Need some help with a Condo Appraisal

[TXCBoy36]

Hello all!

I need some professional advice on an assignment that I have. The property is a Condo and it is a Refi.

The subject property has a second level that consists of a family area/loft area, which appears to only be available on the third level units, while the other two lower levels do not have the interior second level. This would classify the subject property as a 1.5 Story unit and not a Ranch style unit.


This subject property is located in a project that consists of 9 buildings and each building has 12 units for a total of 108 units. Each building has 3 levels, one level for 4 units. The subject property is positioned on the third level and the subject's particular location, in reference to where the subject's building is located, gives the subject an ideal panoramic view of the Colorado Rocky Mountains. As you view each building, looking at each level, there two units on the front section and two units on the rear section. So, of each building, only two out of the four top level units are high enough to have any significant view.


Of these 9 buildings, only 3 buildings are positioned at a point where the third level shares this good view of the snow capped mountains. So, with information made available, it is clear that only 6 out of 108 units share this ideal view.


Also, the third level units have second levels within the GLA, which also makes these units unique and not comparable to the lower units, which only consist of one level along with not having the same panoramic view of the Rocky Mountains. The appraiser checked local MLS and County Records and none of these 6 units,that share the same view,have sold recently, in an effort to establish a market value range.


All of the sales in the subject's project were examined and there was only one recent sale of another third level unit and this recent sale was one of the interior building that do not share the mountain views. With this in mind, it is the determination of this appraiser, that this recent sale does not share the same appeal in the market place as the subject property. I found other sales but they are smaller, lower level units that do not share the same GLA measurements or the good view. Also, these recent sales are considered distorted sales, due to the fact that they are REO, Foreclosed Properties and/or Corp Relocation sales. An analysis was performed and of the 108 units, less than 4% have been bank owned sales. So, I do not feel that the market is declining, but I could be mistaken.


The subject property's location backs to a nice park/green belt area and located next to this park area is a competing neighborhood of another phase of condos, but this other group of condos are of new construction, but they are similar in size, style and location. These condos are the closest available comps but my concern is their year of construction.

I am looking for some advice on how to proceed with this appraisal due to unique design, location and view of the subject property and the complete lack of available comps when examining recent sales in the subjects immediate project.


Any help in this matter would be greatly appreciated.
John​

 

[Mike Kennedy]

"another phase of condos, but this other group of condos are of new construction, but they are similar in size, style and location. "

suggestions:

1. view consideration is first..... adjust for age and condition
2. of the units in subjects' condo WITH indicated view......when were the last sales, possibly adjust for time......
3. the most similar units in subject's condo - lacking view.
4. actives / contracted available?
5. MLS search may not report ALL sales - personally review County or Town Assessor sales records?

 

[Ray Miller]

"another phase of condos, but this other group of condos are of new construction, but they are similar in size, style and location. "

suggestions:

1. view consideration is first..... adjust for age and condition
2. of the units in subjects' condo WITH indicated view......when were the last sales, possibly adjust for time......
3. the most similar units in subject's condo - lacking view.
4. actives / contracted available?
5. MLS search may not report ALL sales - personally review County or Town Assessor sales records?

Rocken Robin, got her down pat. No. may be your key. Many appraisers over look going to the township offices or county court house. Cause it not on line from thier office.

 

[Mike Kennedy]

AWW.....Ray..........say it ain't sooooo.....

 

[Couch Potato]

I agree it is very likely the view has value in the market. Since you can't value the view it the easy way do to a lack of recent sales, you will need to look at much older sales to find a pairing or two to quantify that value. If the value is indeed present in your market, it should not be to difficult. Your appraisal will not fit typical guidelines, so be sure to explain thoroughly why. I doubt you can make a credible report with less than five sales, given what you told us. It could require more than that.

