This morning, a duplex seller shared with me the “comps” another Realtor had given him for his duplex.
“Comps” are the comparable properties that have sold in the area in the last few months, which help establish the market value of the property.
In his cover letter, the Realtor suggested the seller compare the amount of finished square feet in each property to his own.
And in that note, he revealed how very little he knows about duplexes.
Duplexes are priced a couple of different ways. There are different methods because there are different kinds of duplexes.
Many duplexes always have been and always will be completely occupied by tenants. As such, their worth is dictated almost entirely by the amount of rent they generate every year, their expenses, and the remaining cash flow.
Other duplexes are one hundred percent owner occupied. Since the owner doesn’t usually pay rent, and often makes improvements to the property beyond the scope of what most landlords provide tenants, pricing is a bit more difficult and requires more art than science.
To determine the value of these properties, a Realtor will use a combined approach that includes both the amount of rent a tenant pays, and the ballpark value of single family homes that are comparable to the space in the property the owner occupies.
Neither of these valuation methods use the amount of square feet in a unit; except for how it contributes to the amount of rent the property generates.
In the case of my seller, calculating his duplex’s value according to the amount of square feet actually decreased his value by tens of thousands of dollars!
This again underscores the importance of hiring a Realtor who specializes in duplexes when it’s time to sell. Not doing so may cost you a fortune.