How can I appraise a home that is part of an affordable housing program?

[Shawangunk RE]

Home is in a program that has a limited number of homes available based on income and also several other things, such as local resident, volunteer fireman, veteran, elderly etc.
The home in question is not sold on the open market, the town sets the maximum allowed sale price, the home is selling for $220,000 in a PUD where typical homes sell for between $500 and $700,000. The home would be returned to the program if resold and the resale price would be set by the town.
There are no recent sales of other "affordable" units from the program. People tend to keep them lol.

 

[Tom D]

Yous got a problem without any similar sales. However, how far did you look. There are no poor people nearby with lower priced homes. Normally they build these homes in the ghetto to help stimulate some future potential uplifting of values, or gentrification like it happened in this big old city. In this case the are dumping poor people into a $700,000 neighborhood to fell themselves righteous. There is a deed price restriction, where you put that on the grid, i don't know. I always found affordable homes, but me in big city.
And they aren't always listed as such. Here the non profit community groups build them with HUD money, i mean your hard earned money given to the tax barons.

Do appraisal, run rabbit run.

 

[Elliott]

I had a neighborhood that was full of 'new' FmHA homes and there were two markets.....if the home had a participation equity with FmHA there were one set of values, and then there was the market value of houses that had moved out of the program. So the short answer is, comparables that are similar in their equity requirements based on the mortgage program.

 

[Shawangunk RE]

I had a neighborhood that was full of 'new' FmHA homes and there were two markets.....if the home had a participation equity with FmHA there were one set of values, and then there was the market value of houses that had moved out of the program. So the short answer is, comparables that are similar in their equity requirements based on the mortgage program.

Thanks, but since these homes are not sold thru the MLS, I am going to have to go to the town and to the program and beg for sales. I dont understand why the lender even needs an appraisal. If its foreclosed on, it gets put back in the program and is resold to the next guy for the maximum allowable price.

 

[Shawangunk RE]

Yous got a problem without any similar sales. However, how far did you look. There are no poor people nearby with lower priced homes. Normally they build these homes in the ghetto to help stimulate some future potential uplifting of values, or gentrification like it happened in this big old city. In this case the are dumping poor people into a $700,000 neighborhood to fell themselves righteous. There is a deed price restriction, where you put that on the grid, i don't know. I always found affordable homes, but me in big city.
And they aren't always listed as such. Here the non profit community groups build them with HUD money, i mean your hard earned money given to the tax barons.

Do appraisal, run rabbit run.

Its a head scratcher for sure, plus I cannot put it on the URAR even if I have recent sales, since the reconciliation statement references "market value" this is def not selling at market value.

 

[Hondo]

Thanks, but since these homes are not sold thru the MLS, I am going to have to go to the town and to the program and beg for sales. I dont understand why the lender even needs an appraisal. If its foreclosed on, it gets put back in the program and is resold to the next guy for the maximum allowable price.

Call the ADU program office, they probably can give you some comparables, haven't done one for a long time but I always got some good comps from them.

 

[George Hatch]

We don't appraise properties, we appraise property rights. In this case the property rights being appraised are more limited than properties without these legal encumbrances.

The maximum price established in the documentation will be the transaction price. In the unlikely event that it's the same number or a higher number than the property would sell in the market then the lower price will represent what the informed buyer would pay.

If/when it's the case:

"The maximum price established in this program is well supported by the outside sales"​

 

[Shawangunk RE]

We don't appraise properties, we appraise property rights. In this case the property rights being appraised are more limited than properties without these legal encumbrances.

The maximum price established in the documentation will be the transaction price. In the unlikely event that it's the same number or a higher number than the property would sell in the market then the lower price will represent what the informed buyer would pay.

If/when it's the case:

"The maximum price established in this program is well supported by the outside sales"​

Clearly that is the case, sales in that neighborhood sell for hundreds of thousands more than the "set price' for this unit. Still not clear why the lender even needs an appraisal.

 

[George Hatch]

To document the point that they didn't overencumber the property. It is possible for the MV/non-encumbered is less than the maximum price, and also possible for the deed encumbrance to specify the sale will transpire at whichever is the lower price.

These programs virtually always include maximum household income as a means of qualifying the buyers and in general the prevailing authority will often maintain a list of eligible buyers, sometimes ranked in order of precedence. That's not the only way these get marketed but it's one way. I always go back into the sales history to identify past performance of these units vs their respective comparables.

This is an assignment type where most of the work goes into problem identification rather than the analysis of the comparables. Also an example of an assignment where the value conclusion itself might not be the most relevant factor in their decision making.

If you see a hanging chad it might not be a bad idea to pull on it to get ahead of the questions which will often come next.

 

[ucbruin]

Whenever I had been assigned an appraisal of an affordable housing property....
I'd inform the lender and it would be canceled....