Before I call the appraiser.

[George Hatch]

If she already has a mortgage on the duplex then it does present a different scenario. At that point the "as is" value of the lender's collateral (the duplex) may be relevant to the "restructuring" of the debt.

 

[Carnivore]

sue,

Something is confusing or maybe the bank is confused.

I thought you said this was a condo conversion(a duplex(1 parcel each) will be divided into two condos?

If not, are you creating Tenants in Common(two undivided interest of a duplex)?

I can not imagine how your sister can be paying down a loan on a parcel that will have its legal attributes changed once you enter the picture.

 

[Charles Knutson]

Hi Sue --

Question -- why are you doing a condo conversion, instead of a townhome split with a party wall agreement? Does the zoning not permit lot splitting?

The lending industry holds condos in lower regard than attached single family townhomes, even if the real estate market is indifferent to the distinction. A half duplex with land ownership and a party wall agreement is superior to a 2 unit condominium association, because there is no need for an HOA or an association to own the land.

If legally permitted, dividing the land and writing a party wall agreement is they way I'd go. Of course, there are other issues -- like water taps. In Denver, the Water Board likes to see an individual tap for each townhome unit; but I have seen conversions with a single tap addressed in the party wall agreement -- sort of a utilities only HOA.

As for the report -- I'd try to go with the old 2055. If the lender is okay with a duplex on the old 2055, they should be okay with the condo or half duplex townhome on the same report. Are they really willing to accept a single report for both situations? It will take a lot of narrative, but I guess it can be done.

I would argue the better choice would be two reports that are similar in content, but one for the duplex and one for the half duplex. In fact, the most conservative approach would be a 2-4 unit income property report for the duplex, and a 1004 ASF or a 1073 Condo report for the half duplex. But since the lender doesn't want that, the old 2055 is probably the best option.

 

[hastalavista]

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.

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

George-

I understand the "as is" requirement for a mortgage loan.
But isn't the answer to do an as-is value and an EA value? The lender then, once the conversion takes place, needs to ensure that the EA has been satisfied?

Sue-
If I were the appraiser, I'd be reluctant to perform that analysis on a current Fannie form. I'd consider the likelihood of having the report misunderstood too great, and would argue that the two appraisals (which is what the assignment involves) be reported separately to avoid any confusion.

We get this type of request from time to time; in some of my markets, 2-4's are being converted into condos, and the request comes in prior to the conversion.
I explain to the client (as George points out) that they need an "as is" appraisal to make the loan. Interestingly enough, in many cases, they wait until the legal changes have taken place before they go forward with the appraisal- then it is as-is without any EAs.

 

[Sue McHugh]

Charles, we do not have that type of arrangement around here.

I'm thinking this could be reported on an old 2055. Even if the appraiser does two of them, one for the duplex, one for the condo, I don't see a problem. I don't think my sister's mortgage company will care if they get two reports, they just wanted her to know that only one was needed.

 

[Charles Knutson]

Here are some links on party walls.

Party walls defined --

http://www.answers.com/topic/party-wall?cat=biz-fin

party wall agreement google search

http://www.google.com/search?q=part...s=org.mozilla:en-US:official&client=firefox-a

In my experience, in most locations where duplexes are permitted, the zone lot for a 1/2 duplex is equal to 1/2 the minimum zone lot for the duplex itself.

On the other hand, I recently did a report on a 1/2 duplex condo in Boulder CO -- the zoning ordinance there does not allow subdivision of lots, so going condo is the only way to subdivide a duplex.

 

[Mike Garrett RAA]

Way too complicated for me. I would suggest treating each part of the transaction individually. Step 1...appraise it "as-is" on the appropriate form which sounds like a 1025, small income as a duplex. Once that is done create another appraisal with the hypothetical condition it becomes a condo. Use the condo form 1073. That's how I would handle it. Two different assignments, two different fees.

 

[Vermonter]

Way too complicated for me. I would suggest treating each part of the transaction individually. Step 1...appraise it "as-is" on the appropriate form which sounds like a 1025, small income as a duplex. Once that is done create another appraisal with the hypothetical condition it becomes a condo. Use the condo form 1073. That's how I would handle it. Two different assignments, two different fees.

I've done exactly this. 1025 on it first and a few months later 2 1073s with the HC and a letter from the attorney handling the conversion.

BTW, there was a substantial difference in values between 1 multi and 2 condos.

 

[Lawrence R.]

I've done exactly this. 1025 on it first and a few months later 2 1073s with the HC and a letter from the attorney handling the conversion.

BTW, there was a substantial difference in values between 1 multi and 2 condos.

I agree with robert, because it is what I wrote 4 hours ago...

 

[Vermonter]

I agree with robert, because it is what I wrote 4 hours ago...

Sound like my wife when football is on.:icon_mrgreen: