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condo conversion

Discussion in 'Urgent - Help Needed' started by Gerry Fernandez, Nov 3, 2011.

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  1. Gerry Fernandez

    Gerry Fernandez New Member

    0
    Sep 21, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I got the following email:

    "We are looking into purchasing a 7 unit apartment building and converting it into condos in a very rough area. We would like to sell each unit for $35,000.

    Our problem is that there are no regular sales in our area. Every single sale for condos in the last 2 years have been REOs from condo conversions that occurred during 2007 and in very, very bad areas.

    Our project is located in one of the best areas within a close distance from this bad neighborhood but it is a low better in my opinion.

    We are in the process of getting FHA and FNMA approval so we can do FHA and FNMA loans.

    So, since there is nothing to compare our beautifully remodeled condos with stainless steel appliances and custom paint jobs, we think the appraisers that will show up with use the REO condo sales that are from $5,000 to $15,000.

    We are looking for a very experienced appraiser to help us create our own market, legally and ethically, so we can sell units for $35,000 a condo.

    We have the resources and 2 arms length transaction type buyers that we can sell 2 units to for $50,000 to create our own market.

    Let me know if you can help us achieve our goals.

    ----------------------------------------------------------

    I did not have the chance to analyze this neighborhood, as I am very busy at this moment and probably not able to take care of more work; however, this request appears an interesting case in my opinion. My first thought was tell him that if he wants to create its own market, go and just purchase the entire municipality. However, I would like to inform this person properly about our ethical obligations as appraisers and I would appreciate any thoughts.
    Thank you guys.
     
  2. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois
    Personally, I would just say "No, thank you" and move on.
     
  3. leelansford

    leelansford Elite Member

    45
    Mar 29, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Illinois

    OK. I'd probably keep my eyes on this situation but I doubt that I would want to be involved as the appraiser.
     
  4. Gerry Fernandez

    Gerry Fernandez New Member

    0
    Sep 21, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    thanks for the advice Lee... I think that is a very good option; instead of give them an appraiser's class, I might consider to just say: thanks but not thanks
     
  5. Ken B

    Ken B Elite Member

    158
    Feb 18, 2004
    Professional Status:
    Certified General Appraiser
    State:
    Florida
    I guarantee you that both "arm's length" purchasers are located in the same office as the seller.

    And no one is doing condo conversions right now. People that are buying condos are buying them cheap and leasing them. From what I have seen, developers who sold condo conversion units in 2005 are buying them back at a 75% discount of what they previously sold. In the not so distant past, I've appraised completely renovated and leased up apartment projects with condo docs drawn up, but never recorded, because it was not financially feasible to follow through with the conversion. The owner decided to keep the project as a rental apartment.

    Walk away...no...run away. And don't look back.
     
  6. Scott R Marshall

    Scott R Marshall Senior Member

    0
    Dec 14, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    I agree to politely decline. So basically they are saying there is no market other than REO's, which are selling for $5000 to $15000 but miraculously we have 2 buyers that will pay $35000 to $45000 more simply because we have stainless steel appliances and some nice paint and while we're near the "bad" areas, our area is leaps and bounds better. The only problem is every appraiser out there thinks they're worth $5000 to $15000 and we're looking for an appraiser than can get us up to that magical $50K number so that we can then show potential buyers what a deal they're getting by only paying $35K.

    After thinking over this scenario while typing this, I don't think I'd even bother responding to the e-mail.
     
  7. J Grant

    J Grant Elite Member

    455
    Dec 9, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Is that a joke?

    If it is not a joke and a real email, could be an FBI sting. They do look into mtge fraud and FL is a hot spot.. Just say no applies of course.
     
  8. Walter Kirk

    Walter Kirk Senior Member

    19
    Jun 24, 2003
    Professional Status:
    Licensed Appraiser
    State:
    New Jersey
    Assuming the two buyers are actually arms length purchasers an appraiser would still have to find at least one, and more probably several, sales in competing projects. If this can' be done the units are not worth the asking price.
     
  9. Gerry Fernandez

    Gerry Fernandez New Member

    0
    Sep 21, 2006
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    Thank you guys for all your comments... very interesting point Grant, I thought about it, but I am just too decent... why me? I was starving for not getting work from mortgage brokers who wanted specific values back in 2006-07... I thought about FDIC or attorneys? FDIC requested me work file last year, never heard back from them... ot it just could be an attempt to fraud; "people trying to create a higher market"?? I think I saw that before...
     
  10. vanguard

    vanguard Member

    0
    Oct 18, 2004
    Professional Status:
    Retired Appraiser
    State:
    Minnesota
    You may want to determine the feasibility of selling them to cash buyers. Determine what your cash market is like for the area. Depending on the location of the building, you may be able to market them to snowbirds. I would find a real estate agent who is successful at marketing properties for cash. Appraisals traditionally are not requested for cash transactions. If that’s the case then your services may not be necessary.
     
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