Can A Condotel Be Completed On A 1073?

[heritagegroup]

I believe that, because I must certify that the report can be relied upon in the secondary market (see quoted text), that I can't use that form (since FNMA won't loan on condo-tels). Am I correct?

"23. The borrower, another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal report as part of any mortgage finance transaction that involves any one or more of these parties."

Also, I read somewhere that a CG was required on condotels. Can anyone confirm?

Thanks for any input!

 

[Meandering]

Forms are for 1-4 unit residential.

If what you are appraising is not 1-4 unit residential, then don't use a Fannie Form.

CGs are required for commercial properties. Start with, is your property in a commercial or residential zone?

 

[Proactive]

I have a lot of experience turning down condotel work and always recommended a CG. Back in the rah-rah days a big condotel was built in my market... then the bottom fell out. Turns out a LOT of residential appraisers signed off on appraisals for secondary market loans. Although many units went into foreclosure, I haven't heard of any appraisers being whacked by the state over it. Tis a shame, IMHO.

Good luck!

 

[J Grant]

Condo hotels can be on the 1073 form, the fact that most lenders won't lend on them for res loans is another matter. Let the client know it is a condo hotel and see if they want to proceed.

As far as I know there is no "rule" that a CG has to do a condo hotel when the main use is residential...they are a weird hybrid property type because in a "regular" hotel, there is one owner or consortium of owners, and (owned by Hilton Hotels for example) and all the rooms /suites are rented out but owned as a whole . In a condo hotel, you typically have multiple owners,...such as 100 condo apartments owned as any other condo, aka each unit has its own legal, deed and owner, but they are allowed to be rented daily or weekly or monthly (up to the building), and often are in a pool under professional management to arrange renting, housekeeping etc.

 

[Meandering]

(they are allowed to be rented daily or weekly or monthly (up to the building), and often are in a pool under professional management to arrange renting, housekeeping etc.)

Glorified hotel/motel according to this verbiage.

We really can't decide until you have the deed and paperwork that describes the rights which the owner owns. Weekly/Monthly rents are commercial endeavors requiring considerations for vacancy, seasonal rates, holiday rates, etc, similar to motels.

 

[Ken B]

A condo-hotel is legally structured so that those components of the property in which traditional condominium unit owners have an undivided interest are actually owned by the hotel unit. Common area elements are virtually non-existent. Unit owners in a condo-hotel literally own the paint on the walls and ceiling, the carpet on the floors, and the air in between. And that is all.

A key aspect of a condo-hotel unit is that the unit can only be leased through the hotel operation. Naturally, marketing will tell a prospective owner how much they can make by leasing the unit when the owner doesn't occupy it. Naturally, they understate the maintenance fees you pay (for property in which you have no ownership interest except right of use when you occupy the unit) and the grossly overstate the occupancy rate. Some operations limit the time an owner can occupy the unit.

They are a sucker's game.

 

[J Grant]

(they are allowed to be rented daily or weekly or monthly (up to the building), and often are in a pool under professional management to arrange renting, housekeeping etc.)

Glorified hotel/motel according to this verbiage.

We really can't decide until you have the deed and paperwork that describes the rights which the owner owns. Weekly/Monthly rents are commercial endeavors requiring considerations for vacancy, seasonal rates, holiday rates, etc, similar to motels.

These are weird assignments....yes the short term rental aspect mean one has to account for vacancy , seasonal, holiday etc, it is only analyzed (typically) for the one condo unit being appraised, whereas in a hotel or motel one would be analyzing the income from all the units.

I've done several, it was years ago it was not that hard, use similar condo hotel units preferably in same building to compare as far as rents and vacancies seasonal, and sale prices.. DISCLOSE everything. However, most lenders will not loan on them under residential programs. I have no idea who lends on them or under what program,

 

[Ken B]

If you try to run an income approach on one, you are likely to discover negative cash flow. Good luck getting management to release revpar data.

 

[J Grant]

A condo-hotel is legally structured so that those components of the property in which traditional condominium unit owners have an undivided interest are actually owned by the hotel unit.

Is that true for all of them? The ones I did, each unit had an individual owner ( of course one owner can own multiple units)

Common area elements are virtually non-existent. Unit owners in a condo-hotel literally own the paint on the walls and ceiling, the carpet on the floors, and the air in between. And that is all.

The ones I did has pool, lobby, parking etc..regarding the common elements each owner owned a % similar to how other condos are structured.

A key aspect of a condo-hotel unit is that the unit can only be leased through the hotel operation. Naturally, marketing will tell a prospective owner how much they can make by leasing the unit when the owner doesn't occupy it. Naturally, they understate the maintenance fees you pay (for property in which you have no ownership interest except right of use when you occupy the unit) and the grossly overstate the occupancy rate. Some operations limit the time an owner can occupy the unit.

They are a sucker's game.

I realize I did one only a year ago. Lender approved it for loan, all disclosed about teh short term rental and management on site etc. A beach side area, small, cute building, furnished condo apartments for rent weekly/monthly, common area pool and gardens. An owner does not have to rent their unit, but if they choose to rent it, it is managed by the designated manager for building (typically). A few owners choose to live in them year round or live in them part time, then rent it out other months or make it avail to friends or family.

 

[J Grant]

The owner pays their condo monthly maintenance. IF management rents the unit, they typically charge a percent of the rent. How well it works out in income can depend. it could work out well for some owners if they are in a high demand area.