"Hypothetically" that the development is a success or that it is ever completed? What? Where is the "data pool" to derive something other than "air"? 40 miles away and by your own description not comparable? Three states away and maybe THEN you have something you can analyze. Tear apart the economic/locational differences (which should take about 6 months) and start making adjustments. Using 1/2 of a duplex (different markets consider "duplexes" different things so I'm not even going to try and touch that one). Basing it soley on the income approach? THAT is a possibility but no "mortgage company" or "broker" (I use those terms loosely) is going to touch it. If you attempt it, I wouldn't consider the fact that you came up with a number being an "expert witness". Send in twenty appraisers, you'd probably have twenty different "numbers". If it were "fee simple absolute" ownership instead of condo rights (of which by your own admission you have more "air" concerning common elements, etc.) in MAY be somewhat feasible in MY opinion to complete a reasonable analysis, BUT, since it isn't, I stick by my first advice. RUN.
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COMPLEX question: Extraordinary assumption???
- Thread starter Farm Gal
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Pamela Crowley (Florida)
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OK Lee Ann, If you still insist on doing this, and I do understand loving the challenges, order the book from the Appraisal Institute titled "Appraising the Tough Ones". I'd offer to go through it for you but, a trainee last year stole mine and I still need to order another one myself. It's an excellent reference!
Next, consider doing this as a consulting assignment instead of an appraisal assignment. This way you can put in an "estimated potential sale price range" and get out from under a lot of liability. It still gives you all the challenge you could possibly want and you get to write it all up using your research and opinions. Narrative. Read USPAP regarding 'Consulting". I did one a few years ago that went to court. Was very interesting and financially rewarding. Would have been a lot easier on me had I found this forum first though.
I'll help any way I can. Keep us informed!
Next, consider doing this as a consulting assignment instead of an appraisal assignment. This way you can put in an "estimated potential sale price range" and get out from under a lot of liability. It still gives you all the challenge you could possibly want and you get to write it all up using your research and opinions. Narrative. Read USPAP regarding 'Consulting". I did one a few years ago that went to court. Was very interesting and financially rewarding. Would have been a lot easier on me had I found this forum first though.
I'll help any way I can. Keep us informed!
Farm Gal
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Pam:
Have copy can travel but hadn't considered doing as a consulting assignment... instead of appraisal, now THAT is the sort of feedback I find valuable...
I am still looking for POSITIVE feedback on how to properly attend to the variables, rather than personal attacks on my competency.
Ray: because the developer DOES stand to lose face (has family in the area) and cash if he does not do something to complete the complex, he just might finish it... but NOT in the manner he started. He had a great idea, but the wrong timeing and location... I am honestly more concerned about him going under on other cash flow issues, or keeling over in general, than just walking cause his intial plan didn't work.
I am somewhat sympathetic to his marketing problem, in that I built some remarkably similar free standing homes in a similar small town located some 40 miles east of his attempt. We had less resistance but again they were fee simple ownership of individual homes. Problem was that despite folks buying single car existing homes all day long there is SUBSTANTIAL resistance to new construction in those areas with one stall garages. Our attempt was a few years earlier and on resale the homes appear to do fine :roll:
The condo structure is something of a concern, but I have certainly seen such arrangements (granted in other markets) converted to 'other ownership' particularly when the building style is side by side not stacked.
How to measure buyer reaction in this market? ummmm. I personally think George's bottom of the adjusted scale and EO, along with a very clear scope is about as good as it can get on this one.
The simple fact is that SOME folks will ALWAYS purchase new or near new housing at some point despite a room full of lawyers telling them it is a bad idea, IF it is cheaper than rent. Were that not the case the manufactured/modular home market would have collapsed long ago!
Not sure that is the case here, but so it goes.
Have copy can travel but hadn't considered doing as a consulting assignment... instead of appraisal, now THAT is the sort of feedback I find valuable...
I am still looking for POSITIVE feedback on how to properly attend to the variables, rather than personal attacks on my competency.
Ray: because the developer DOES stand to lose face (has family in the area) and cash if he does not do something to complete the complex, he just might finish it... but NOT in the manner he started. He had a great idea, but the wrong timeing and location... I am honestly more concerned about him going under on other cash flow issues, or keeling over in general, than just walking cause his intial plan didn't work.
I am somewhat sympathetic to his marketing problem, in that I built some remarkably similar free standing homes in a similar small town located some 40 miles east of his attempt. We had less resistance but again they were fee simple ownership of individual homes. Problem was that despite folks buying single car existing homes all day long there is SUBSTANTIAL resistance to new construction in those areas with one stall garages. Our attempt was a few years earlier and on resale the homes appear to do fine :roll:
The condo structure is something of a concern, but I have certainly seen such arrangements (granted in other markets) converted to 'other ownership' particularly when the building style is side by side not stacked.
