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Appraising below market affordable housing units

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timd,

The conflict is with making an as is appraisal of a property with these types of deed restrictions and the first sentence of the Definition of Market Value preprinted on the FNMA form. "The most probable price which a property should bring in a [highlight]competitive and open market[/highlight] under all conditions requisite to a fair sale,".

If the sales price is regulated and not affected by the forces of suppy and demand how could this be considered a competitive market?

If the program disqualifies the majority of the population and drastically limits the number of eligible buyers how could this be considered an open market?

In response to your question "Why would I use a hypothetical condition as the client wants an appraisal of the property as is? The client can't always have what they want.

Based on the preprinted definition of market value the appraisal cannot be made as is without utilizing a H.C.

If they would like the appraisal made as is then the preprinted definition of market value would need to be altered.

In the prior threads on this subject there are many other appraisers experienced with this type of property and in agreement on how they are handled. There was no debate on the interpretation of the preprinted definition of market value.

As for fear of the MD Board of RE Appraisers, why would they have a problem with an appraisal made with a hypothetical condition?


Larry, in the past I have certainly agreed with your thoughts on this matter, however, recently I have come to ask myself if "open and competitive market" does not in fact mean the market in which the property exists. In the instance of this thread, that would be competitive with other properties that have similar deed restrictions.
Does this fly in the face of what the majority of us think? Im sure it does ... but the question remains is there a "market value" for properties with similar deed restrictions? I am beginning to think the answer is yes and that the terms of the restrictions are important in selection of your "market" sales.

Just an interesting thought on the issue. Or maybe, not so interesting a thought. I will let each of you decide.
 
timd,

The conflict is with making an as is appraisal of a property with these types of deed restrictions and the first sentence of the Definition of Market Value preprinted on the FNMA form. "The most probable price which a property should bring in a [highlight]competitive and open market[/highlight] under all conditions requisite to a fair sale,".

If the sales price is regulated and not affected by the forces of suppy and demand how could this be considered a competitive market?

If the program disqualifies the majority of the population and drastically limits the number of eligible buyers how could this be considered an open market?

In response to your question "Why would I use a hypothetical condition as the client wants an appraisal of the property as is? The client can't always have what they want.

Based on the preprinted definition of market value the appraisal cannot be made as is without utilizing a H.C.

If they would like the appraisal made as is then the preprinted definition of market value would need to be altered.

In the prior threads on this subject there are many other appraisers experienced with this type of property and in agreement on how they are handled. There was no debate on the interpretation of the preprinted definition of market value.

As for fear of the MD Board of RE Appraisers, why would they have a problem with an appraisal made with a hypothetical condition?

Larry,

I understand what you are saying and do not disagree with some of the points that you make, but it does not matter as I know how the board in my state is likely to rule on the matter.

Regarding your comments about Fannie's definition requiring a competitive and open market, I disagree that "open" market requires a proeprty to be saleable to everyone on the planet. No market is truly 100% open as most state laws would prohibit someone who is under 18 from purchasing real property since they are not comptent to enter into legally binding contracts. All markets for real property are somewhat restrictive, it is just that some markets are more restrictive than others. A property placed on the open market within a particular submarket that may include restrictions still meets Fannie's definition IMHO. This is no different than a property offered for sale in an adult restricted (age 55+) community. That's a restricted market also, but I am sure that you would not argue that those properties do not have a "market value" which meets Fannie's definition because of the age restrictions or that the appraiser should ignore the age restrictions when appraising such properties and use properties which have no age restrictions as comparable sales....please don't tell me that a HC should be used when appraising properties in a adult restricted community

Again, none of this really matters, since I know how the Maryland board will likely rule on the matter. Other state boards may rule differently and that's why appraisers should pay attention to what their state boards and people connected to their state boards have to say on certain matters.
 
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