Anyone have recent appraisal bids for multifamily properties they can share? Trying to reconcile what the difference should be on a larger institutional property (i.e 150-250 units) vs a smaller 20-30 unit property. Reason I ask, I just paid $2,600 on a 24 unit value add apartment deal last month, was quoted $4,800 for a to be built 62-unit apartment/mixed-use property, and was quoted $2,400 for a SFR being rented out for income, which in theory should be way simpler than the 24-unit and cheaper by a wider margin.
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Based on the most helpful WSO content, appraisal costs for multifamily properties can vary significantly depending on the size and complexity of the property. Here's some insight:
Smaller Properties (e.g., 20-30 units): Your $2,600 appraisal cost for a 24-unit value-add apartment deal aligns with typical pricing for smaller multifamily properties. These appraisals are generally less complex and require less time compared to larger institutional properties.
Larger Properties (e.g., 150-250 units): For larger institutional properties, appraisal costs can be significantly higher due to the increased complexity, more extensive data collection, and detailed analysis required. While specific numbers for this size range aren't directly mentioned in the context, it's reasonable to expect costs to scale up proportionally.
Mixed-Use or Development Projects: Your $4,800 quote for a 62-unit apartment/mixed-use property reflects the added complexity of mixed-use developments. These appraisals often require additional considerations, such as zoning, construction costs, and potential income streams from different uses.
Single-Family Rentals (SFRs): The $2,400 quote for an SFR seems high compared to the multifamily property, as SFR appraisals are typically simpler. However, factors like location, market demand, and appraiser availability can influence pricing.
For institutional properties, appraisals can range widely, but some WSO threads suggest fees around $6,000 for annual reports and $2,000 for quarterly updates. If you're managing multiple properties or working with funds, these costs can add up quickly.
Sources: Multifamily Rent Per Square Foot vs. Rent Per Unit, Can I get some feedback on underwriting a 60 unit apartment deal, Jobs as a Commercial Real Estate Appraiser Suck?, Would I get hired after graduation?, Value add - multifamily ... RENTS, TAXES, WTF??
Those look like low fees for the commercial appraisals. I would have expected significantly higher for both. Having said that, there is always a significant range that may account for location, regional shop vs sole proprietor vs national shop, ease of data access, turnaround time, etc. You also have to factor in things like how busy a firm is or how desperately they need work. Fees in 2021 were insanely high because everyone was busy. Now, we have some firms that are begging for work and will barely break even taking certain assignments but it keeps their staff busy.
The SFR fee is high, but probably not outlandish. Based on that fee, I assume the value was north of $1MM or it was a highly unique property.
*Source - I've awarded close to 20k commercial and residential appraisals over the last 10 years.
user name checks out.
Not to be that guy, and I'm not putting these words in OP's mouth, but if a deal falls apart on appraisal cost, it might be too skinny.
Seconding this. Fees move around as the calendar fills up, if a shop is busy they will quote higher than if they have spare capacity.
I honestly never even compare cost of appraisal across deals. I just see they are always 3-6k for 2-3wk turns and think god how do these people make money.
we do it for the love of the game. /s
Typically they are working on multiple reports concurrently. It's not like the entire 2-3 week timeframe is spent on just that one report
Correct - most appraisers take home a fee split of 30% to 55% of their billings, pre-tax. So realistically they need to be closing out 2-3 assignments per week in most markets
There is like 0 overhead for appraisals and they always need to be done for loans and regulatory reasons. Also at these big shops, other than site travel, which these appraisers schedule multiple visits back to back to back, they have this template which essentially pushes in literally everything from the model and can probably crank out an appraisal in an hour or so. Travel and pictures is the largest time sink.
Who cares? Appraisals are regulatory mumbo jumbo to the equity investor. Just pay the $5k tax per-deal and move on.
Love these takes and guys who have them (have a banana!). Makes me realize I actually know a lot more about real estate than others, and have a future in the industry.
For the uninitiated, if your property doesn’t appraise you don’t get the loan you thought you were getting. If you know how real estate works, that’s not a good thing. And if it takes 3-4 weeks instead of 1-2, and you go non refundable without it, you’re really exposed. Furthermore, that insured replacement value is going straight to the insurance carrier and right into your insurance expense which (if you’ve done deals) you’d know can very easily kill underwriting. Lastly, when you need to defend a deal and its comps, the appraisal has a rich selection to choose from and actually has someone documenting it / standing behind it unlike the broker who just says ‘oh yeah such and such lease deal was $50/ft and such and such sale comp was a 4.5-cap’.
Other than killing the deal, ‘how was your appraisal Mrs Lincoln?’
Glad I could boost your confidence. You're a (female) genius.
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