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  #1  
Old 11-06-2009, 01:43 PM
WadeKoutnik WadeKoutnik is offline
 
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Default Concessions CDD Fees.

All the comps in this neighborhood have concessions where the builder is paying their CDD fees for the the life of the fees (roughly 1200 a year). What number would you use as a concession adjustment for this?
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Old 11-06-2009, 01:50 PM
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Is the builder paying up front or just until he transfers all his assets to a new corporation and declares bankruptcy?
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Old 11-06-2009, 01:57 PM
WadeKoutnik WadeKoutnik is offline
 
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Definitely not up front
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Old 11-06-2009, 02:06 PM
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Technically, if you felt it proper to adjust dollar for dollar, you would need to discount all the future payments to a present value using an appropriate rate.

You should also determine if the builder's contributions are transferable to a new owner in the event the original owner sells. If not, you need to conclude how long the typical owner will retain the property prior to resale.

In practice, you should ask yourself what, if any, impact the contribution had on value. It may be more or less than the present value of the future payments.

You do bring up the question of what impact the CDD assessment may have on value of a property in the CDD compared to a property outside the CDD. You may find properties subject to a CDD assessment sell for something less than properties not subject to that assessment.

A truly astute purchaser would require the builder deposit the future CDD payments in an interest-bearing escrow account with the amount deposited representing the present value of the future payments discounted at a safe rate as represented by the interest paid on that account.
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Last edited by Ken B : 11-06-2009 at 02:11 PM.
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Old 11-06-2009, 02:21 PM
WadeKoutnik WadeKoutnik is offline
 
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My initial thought was the present value of those payments over the time period a typical buyer stays in a home in this market.

That seems the most logical
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Old 11-06-2009, 02:37 PM
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But does the market follow your logic?
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Old 11-06-2009, 02:41 PM
WadeKoutnik WadeKoutnik is offline
 
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Does it follow anyones??
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Old 11-06-2009, 04:44 PM
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If All the comps are IN this neighborhood have concessions where the builder is paying their CDD fees ....

Why would adjustment to the comps IN that "neighborhood"/development be necessary? Would sales OUTSIDE be truly comparable?
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Old 11-07-2009, 11:18 AM
Mike Boyd Mike Boyd is offline
 
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Quote:
Originally Posted by Ken B View Post
Technically, if you felt it proper to adjust dollar for dollar, you would need to discount all the future payments to a present value using an appropriate rate
A truly astute purchaser would require the builder deposit the future CDD payments in an interest-bearing escrow account with the amount deposited representing the present value of the future payments discounted at a safe rate as represented by the interest paid on that account.
OR, post a bond.
  #10  
Old 11-07-2009, 01:20 PM
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Would someone kindly define "CDD fees."

(serious inquiry, as I have not encountered this out here in the wild west)
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