Before I call the appraiser.

[Sue McHugh]

I am buying (as some know) what will be a condo when all is said and done. I am buying it from my sister.

The appraiser called to schedule the appraisal for the side I am buying and I need to call him back and ask him if he can do another appraisal also. My sister is paying a lump sum to pay down her loan after I pay her and I guess her lender is doing a partial release.

Anyhoo, I am trying to condense this, but here goes.

Her bank requires an appraisal that can be either on a 1004 or a 2055. They wrote that they only needed one appraisal.
They want the two values to be indicated in the report, current value and value when it becomes a condo. Problem is, it is now a duplex.

If you got stuck with this assignment, how would you handle it?

 

[Mike Kennedy]

1004 "as-is" and 1073 subject to condo conversion

 

[George Hatch]

We appraise property rights. There is no "as is" value for her unit until the unit is created.

If this were a 100-unit condo complex under construction or a proposed condo conversion of a 100-unit apartment building I doubt that providing the "as is" value of the entire project would be a meaningful solution within the context of the intended use of an appraisal of one of those units. Same thing here, just a smaller scale.

 

[Lawrence R.]

Hmm. This is a good one. I think you would have to use a condition of some sort.

I don't know that 2 values can be expressed on the types of forms that you mentioned. I have never done/been asked to do that.

However, to make a valuation based on something that hasn't happened will require an appraiser to make a statement that the value is contingient upon completion of certian things, such as the proper classification by the agencies with police powers to declare the property a condo, and not a duplex.

I would think you would then need a seperate appraisal for the building in its current state/classification.

They would require at a minimum to be compared to 2 different types of properties, as well.



There could be differences in the values due to that. The sum of the parts may not be the same as the value of the whole.

I could see a scenario where you could need 3 appraisals.

1 for the duplex

1 for the left side "condo"

1 for the right side "condo"

But that depends on if the bank would need one for your sister's condo to make sure they weren't negatively impacted. They may have enough sense to know it would be darn close to what yours will be worth.

If the bank will not accept an appraisal with a hypothetical condition, you may have to wait until they actually are zoned condo to apply for the loan.

Make sure your bank will accept that kind of appraisal.

My guess is they will.

Good luck, and hopefully some others will chime in too!

Edited to add:

The form to appraiser a condo is commonly called a 1073.

 

[Sue McHugh]

Since its a 2 family right now, I guess he would have to do a multifamily form. Oy, 3 assignments for 1 house. Not going to be a bad week for that appraiser LOL.

 

[Sue McHugh]

Larry,

The lender I am going through will accept the hypothetical condition for my side.

 

[George Hatch]

Sue, did you read my post above? Doing the "As Is" on the duplex is a waste of time. The lender can't foreclose on the duplex unless they're loaning on the duplex. If their loan goes belly up prior to the completion of the condo they might be able to put a lien on it but they can't take it. It's not like when they're loaning on an SFR under development wherein they still get the (existing) lot.

 

[DTB]

Don't know if you are paying cash to your sister, hence your lack of a required appraisal, but she is not financing anything correct?

Why can't the duplex, as it is now, be appraised as-is on an old 2055?

The new condo, to be formed, can also be appraised on the old 2055 subject to legal formation?

Did these all day long for myself in the early part of the millenium. Current 3 unit is worth zzz. 3 condos after renovation = XXXX. Minus renovation, marketing, legal and holding costs, voila profit.

 

[Sue McHugh]

Sorry George,

I didn't see that post.

Okay, this gets complicated. m2:

 

[Sue McHugh]

Mike,

I am taking a small loan out for my side.

My sister is just paying down her loan and not financing anything. The loan she has now will be restructured to reflect the lump sum she will be receiving, thus lowering her mortgage payment. They are calling what we are doing a Partial Release.