
There is also an exception for model homes appraisals in developments. Perhaps it applies in this situation. Check out OCC 2005-32 Question #9. For a link, click Here.
Good Luck.