Co-op Appraisals

[Tim Juska]

For the first time in over 12 years, I have an assignement to appraise my first townhome under a co-operative ownership.

I am not as familiar with co-ops but don't know if there are any special items to consider. I requested a copy of the co-op by laws to read and help out but have not recieved them yet.

Based on conversation with the borrower, Co-ops seem similar to a condiminium ownership but slightly different.

Any tips on appraising co-op properties? I did a pre-search. Co-ops are not uncommon for this area of Chicago (Hyde Park) and there seems to be enough co-op comps to utilize but want to know if there are any special items to look for.

Thanks

 

[Rick Kulman]

Tim

Co-ops and condominiums are NOT the same.

As a starter see the topic in this forum satarted June 19, 2004... Appraising a co-op by Janet Olson

I've attempted to provide a link to it

http://appraisersforum.com/forum/index.php?showtopic=17862

Rick

 

[aprazer]

See if the owner has a copy of the prospectus or offering plan. It is typically an over sized soft cover report which details the project. This is more important than the by-laws-which should be included in the book anyway. Read the co-op form and make note of the areas not covered on the condo form so you can see what info you will need to obtain. Make sure you get the name and number of the managing agent for the co-op.

Co-ops are not listed as real estate sales and typically the agent is the only source of sales within the project. There should be sales on MLS as well, but there are always sales that are private and there is no public record of the transfers. It is also crucial that you use sales from the subject building-all 3 if possible. The underlying mortgage on the complex is paid for on a pro rata share per owner depending on how many shares in the co-op corporation they own. This can have a significant affect on the value of the units and each co-op development has a different underlying mortgage which is why it is important to use sales from the subject project. You will need info on the mortgage which is also only obtainable from the managing agent. Many software programs have the project info sheet which you can submit to the agent. Be prepared-it has become common for them to charge a fee to provide this info. Usually $50 or less.

 

[Travis McGee]

Disclose all over the place that it is a coop not a condo ( even though I write it on a condo form. co ops can be listed on MLS and can be a matter of public record, but they are in actuality shares of stock, with a leashold on the apartment. So in the fee simple part, I write Leasehold.

The shares of stock are in the building, with the value in the leasehold to the apartment or unit- for all intensive purposes they "live" like a condo, but the co-op form gives the owners more control- they can impose any rules they want , plus there may be an underlying mortgage on the building/land, which each shareholder pays a percent of as part of maintencance.

Compare to other co-op units and you should be okay

 

[Jim Onderisin]

I've done some (but not many) co-op units in Chicago, one of them down near you in the South Shore area, the others up in the North Shore and Lincoln Park area. We don't have the same availability of comparable sales that they do in a place like New York City, where co-op buildings are more common. But, since the value of the property is the value of the underlying shares in the co-operative, it is important to compare the property to other units in the same building. If you don't have sales in the building, then compare to co-op units in other buildings, but try to get the most similarities not only between the physical characteristics of the property, but also of the quality and reputations of the co-operatives. That's about all I know.

 

[Claude From NY]

What aprazer said about the underlying mortgage(s) of the cooperative is key. You may have the same size unit on the same floor in a cooperative building directly across the street from your subject but the difference in monthly maintenance charges could be significant (hundreds of $) because the underlying.

You would also want to take in to consideration the amenities and facilities of competitive coop buildings vs. your subject. For example pool, health club, laundry facilities, storage, concierge and parking availability. In many NYC area buildings, floor location and view also come in to major play.