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Appraisal On A New Proposed Development

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Eminent Domain

Junior Member
Joined
Jan 19, 2002
Professional Status
Certified General Appraiser
State
North Carolina
I was recently contracted to appraise a proposed forty unit development with significant lake frontage. The development is to include approximately 40 units which initially started out as condos and have subsequantly been modified to be detached townhouses with all units either being along the lake frontage or being off the water but having thier own boat slips (The primary draw of the community). The highly sought after lake access but high cost and extremely limited supply of individual lake front lots (one of the last to sale was 0.16 of an acre for $395,000) makes this type of development seemingly desirable since it is proposed to offered a combination of the lake frontage or the ability to have reasonable access of the lake with all the preceived benefits of this type of ownership (not having to keep up yards, grounds, etc.). Of course the normal things such as infrastructure, club house, etc are to be developed and then all turned over to the home owners assocaition at some pre-determined point.

The problem has arose that comparable sales of townhouses in this particular area are non-existant. Before jumping to the conclusion that I need to go back further in time I would like to explain. This is a very rural area with a small population that doubles in the summer. In this particular county there has never been a condo or townhouse built little alone sold. These are the first! However, given the nature of the resort and tourist industry growing in this region it is inevitable and only a matter of time before they become common place with the dwindling land supply (USFS owns most of the land 76% in this county and 85% in the adjoining county).

I have scoured an eight county area and come up with only one or two townhouses that have sold both of which are several years old with markedly different attributes. However, there appears to be a vibrant market in several areas for condos, particularly within golf course communities. While I do feel that a golf course community and a lake front community are two totally different animals the pickings are slim. If I can determine that underlying values are similar and/or determine what the value differences may be I feel I can overcome the differences using two different communities for comparison with lots of explanation. I feel that while they are two different types of communities the market is essentially the same, "Out-of-state residents seeking part-time recreational single family residential units who primarily utilize these homes in the summers, for vacation, holidays, etc."

I am not as concerned about absorption rates since from these golf course developments I can determine a range. My question is would it be totally off base to compare a condo to a townhouse? Is this totally out of the question even if these are the most similar to the subject? And, if I can't use these what other alternatives do I have? If I could use these what differences should I address and reconcile? Bearing in mind I know that condo ownership is different from townhouse ownership in that typically the townhouse owner also owns the footprint of the land on which the improvements sit and are responsible for the upkeep of the improvements as a whole. While on the other hand a condo owner does not own the land and can either own from the middle of the wall or from paint to paint and may or may not be responsible for the maintenance of the exterior of the unit. Some of the condos are actually free standing and detached with the owner maintaining interior and exterior. In this area these are relatively new types of residential development and its a hodge podge of variety as the developers wet their feet in all the various ways to build these.

Any input from you folks who deal with these types of properties on a more frequent basis would be most appreciated. And if I can reciprocate information I will.

Thanks in advance for the consideration.

Bryan

Dazed and confused because of a systematic execution of to many brain cells during my college days. :beer:
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Bryan,

Sorry for not responding earlier, but I really thought someone would beat me to it. I appraise a number of these projects every year, although not with this type of location. This isn't lake country where I'm from, so I can't help you there. But if your question is about the comparability between detached and semi-detached units under condo maps vs. subdivided lots, my experience with these projects is that the buyers in the lower price ranges don't make much of a distinction other than to (sometimes) consider the extra costs of the Association dues into their housing costs. The biggest distinction they make other than that seems to be how much usable yard they "have" compared to a small subdivided lot. We have a lot of these types of projects in this area and because that end of the market is so hot, they often sell out at or even prior to completion because they represent the only new homes in that size range and are thus a bit cheaper. Your milage may vary.

In lieu of other projects of similar type, I'd try to bracket this one using sales of townhouses on the low side and similar homes on the smallest subdivided lots you can find on the high side. There's usually not a huge difference in pricing between the two types because they fill a similar niche. Except for the location influences, your project's units will probably be within that range.

As for the location issue, all you can do is try to isolate that adjustment the same as you would for any other location and/or view adjustment, by gathering as much of the two different types of data as you can find and looking for the trend.

Stick with it. If they were all easy, we wouldn't have a job.


George Hatch
 

Eminent Domain

Junior Member
Joined
Jan 19, 2002
Professional Status
Certified General Appraiser
State
North Carolina
George,

Thanks for the reply. I was beginning to think that my question about townhouse as compared to condo was so stupid no one wanted to take a stab because they couldn't stop laughing. Since these are the first in the county I am having to jump on the learning curve and the ride is steep at first. I must admit that after multi-million dollar campgrounds, b&b's, c-stores, etc. it is a bit humbling to come across a property type that is so common place in most other areas and be stumped.

You stated just what I was thinking that although a condo and townhouse can take on many forms and are distinctively different in some fundamental ownership rights the fact remains, at least in this area, they typically satisfy the same niche market and are fairly interchangable. Also as you stated it became apparent from the data I have that the condo fees seemed to be double that of the the townhouses sold and that for the proposed property I am appraising. Thus, seemingly supporting the reasoning that the condo HOA's takes on more of the maintenance of the units themselves as compared to the townhouse HOA's.

Again, thanks for the reply and maybe I can make it through reconciling these things.

Bryan

PS. By the way the homes of similar size on 0.10 acre lots sell inthe $500K range and the proposed development is expected to offer the townhouse units in the $350K range. So as you stated I expect the new development to be between the golf course condos and that of low end fee simple owned lakefront homes.
 
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