Reviewing a BMR appraisal

[spgray65]

Hi all.

I'm reviewing a BMR (below market rate) SFR appraisal (1004) and have a question for those more experienced that I.

I've been the appraiser for a half-dozen BMR homes in the past 3-4 years and I always reported the opinion of value exactly what the particular housing authority dictated the sale price to be based on a formula sheet they provided to me. The BMR value was always less than the market rate (duh!) of similar properties.

The report I've been asked to review has a twist. The OA properly explains that the subject is a BMR unit and discloses the sale price per the county housing authority. Yet the OA's final opinion of value is less than the BMR price dictated by the county. The OA used very recent sold comps of market rate arms-length SFR's and one 5 month old sale of a BMR model-match and gave it a negative time adjustment.

I actually agree with the OA's value due to a declining market and feel the BMR price is too high for current market conditions in this neighborhood.

My question is, is this the proper way to appraise a BMR unit when the scheduled price per the county is higher than the true market value? Or should the value opinion always match the price set by the county and explain explain explain in the report that the BMR value is higher than the going market value of competitive homes in the neighborhood?

Thanks for your thoughts.

 

[Riick]

Beats the H*LL out of me.
I'd look at those platitudes pre-printed at the end of the 1004 report, and figure it out from there, but I'm too lazy tonite.

.

 

[timd354]

Or should the value opinion always match the price set by the county and explain explain explain in the report that the BMR value is higher than the going market value of competitive homes in the neighborhood?

If the value of a BMR home should always match the price set by the county then why would anyone bother ordering an appraisal of such a property?

 

[coolhandluke]

Hi all.

I'm reviewing a BMR (below market rate) SFR appraisal (1004) and have a question for those more experienced that I.

I've been the appraiser for a half-dozen BMR homes in the past 3-4 years and I always reported the opinion of value exactly what the particular housing authority dictated the sale price to be based on a formula sheet they provided to me. The BMR value was always less than the market rate (duh!) of similar properties.

The report I've been asked to review has a twist. The OA properly explains that the subject is a BMR unit and discloses the sale price per the county housing authority. Yet the OA's final opinion of value is less than the BMR price dictated by the county. The OA used very recent sold comps of market rate arms-length SFR's and one 5 month old sale of a BMR model-match and gave it a negative time adjustment.

I actually agree with the OA's value due to a declining market and feel the BMR price is too high for current market conditions in this neighborhood.

My question is, is this the proper way to appraise a BMR unit when the scheduled price per the county is higher than the true market value? Or should the value opinion always match the price set by the county and explain explain explain in the report that the BMR value is higher than the going market value of competitive homes in the neighborhood?

Thanks for your thoughts.

SPG-If you were solving for market value as defined in the SOW the active listings and sales of at market arms length sales would be relevant, but you are not solving for market value. The buyer must have a reduced or restricted income in order to qualify for the program which makes the unit available to him/her. If it were available to anyone, then the usual market forces would apply. In an appreciating market a so called BMR unit would be just that: below market value. In a declining real estate market the scenario you have described can also occur. The key concept is that the buyers financial situation and the local governing authority determines the price rather than the innate value of the real estate.

In NJ these are known as "Mt Laurel'' units, named after the NJ Supreme Court decision on affordable housing in 1975.

 

[spgray65]

If the value of a BMR home should always match the price set by the county then why would anyone bother ordering an appraisal of such a property?

Because even though they are BMR's they still are mortgaged and lenders require an appraisal.

 

[spgray65]

SPG-If you were solving for market value as defined in the SOW the active listings and sales of at market arms length sales would be relevant, but you are not solving for market value. The buyer must have a reduced or restricted income in order to qualify for the program which makes the unit available to him/her. If it were available to anyone, then the usual market forces would apply. In an appreciating market a so called BMR unit would be just that: below market value. In a declining real estate market the scenario you have described can also occur. The key concept is that the buyers financial situation and the local governing authority determines the price rather than the innate value of the real estate.

So then it appears the OA may have erred when they solved for market value instead of BMR value. But I don't know what the SOW they were operating under. It's possible that the lender knew about the declining market and requested a market value.

Hmmm.....it would totally suck for you as the buyer if you were low income and the BMR units were priced higher than market value homes in your neighborhood.

Thanks for your help and input, I appreciate it.

 

[timd354]

Because even though they are BMR's they still are mortgaged and lenders require an appraisal.

I fully well understand why appraisals on such properties are ordered...my question is a rhetorical one...designed to help you realize the silliness inherent in the the following question when talking about appraising a property(whehter ofr not it is a so-called BMR):

Or should the value opinion always match the price set by the county?

Please consider this: If the price of so-called BMR is higher than the price of similar unrestricted typical properties in your market area, why would someone who is knowledgeable, well informed or well advised pay more (or even as much) to purchase a BMR (which typically has pretty severe resale restrictions) instead of a unrestricted property? Obviously, anyone who would pay more for a BMR in such a situation is not a well informed or well advised buyer.

Now, go read the definition of market value that is a part of the typical mortgage lending/GSE appraisal form and you should be able to figure out the answer.

 

[spgray65]

I fully well understand why appraisals on such properties are ordered...my question is a rhetorical one...designed to help you realize the silliness inherent in the the following question when talking about appraising a property(whehter ofr not it is a so-called BMR):

Or should the value opinion always match the price set by the county?

Please consider this: If the price of so-called BMR is higher than the price of similar unrestricted typical properties in your market area, why would someone who is knowledgeable, well informed or well advised pay more (or even as much) to purchase a BMR (which typically has pretty severe resale restrictions) instead of a unrestricted property? Obviously, anyone who would pay more for a BMR in such a situation is not a well informed or well advised buyer.

Now, go read the definition of market value that is a part of the typical mortgage lending/GSE appraisal form and you should be able to figure out the answer.

I do not understand why senior appraisers on this forum feel the need to respond to junior appraiser's questions in condescending ways. It really discourages question asking.

I fully well understand what market value means. BMR units are not market value units. The OA gave this unit a market value conclusion. Do you agree with me that they made an error?

Of course a well informed buyer wouldn't buy a BMR unit priced higher than a similar unit with a lower market value in a declining area. But that's a side topic.

 

[residentialguy]

I always thought BMRs were over priced....I prefer American cars.

 

[timd354]

So then it appears the OA may have erred when they solved for market value instead of BMR value. But I don't know what the SOW they were operating under. It's possible that the lender knew about the declining market and requested a market value.

You have very likely reached the wrong conclusion.

Read the original appraisal that you are reviewing which undoubtedly contains the definition of value utilized in the appraisal. The original appraisal also undoubtedly discloses the Scope of Work. Assuming that the original appraisal was reported on a standard Fannie/Freddie form such a Fannie Mae form 1004, the appraisal was a market value appraisal.

Apparently, you did not bother to read the definition of value utilized or the scope of work disclosure in the appraisal report that you are reviewing.

Frankly, your questions and statements in thread show that you are in way over your head on this assignment and lack the requisite competence and knowledge to perform a review assignment, especially of an appraisal of this type of property.

You really need to decline this assignment or partner up with someone with more knowledge and experience with the requisite issues involved in this assignment.