Can A Condotel Be Completed On A 1073?

[Ken B]

A project with short term rental pool run by the HOA who hired management to provide housekeeping and rent the units would very likely be considered to be a condo-tel by the GSEs, resulting in a repurchase request if the loan defaulted or otherwise came to their attention through the QA process.

I have appraised the same property type on a larger scale. The property wasn't legally structured as a condo hotel, but short term rentals were permitted and participation in the rental pool was voluntary. If I remember correctly, it was the zoning designation that permitted the short term rentals. Except for that characteristic, it was a traditional condo ownership with extra services provided for units participating in the rental pool.

 

[Ken B]

A project with short term rental pool run by the HOA who hired management to provide housekeeping and rent the units would very likely be considered to be a condo-tel by the GSEs, resulting in a repurchase request if the loan defaulted or otherwise came to their attention through the QA process.

I have appraised the same property type on a larger scale. The property wasn't legally structured as a condo hotel, but short term rentals were permitted and participation in the rental pool was voluntary. If I remember correctly, it was the zoning designation that permitted the short term rentals. Except for that characteristic, it was a traditional condo ownership with you extra services provided for units participating in the rental pool.

Thinking about it more, it was a traditional condo conversion and the condo docs didn't originally permit short term leases, but that was changed after the original declaration.

 

[timd354]

I really don't care much about forms, I care about reports. I also don't care about lenders who are not paying attention as it is certainly not the appraiser's fault if the lender/intended user does not bother to read the report. I think that just about any form can be used to report an appraisal of just about anything with enough modifications and supplementation. Regarding the situation described by jgrant, I don't know whether or not that proejct is really a condo-tel (much more information would be required for me to make an intelligent conclusion), I just know that the GSE's would likely conclude it is an ineligble project based on the short term rental pool ran by the HOA

I have appraised the same property type on a larger scale. The property wasn't legally structured as a condo hotel, but short term rentals were permitted and participation in the rental pool was voluntary. If I remember correctly, it was the zoning designation that permitted the short term rentals. Except for that characteristic, it was a traditional condo ownership with you extra services provided for units participating in the rental pool.

Thinking about it more, it was a traditional condo conversion and the condo docs didn't originally permit short term leases, but that was changed after the original declaration.

There are quite a few projects that did not allow short term leasing when built, but after the bubble burst, they either changed the condo declarations or stopped enforcing the restriction on short term rentals and started operating in a condotel like manner with many, if not most, units included in short term rental pools, especially the units that the developer failed to sell before the bubble popped.

 

[J Grant]

Good explanation TMD . The scarier assignments imo are units in condos that used to be rentals, then turned condo, half the units sold, half never sold, a number of the buyers go into default, , current developer gets behind in HOA fees, a new developer comes in, buys the empty units and rents them out, a real nightmare to appraise. I did a few of those too..ugly. like a lender is going to approve a loan on a condo that is 70% rented and half developer owned units? NO. Which means l the units sell for cash which means mainly investor buyers who rent so it basically turns back into a rental...why those conversions were approved is beyond me. (oh I forgot greed. They should name them that...Greed Manor, Greed Lakes at the Cove, Greed Towers etc)

The condos with a short term rental pool, I disclosed it all so if a lender wanted to lend on it, their decision. One was an REO in any event so if they did not know what they had before, they know now.

 

[J Grant]

Well, the "best" one I appraised was all the above, (rental turned condo and the above ugly history), AND it turned out to have Chinese drywall! What fun THAT was!

 

[heritagegroup]

Just wanted to say thank you to everyone who replied. The unit definitely qualifies as a condo-tel (single unit being appraised). The lender is aware of this and they verified that they DO lend on condo-tels. I spoke with our state board's compliance coordinator and she stated that a 1073 is permitted and that a lowly licensee is allowed to appraise the unit, provided they possess competence (and quite a bit of confidence, to be honest . I've requested a host of documents from the HOA and hotel management. I'll determine whether I am capable of completing the assignment once I see what I get back from them. Thanks again for all the help/advice

 

[J Grant]

It's like any other assignment...if you have good data and sold comps it's smooth sailing, if not, not. Good luck!

 

[Howard Klahr]

It's like any other assignment...if you have good data and sold comps it's smooth sailing, if not, not. Good luck!

Bad advice ... and not true

 

[J Grant]

General appraisal observation, if you have good comps and data the assignment is easier. I cant' fathom how this is possibly bad advice or not true. Of course, a condotel is not exactly like any other assignment. I assume people have context for what they read and would not take that comment as a literal stand alone.

 

[Howard Klahr]

. Of course, a condotel is not exactly like any other assignment.

And only perpetuates the issue of one does not know what they don't know.