Multifamily home sales volume in Cambridge increased significantly during the first quarter of 2004 compared to the same period year ago. This two-family home at 17-19 Brewster St. in Cambridge features 23 rooms and is available for sale for $5.7 million.

Two- and three-family homes may seem like an extinct property form in Cambridge, but sales activity for such properties appears to have picked up during the first quarter of the year.

Forty-two two- and three-family homes were sold during the first quarter of the year, up from 27 such sales during the same period last year and 32 sales in the first quarter of 2002, according to The Warren Group, parent company of Banker & Tradesman.

Healthy demand for such homes has been apparent, but the supply of for-sale multifamily homes usually is slim, according to local Realtors, because many residences have been converted into condos. Last week there were only 27 two- and three-family homes for sale in Cambridge, compared to about 130 condos listed for sale on Realtor.com, the official Web site of the National Association of Realtors.

Some Cambridge real estate agents discuss the possibility of condo conversion with home sellers who own multifamily properties prior to putting the home up for sale. “Not a lot of multifamily properties come on the market because, generally, an owner can do much better financially if they do a condo conversion,” said Laura Palumbo-Hanson, a broker at Hammond Residential GMAC in Cambridge.

Palumbo-Hanson said she recently met an owner who was interested in selling a two-family home in Cambridge. Palumbo-Hanson advised her client that it would probably be more financially beneficial to convert the property into two condo units. A two-family home could draw a purchase offer of between $700,000 to $800,000, but an upper-floor condo in the same residence can fetch about $650,000, while the first-floor unit would likely sell for somewhere in the $400,000 range, she explained.

The seller agreed and Palumbo-Hanson is now marketing the property as two condos.

“It used to be that you bought a multifamily home so that your living expenses were low for a good space of time,” said Palumbo-Hanson, explaining that homeowners used the rental income to pay the mortgage or other expenses. “Now that rents have gone down and prices have gone up so much, it’s not as much as a lure as [it was] 10 to 15 years ago.”

The multifamily homes that do come on the market are usually sold pretty quickly. Last year, two- and three-family homes in Cambridge were on the market an average 51 days before being sold, according to statistics from MLS Property Information Network provided by Palumbo-Hanson.

David Pap, a sales associate in one of the Cambridge offices of Coldwell Banker Residential Brokerage, said he recently marketed a three-family home in Central Square, which drew 10 offers almost immediately.

Assessing Options

Sales of two- and three-family homes in Cambridge slipped last year to 123 properties sold, compared with 152 multifamily transactions in 2002. Those sales pale in comparison to the number of condo units sold in Cambridge. Condo sales were particularly brisk last year in Cambridge. Some 952 condo units were sold, a 23 percent jump from the 773 condos sold in 2002, according to The Warren Group. The median price for condos sold last year was $353,000.

In the first quarter of this year, the median price for the 126 condos sold in Cambridge climbed slightly to $354,001, with unit sales remaining flat compared to the same period in 2003.

Statewide, condo sales are an increasingly popular choice for entry-level homebuyers and empty nesters seeking alternatives to higher-priced detached single-family homes, according to leaders of the Massachusetts Association of Realtors. MAR reported last week that condo sales in Massachusetts reached 3,084 during the first quarter, a 7. 5 percent increase from the 2,868 condos sold during the same months last year. The median price for condos sold jumped 14.4 percent to $232,740, according to MAR.

Meanwhile, the median price for the 19 two-family homes sold in Cambridge during the first quarter rose 13.8 percent to $655,000 from $575,505 during the first quarter of 2003. In contrast, the median price for three-family homes sold between January and March this year dipped to $595,000 from $625,000 during the same time last year, according to The Warren Group. But there were fewer three-family homes sold during the first quarter of last year – only 8 compared to 23 during the first three months of 2004.

While many property owners are opting to do condo conversions, real estate broker Fred Meyer said condo conversions can be complicated because of certain tenant rights and protections built into the condo conversion law. So he advises clients to consult with a lawyer before proceeding with a condo conversion.

According to Meyer, who is the broker-owner of University Real Estate in Cambridge, the law protects tenants who are currently living in an apartment in a multifamily home that is about to be converted into condos by giving them the right of first refusal to purchase the unit. Meyer said a tenant has to be allowed to buy the unit at the original listing price first and if the tenant refuses and a lower offer emerges that the homeowner wants to accept, the tenant must again be given the chance to purchase the unit at the lower price.

Owners of some higher-priced multifamily homes in Cambridge actually decide to leave their homes as they are because they can attract more affluent buyers who desire all the living space. Meyer said some buyers want two-unit homes because in Cambridge they can use up to a quarter of the living space for a professional office. They can also use the extra space as an au pair suite or for elderly parents, he said.

Palumbo-Hanson, who estimates she has been involved in the conversion of 30 to 40 multifamily properties over the course of here 20-year career, said not all multifamily homes sell better as condos. It all depends on the home size, its location and the condition of the units, she said, and also on the whether the seller has already found another home to purchase and doesn’t have the time to sell two units.