It would not be unreasonable for someone to say such an analysis is somewhat complex. As such the license limit of $250,000 transaction value would need to be considered. Not saying it necessarily is the case, but it is something to keep in mind anytime an assignment is not simple. If I were a licensed appraiser, I would have a relationship with a local certified appraiser, who knew I did good work, and would cosign reports for $30 or so. As a residential appraiser, a cosigning general appraiser is how I handle properties with potential commercial aspects. Most of the time it is probably an unnecessary precaution, but I think it is worth it to protect the interests of my client

 

[Ray Miller]

I agree it is very likely the view has value in the market.

When I am in Denver i always request a room on the west side as high as I can get in those downtown hotels. I can see that view in my mind now with the snowcap mountains. Damm I miss those hills!

Well headed to the ranch for most of the day.

By the way the ranch is on the market or at least my shares and Bobbies. Retirement is looking better and better each day.

 

[Couch Potato]

When I am in Denver i always request a room on the west side as high as I can get in those downtown hotels. I can see that view in my mind now with the snowcap mountains. Damm I miss those hills!

Well headed to the ranch for most of the day.

By the way the ranch is on the market or at least my shares and Bobbies. Retirement is looking better and better each day.

View is always important for a vacation spot, IMHO, but for a full-time residence I think it is just important that the view not be ugly. As anyone who has owned a house with a great view will tell you, it will be ignored by the resident after the first few months. As long as the view is pleasant and private, they are all about the same after a year.

 

[TXCBoy36]

"another phase of condos, but this other group of condos are of new construction, but they are similar in size, style and location. "

suggestions:

1. view consideration is first..... adjust for age and condition
2. of the units in subjects' condo WITH indicated view......when were the last sales, possibly adjust for time......
3. the most similar units in subject's condo - lacking view.
4. actives / contracted available?
5. MLS search may not report ALL sales - personally review County or Town Assessor sales records?

The recent sales in the same subject project, that have the good view, are over 2 years old. I checked county records also and the only recent sales that I could locate were the sales that I mentioned earlier. The only recent typical arms length transactions were the sales in the competing neighborhood. No good sales in the last 18 months in the subject's project.

There is one other thing that I noticed. The are also has alot of Townhomes in the area also. Can I use townhomes, when there is a lack of similar condo sales? The one big drawback on the condo sales is the fact that these townhomes all have basements and the condos do not have basements.

John

 

[Couch Potato]

The recent sales in the same subject project, that have the good view, are over 2 years old.

So compare those to 2 year old sales without the good view to get your adjustment. Then calculate need market condition adjustments between 2 years ago and today. It's fairly straight forward, but it is a lot of work. Include the sales used to calculate the adjustments either in the normal grid or in your comments. They are more likely to be read and understood in the grid, IMHO.

 

[Charles Knutson]

What is the value range of these condos? I've found that in entry level properties in Metro Denver, the value premium for greenbelt locations and superior views is limited -- as you move up the demand/value scale, home buyers will pay more for superior view and location amenities.

I think you are on the right track, incorporating the data from the newer condos and townhomes with basements; age, condition, style, and basements can be adjusted to make these reasonable high end bracket comps. The trick will be determining an accurate adjustment factor for the view and location amenities within the subject property's development -- how much extra would would a typical buyer pay to have these amenities?

If an accurate adjustment factor cannot be extracted from a paired sales analysis, you'll need to rely on your judgment as an appraiser to adjust for view and location. Absent hard evidence, I tend to be conservative in adjustments for this type of amenity. On my first inspection as a trainee 9 years ago, my supervisor explained the 1-2-3 percent rule of thumb -- if the subject (or comp) has an amenity of undetermined value, give it a 1% adjustment if it isn't a big deal; 2% if it's significant; and 3% if it's a very big deal. I don't follow that rule of thumb anymore, but it was very good way back when. The other side of the coin -- Fannie Mae guidelines require comments when line adjustments exceed 10%, the net exceeds 15%, and the gross exceeds 25%. The logic of the Fannie Mae guidelines is that if adjustments exceed those amounts, the comps aren't really comparable.

If it were me, I would base the value on sales within the subject's condo project, and then use the comps from other projects to support the upward value adjustments. If you want to discuss the details of this assignment in greater depth, you can send me an email.