Condo Budget Analysis

[Randolph Kinney]

I got to appraise a unit in the Ritz condo in DC where Michael Jordan lived. If anybody remembers, there was a huge mold issue. The pending litigations question was very important.

Condo here are susceptible to termites. Since the HOA is responsible for this item of maintenance, when was the last time a termite inspection was done? How many times have termites been found and what was the damage?

Slab leaks are also a problem on older condos where the plumbing was routed through the concrete foundation.

For some condos and PUDs built in the mid 80's, they used plastic plumbing and have problems with pipes leaking or bursting. It is important to know where the responsibility ends and begins for the HOA.

Andrew makes the point about mold and it can affect the HOA with lawsuits.

 

[ZZGAMAZZ]

--Prospective budgetary impact of foreclosure-related vacancies

 

[TJSum]

Pick several competing projects within the marketing area and conduct an analysis of their budgets/management as well so that you can make judgements and comparisons with the subject's project to make sure it is typical and within market expectations. If not, compare and contrast among the various condo projects and point out differences.

Also, if there is a relatively large rate of late payers or non payers of monthly condo fees, find out what steps the management takes to enforce payment issues, based on local and State laws. In this area, many projects have assigned parking for that reason only, so they have some sort of leverage to get unit owners to stay current with their payments (if they do not pay they lose their assigned parking space).

 

[timd354]

Well, if you say so, yours might not be reliable. But that is everyday, ordinary kind of stuff and mine would be dead-on reliable. I find it remarkable that there is a concurrent thread where an appraiser is claiming he can value the undivided common interest in a condo (by itself) and in this thread appraisers are claiming that an income and expense statement is beyond their expertise. No wonder this profession is in a mess!

The real bottom line here is that most residential lenders do not expect or require such an anlysis to be part of the SOW for the appraisal of an individual condominium unit. They undoubtedly do not want to pay the fee that would be required if such an analysis was included in the typical individual condominium unit SOW.

 

[Howard Klahr]

The real bottom line here is that most residential lenders do not expect or require such an anlysis to be part of the SOW for the appraisal of an individual condominium unit. They undoubtedly do not want to pay the fee that would be required if such an analysis was included in the typical individual condominium unit SOW.

Since this is included on the FNNMA form as a specific line item question, I would believe that it is within the standard scope of work for all for all residential condo appraisals performed for financing.

Does anyone actually read form that they fill out, certify and sign?

I'd love to see the accuracy or relevance of your-or my- analysis of a 500 unit high rise development with rooftop pools, indoor pools, 8 elevators, 20,000 square foot fitness center...

Anyone relying on that would be delusional. IMO

So the pre-development appraisal of the same project is just as inaccurate or irrelevant? It would seem that all large scale development assignments must not be able to be properly performed. How do lender's manage to complete transactions. It seems that the income portion of everyones appraisal training is just woefully inadequate. All those appraisers out there that can perform a simple analysis of a financial statement.

 

[Randolph Kinney]

Does anyone actually read form that they fill out, certify and sign?

No lender has ever requested or insisted that after the box checked NO and whatever explanation is given has ever come back on the appraiser.

To me, it is like Fannie's cert #23 where they name many entities that may rely on the appraisal however, it does not make them intended users if you insert a clarifying statement.

The analysis required of the condo budget is vague and generalized as stated on the form. The fact that you are given the opportunity to say no I did not analyze the current year project budget and why, is the easy out. Take it.

 

[Howard Klahr]

the easy out. Take it.

Why fill out any part of the form? Just enter tha value and sign it.

 

[TJSum]

Since this is included on the FNNMA form as a specific line item question, I would believe that it is within the standard scope of work for all for all residential condo appraisals performed for financing.

Does anyone actually read form that they fill out, certify and sign?



So the pre-development appraisal of the same project is just as inaccurate or irrelevant? It would seem that all large scale development assignments must not be able to be properly performed. How do lender's manage to complete transactions. It seems that the income portion of everyones appraisal training is just woefully inadequate. All those appraisers out there that can perform a simple analysis of a financial statement.

How many Condo meetings have you attended in order to fill out the form, the form also ask about any information learned from Condo/HOA meetings.... m2:

 

[timd354]

Since this is included on the FNNMA form as a specific line item question, I would believe that it is within the standard scope of work for all for all residential condo appraisals performed for financing.

Does anyone actually read form that they fill out, certify and sign?
quote]

Howard, I do read and fully understand the form that I fill out, certify and sign. the Fannie Mae form has a check box that the appraiser can check that states that he did not perform any such analysis? Additionally, the the preprinted SOW does not specifically state anywhere that the appraiser analyzed the budget.

Finally, no lender nor Fannie Mae has ever made an issue with the following disclaimer that I have literally included in hundreds of Fannie Mae appraisal reports for condominium units:

The appraiser was not provided with a copy of the subject Condominium Project's budget nor any reports regarding the budget. Further, it is noted that this type of analysis is beyond the scope of the appraiser's area of expertise. Any such analysis would have to be performed by an expert in that field of study such as a CPA or an expert in property management. It is assumed by the appraiser, for purposes of this report, that the budget is adequate.

Thus, it would appear that every lender that I have done condominium appraisals for and Fannie Mae agree with my interpretation that this is not expected in the typical SOW for the appraisal of a residential condominium unit.

Please do not include me in those that say such an analysis cannot properly be done. I know that it most certainly can be done. The fact is that most lenders are not willing to pay for a SOW that includes such an analysis for appraisals of most residential condominium units.

 

[Howard Klahr]

How many Condo meetings have you attended in order to fill out the form, the form also ask about any information learned from Condo/HOA meetings.... m2:

One deos not need to attend Condo/HOA meetings to learn about what occurred. Records about all activities are available through the association.

the Fannie Mae form has a check box that the appraiser can check that states that he did not perform any such analysis

The form also has a check box to indicate whether the appraiser performed research on the sale history of the subject and comparables. That does not eliminate the requirement to perform such analysis.