Appraising A Mount Laurel Unit

[Christopher Lauver]

Just giving a call out to see if anyone has experience with appraising Mount Laurel units. I.E. do you estimate market value or Mt. Laurel value? any appraisal limits? Mt. Laurel comps good, but neccessary? Any help/thoughts would be great.


Thanks,

Chris

 

[Walter Kirk]

Last year I appraised a Mt. Laurel unit (in Mt. Laurel!) it's deed restriction included a formula for calculating resale price and so the calculation of the adjustment was easy. I know that there are several different types of Mt. Laurel units and I believe that some of the deed restrictions run for 20 or 30 years. I wouldn't attempt an appraisal of any deed restricted property without studying the deed.

 

[Michael Filip]

I've done a few of these - yuk!

I'm not sure if it I did it correctly, but since there was not a lot of information regarding re-sales of other mount laurel units, I simply appraised it without any deed restrictions in place, and noted that clearly in the report. I also did new construction units that had different sales prices for the same unit as it was based on income. Making it impossible to determine value based on other similar units. All of the appraisals went through without incident and also with different lenders. So either I was right or the u/w were even more clueless that they did not stip me for anything :lol:

 

[Walter Kirk]

The underwriters are clueless. it's the lenders responsibility to provide the appraiser with information on any deed or title problem but they never do. I'm waiting for someone to default on a mortgage on one of these units. I wonder who they'll blame.

 

[Wendy]

Please help the stupid people!! What is a Mt. Laurel Unit?

 

[Christopher Lauver]

Wendy,

Here is a quick version: a.k.a Mt Laurel 1

"In the 1970s residents and non-residents of Mount Laurel, sued the township over "exclusionary zoning" — land use controls that precluded affordable housing from being built. The case, Southern Burlington County NAACP v. Township of Mount Laurel went to the New Jersey Supreme Court in 1975. The court ruled that because Mount Laurel's land use controls in effect excluded moderate- and low-income families, the township's exclusionary zoning practices were contrary to the "general welfare" requirements of the New Jersey state constitution. The court declared that all developing New Jersey municipalities had the legal obligation to provide their fair share of affordable housing opportunities."


You could fill a lot more screen with all the info regarding this case. I.E. 1983 had the Mt. Laurel 2 case.

Thanks all for the info!

My contact told me he has all the deed restrictions & max loan amount obtained from his state contact.

We'll see about that!

 

[Walter Kirk]

Wendy,
As explained above towns in New Jersey are required to provide affordable housing. Since the towns didn't want large public housing style complexes they have required the developers of higher priced housing to include some lower priced units. These units are typically deed restricted to lower income purchasers which, of course limits their value.

The problem with this situation for the appraiser is that these units are difficult to identify by physical features and unless the appraiser studies the documets it is easy to miss this situation. With mortgage lenders pushing for bigger loans, fast turn arounds and low fees, mistakes will be made.

 

[BarbaraNJ]

Christopher:

Have appraised quite a few "affordable" condo units.

They are appraised at market value.

Here's why:

The price a buyer pays is based on a formula which takes into consideration their total income and number of dependents (among other things).

So, a unit could be offered for sale to three different qualifying applicants, each of whom will pay a different sale price for the same unit.

You cannot be expected to predict what that unit will sell for, because you don't know who it will sell to (or in the case of comparables, who it was sold to).

And anyway, after a number of years (I think I heard 20), the units are supposed to loose the "affordable" status and will be able to be sold "at market".

Just be careful when comparing to other units; while the "rule" is that you are not supposed to be able to tell which units are "affordable" from the exterior of the building, the lower income units are generally less well-appointed inside (cheap floor coverings, kitchen appliances and cabinets), less desireable in location (usually ground floor) and many times slightly smaller room sizes.

Those are all adjustments you can make, esp. if you have been in the project before and are familiar with the quality of finish of the market-rate units.

 

[dobie]

Originally posted by BarbaraNJ@Mar 12 2005, 01:47 AM

They are appraised at market value.

Is that market value as we all understand the definition? Since low and moderate income housing (so called Mt. Laurel units) are almost never exposed to the open market how does your appraised value then correspond to "market value" as defined in your Limiting Conditions? Or do you use a different definition of "market value"?

Are you using other Mt Laurel sales as comps and if so then in all likliehood those prices also don't fit the definition of "market value". Or are you using non Mt Laurel units in the same project? If so how are they comparable to a deed restricted property that must be sold through the local affordable housing authority?

I have looked this issue from every angle and I don't think you can appraise these properties through any traditional methodology.

 

[Dave Carson]

Though, if a municipality were to approve the construction of new MtL housing,
or rehab old properties to become Mtl, then in theory they could aquire any older MtL housing and remove its status, I believe. As long as they keep the same percentage of units. Or, what if suburban municipalities decides to transfer (via credit $$)as many units as possible to the state’s inner cities? Now you have Mtl units, that are no longer Mtl units... So given that, in theory almost any structure can be taken over by the government at any time, it makes sense to appraise at market value imo. But that is not the only reason. What about Zoning changes? A municipality could excercise that power, again in theory. What about the Cost Approach? Take for example some of the units I appraised in Fox Chase, T.F. Condo's, where the Mtl units were identicle to the all the other units in the complex. Will it not be the same cost for RCN? Of course it will. What if the municipality had to demolish some Mtl units due to being unfit? Is the parcel of land not worth the same as a direct comparable piece of parcel? I always appraise/appraised MtL units at Market Value, using either non MtL or MtL comparables.

Unless the State enacts some type of law that directly prohibits this, (currently there is no such law or act) then I would appraise accordingly.


According to the State of NJ it is 30 years.
"Notwithstanding the provisions of any other law regarding the conveyance, sale or lease of real
property by municipalities, the municipal governing body may, by resolution, authorize the private
sale and conveyance or lease of a housing unit or units acquired or constructed pursuant to this
section, where the sale, conveyance or lease is to a low or moderate income household or
nonprofit entity and contains a contractual guarantee that the housing unit will remain available to
low and moderate income households for a period of at least 30 years."

Here is the information link:
http://www.nj.gov/dca/FHA.htm