Buying, selling and operating apartments in Portland

Appraisals – Why, What and How?

26 July 2018
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When we have a well-informed buyer and seller agreed on a price why/when do we need an appraisal and what goes into one?

Why do appraisals exist:

  1. Usually at the request of a 3rd party like a lender who needs to assure (their shareholders) a property in their portfolio has “true” value.
  2. Part of the sales agreement.  Sometimes an appraisal is used to set the price or (like most sales contracts) there is a clause stating a sales price must “meet or beat” appraisal.
  3. Risk-averse buyers – Governmental or non-profits chartered with the stewardship of public funds or donations in a prudently need to ensure they are paying a “fair” price for an asset.

An appraisal is an estimate of value made by an objective disinterested (i.e. neither in favor of the buyer or seller) party and considers multiple market factors.

What does an appraiser look at to establish real-world value?  The object is to see if there is an “average” value of a similar property that has been recently purchased.  They do this by looking at:

  1. The operating numbers, condition and current use (i.e. can it be repurposed and bring higher value) of the property.  This is used to determine a rate of return since commercial property is bought for investment purposes.
  2. Comparable sales of similar properties to normalize/adjust pricing of the appraisal.

What makes a property “comparable” to the appraised property?

  1. Proximity to appraised property (location makes a big difference in value).
  2. Condition of the property (does it need a lot of CapEx just to make it average) will affect sales price.
  3. AgeThe average 70s vintage property sells for the min $/unit compared to other decades.  [cf. The 5-year Portland sales history (on this WEBsite)]
  4. SizeYou have different types of buyers dependent on property size.  Smaller buyers may place aesthetics over investment return.
  5. Unit mix – Comparing an apartment with all studios vs. one with all 3 bed units is not representative.

Whether for an appraisal, your investment return or max sales price, you need to keep your property in good shape (for buyer/tenant appeal), stay on top of maintenance and maximize your NOI.

Steve Morris | Vice-President
IMG Northwest
1234 SW 18th, Suite 102
Portland, OR 97205
Phone: 503.970.4593 
steve@imgnorthwest.com | www.imgnorthwest.com
OR License # 200202054 | WA License # 24512

For the Oregon Real Estate Agency Pamphlet click here.
For the Washington Real Estate Agency Pamphlet click here. 

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Portland Apt Market – 2017 Annual Report

22 March 2018
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To download the individual sales report, right-click the link below and “Save As”:

<<<PortlandAptHistory_2012-2017_14Mar18>>>

Highlights / Contents:

  • General Market Comments
  • New Construction Update
  • Sales by County
  • Sales by Neighborhood
  • Sales by Unit Count of project
  • Sales by Decade Built
  • Tabulation of Largest Sales by $/unit, $/SqFt. Gross $, County and 2012-2017 Largest sales.

If you’d like more information on:

– Free financial analysis of your property, eMail/call me for a SAMPLE report.  It will be very helpful if you’re making decisions about futures or operations and includes I&E comparison to neighboring properties along with recent sales and rent comparables.

– Details/background on individual sales in the report or a breakdown by neighborhood

– Free copy of our 80-page book – Buying, Selling and Operating Apartments Using Financial Analysis

Please contact me:

Steve Morris | Vice-President
IMG Northwest
1234 SW 18th, Suite 102
Portland, OR 97205
Phone: 503.970.4593 
steve@imgnorthwest.com | www.imgnorthwest.com
OR License # 200202054 | WA License # 24512

For the Oregon Real Estate Agency Pamphlet click here.
For the Washington Real Estate Agency Pamphlet click here.