How to measure buyer reaction in this market? ummmm. I personally think George's bottom of the adjusted scale and EO, along with a very clear scope is about as good as it can get on this one.
The simple fact is that SOME folks will ALWAYS purchase new or near new housing at some point despite a room full of lawyers telling them it is a bad idea, IF it is cheaper than rent. Were that not the case the manufactured/modular home market would have collapsed long ago!
Not sure that is the case here, but so it goes.
Someone asks a question but evidently they do not give a clue as to what they are really trying to do. So, what it seems is that you are trying "to help the builder out" OK. If you stated that in your first post, a lot more would be understood. Last builder I worked for (years ago) was indicted for 8.4M in bank fraud. He is STILL trying to "save face". Of course HE didn't go to jail, someone else did.
George Hatch
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Ray,
With all due respect, how about cutting Lee Ann some slack? This is not an ordinary situation and asking for extra input is a smart thing to do in general in a case like this. I do it all the time. Asking the question isn't dumb; what's dumb is running out to do it without really knowing how.
Sometimes just soliciting feedback is helpful. 9 times out of 10, you end up doing what you were originally going to do anyway. I'm sure that will be the case here. What's the point of hanging around a professional forum like this, if not for the occasional question asked or answered that we might not otherwise see? I dunno about you, but I wasn't born knowing everything I needed for this line of work. I don't expect that most people were.
George Hatch
With all due respect, how about cutting Lee Ann some slack? This is not an ordinary situation and asking for extra input is a smart thing to do in general in a case like this. I do it all the time. Asking the question isn't dumb; what's dumb is running out to do it without really knowing how.
Sometimes just soliciting feedback is helpful. 9 times out of 10, you end up doing what you were originally going to do anyway. I'm sure that will be the case here. What's the point of hanging around a professional forum like this, if not for the occasional question asked or answered that we might not otherwise see? I dunno about you, but I wasn't born knowing everything I needed for this line of work. I don't expect that most people were.
George Hatch
Chris Harrison
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- Utah
Lee Ann,
I admire your moxie! It appears from your detailed explanations and your analysis of the situation, that you have a good grasp of the problem. It’s what real appraisal is all about! The challenge of doing a complex residential appraisal always gives me a good feeling, even if you can’t make much of a living doing them. I think your right about using extraordinary assumptions and being very clear about the scope of you analysis of the limited data available. While I agree in most cases that a single family home, duplex, twin home and condominium all have their own individual market, they all compete for the economic base of the area. The smaller the base the more likely the principle of substitution will have on being able to use them as comparable’s.
The problem of not being a completed project is something that will require a carefully analysis of the known three sold properties. You still have property that is complete and your not looking at future value or potential value. Focus on what you have and use your assumptions to CYA.
You've already established your market exposure time for this type of property. Compare that with other properties in the area over the last 2 years. It may give you enough information to base an opinion of just how over priced the units were. Remember that the crystal ball is not a good indicator of value. You can only use the data that is present and it is location, location, location. Using all the data in this small community to base your opinion on is the best method. Comparable properties that are in the same area is always better, even if they are not within the 1 year guideline. Because you are not doing this for a lender, you can use your good judgement to support some of your conclusions.
Good Luck!
Chris
I admire your moxie! It appears from your detailed explanations and your analysis of the situation, that you have a good grasp of the problem. It’s what real appraisal is all about! The challenge of doing a complex residential appraisal always gives me a good feeling, even if you can’t make much of a living doing them. I think your right about using extraordinary assumptions and being very clear about the scope of you analysis of the limited data available. While I agree in most cases that a single family home, duplex, twin home and condominium all have their own individual market, they all compete for the economic base of the area. The smaller the base the more likely the principle of substitution will have on being able to use them as comparable’s.
The problem of not being a completed project is something that will require a carefully analysis of the known three sold properties. You still have property that is complete and your not looking at future value or potential value. Focus on what you have and use your assumptions to CYA.
You've already established your market exposure time for this type of property. Compare that with other properties in the area over the last 2 years. It may give you enough information to base an opinion of just how over priced the units were. Remember that the crystal ball is not a good indicator of value. You can only use the data that is present and it is location, location, location. Using all the data in this small community to base your opinion on is the best method. Comparable properties that are in the same area is always better, even if they are not within the 1 year guideline. Because you are not doing this for a lender, you can use your good judgement to support some of your conclusions.
Good Luck!
Chris
it was just that the way the "question" was originally posed was not all that clear. Since everyone has an opinion I am certainly entitled to mine. Problem is this is obviously a condominum WITHOUT all the common elements in place. THAT factor has a LOT of influence on marketability AND liability. Someone stated that the marketing time has already "been established". With what? One pending sale to a tenant, one that the appraiser admits that no information can be obtained about and one, admittedly, not an arms-length transaction. If this is for permanent financing, I don't know of anyone, other than an extremely high interest, high risk loan shark that would take the loan without the appraisal being created from thin air. No more. I'll keep my mouth shut.
Farm Gal
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RAY: GO AWAY....
When I make a post here it is because I feel a need for other opinions, preferably in a honest and supportive atmosphere.
If you choose to be highly negative so be it... (perhaps you should eat more prunes?) which is as close as I am willing to come to telling you that you are, in my opinion full of _ _ _ _!!!
Despite the fact that in THIS instance I probably won't be using Pam's suggestion, it may jog my memory on some other occasion and at least is offered in a postive format. You will note I did NOT flame her but rather thanked her for that input...
Perhaps you are so great that you can subsit in a professional vacuum secure in your knowlege that every thing you do is right and you appear terribly self-rightous...
I come here to learn and share my knowlege in a positive a manner as possible. I honestly believe it is possible to give a value opinion on nearly any property: the correct answer to some appraisal problems might well be an honest I DON'T KNOW, BUT HERES MY BEST GUESS, complete with as adequate support and rationale for that response as possible...
Open market, willing buyer, willing seller is the question. Both are in this case provided, value is the solution for which I am trying to solve. There are many approaches WITHIN THE MAIN THREE, I intend to select some, describe my efforts and do the work.
You don't want to do that? FINE. Leave the hard work for those of us willing to do it.
In the interum please take your astoundingly nasty attitude some where else. :evil:
When I make a post here it is because I feel a need for other opinions, preferably in a honest and supportive atmosphere.
If you choose to be highly negative so be it... (perhaps you should eat more prunes?) which is as close as I am willing to come to telling you that you are, in my opinion full of _ _ _ _!!!
Despite the fact that in THIS instance I probably won't be using Pam's suggestion, it may jog my memory on some other occasion and at least is offered in a postive format. You will note I did NOT flame her but rather thanked her for that input...
Perhaps you are so great that you can subsit in a professional vacuum secure in your knowlege that every thing you do is right and you appear terribly self-rightous...
I come here to learn and share my knowlege in a positive a manner as possible. I honestly believe it is possible to give a value opinion on nearly any property: the correct answer to some appraisal problems might well be an honest I DON'T KNOW, BUT HERES MY BEST GUESS, complete with as adequate support and rationale for that response as possible...
Open market, willing buyer, willing seller is the question. Both are in this case provided, value is the solution for which I am trying to solve. There are many approaches WITHIN THE MAIN THREE, I intend to select some, describe my efforts and do the work.
You don't want to do that? FINE. Leave the hard work for those of us willing to do it.
In the interum please take your astoundingly nasty attitude some where else. :evil:
You asked a question about how to appraise a condominium unit (assumed - the one unit under contract, not for a construction loan for completion of the job). The fact that it is a condominium is what makes it VERY difficult, if not impossible to provide a reasonable indication of "market value". I gave what I believe to be an appropriate answer. If it is being done for a lender, I do not know of any way, shape or form that an appraisal could be done that a lender would touch. Without, by your own admission, any viable sales data, being "creative" in analysis most "legitimate" lenders I know of would not even consider funding such a deal. The income approach MAY be the only possibility of making somewhat of a "stab" at a number, however since there are "intangible" factors involved (such as operating costs, common elements, reserves, etc., even the income approach appears "weak". Now, as far as being "negative", I am the farthest thing from it in reality. I play the role of "devil's advocate" for the purpose of TRYING to make one think before they leap. I basically have (as long as I have been in real estate and even before) went WAY above and beyond all boundaries in helping people that need assistance (WAY, WAY, WAY ABOVE) without ever requesting any type of remuneration (either cash payment, referrals, work, whatever). People tend to "keep in the databanks" their personal experiences and when they draw on their analytical powers, those experiences tend to "shade" their response but should not be taken in the wrong way. As far as being "right" all the time, that is another thing that is so far off base but I won't even go into it. I TRY and give what I BELIEVE to be the most direct answer I can. If I had a dime for each time I made a mistake, I'd have almost a dollar by now (oh, decimal point in the wrong place, make that a thousand dollars). Case in point about trying to be helpful, way back there was a post about
2055 exteriors and different attachments appraisers used to CYA. I faxed you a couple of the attachments I used as per YOUR request. "NOT A" as far as saying thanks or thanks but no thanks whatever. In this case, I might have been wrong, but I ASSUMED that you were performing an appraisal on the individual unit for mortgage financing purposes. Maybe that assumption was wrong. As far as "prunes" go, I do not require them at this time, but thank you for being concerned about my digestive processes.
2055 exteriors and different attachments appraisers used to CYA. I faxed you a couple of the attachments I used as per YOUR request. "NOT A" as far as saying thanks or thanks but no thanks whatever. In this case, I might have been wrong, but I ASSUMED that you were performing an appraisal on the individual unit for mortgage financing purposes. Maybe that assumption was wrong. As far as "prunes" go, I do not require them at this time, but thank you for being concerned about my digestive processes.
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