Condo Appraisal Based On Plans

[Tdotap]

Hello fellow appraisers, I was hoping to get some help on this topic. I was assigned to appraise a condo unit in a building that's due to be finished next year, according to plans. It's located in a very dense and urbanized city so there are plenty of recent comparable condo sales in very close proximity. The issue is that the subject building has only had 2 sales in the past 2 year which yield very inconsistent sale price per square foot values, and each condo building nearby also appears to have a different sale price per square foot than the next. My suspicion is that this assignment is impossible. Any input would be greatly appreciated.

 

[Deleted member 77547]

Nothing is impossible to appraise. Condos vary widely based on quality, amenities and buyer expectations for that specific building. Higher floors, or tiers, often, but not always sell for more, particularly those with a view. Some have garages, while others may not. The price per square foot may not be the best measure of value because quality, features and amenities can vary widely. I recommend you contact a realtor that is familiar with the condo market and see if they might not have an idea of what buildings/developments might be best comparable from a buyers perspective.

 

[Tdotap]

Nothing is impossible to appraise. Condos vary widely based on quality, amenities and buyer expectations for that specific building. Higher floors, or tiers, often, but not always sell for more, particularly those with a view. Some have garages, while others may not. The price per square foot may not be the best measure of value because quality, features and amenities can vary widely. I recommend you contact a realtor that is familiar with the condo market and see if they might not have an idea of what buildings/developments might be best comparable from a buyers perspective.

After accounting for all differences between comparable buildings, sale prices remain inconsistent. How can you confirm your estimate of market value if there is no market data available from the subject building?

 

[Deleted member 130081]

After accounting for all differences between comparable buildings, sale prices remain inconsistent. How can you confirm your estimate of market value if there is no market data available from the subject building?

There is no such thing as confirm in appraisal. We support our opinion with facts. Appraisals supported with less and poor market data are weaker, while appraisals supported with more and good market data are stronger. You can appraise anything you want anytime you want with as little market data as next to nothing. The only thing you cant do is develop an opinion not based in facts (market data). The important thing is, and read this more than once, is you must explain to the client how weak or strong the appraisal is - that is key. That's why USPAP says we must reconcile the quantity and quality of data and reconcile the methods and techniques used. When you do that, you communicate the context of the appraisal to the client so they understand what they are getting and more importantly, they understand what they are not getting.

 

[Deleted member 130081]

Your mentor ought to be helping you with this.

 

[glenn walker]

No offense but your mentor knows better than this because unless I hated someone I would never give this assignment to anyone who had less than 10 plus years and even though I have been 30 years I would run and not walk because noboday is going to pay the fee .

 

[George Hatch]

I would say your first step is to try to figure out what the different projects nearby have been doing and what the reasons are for their respective price differences. Unlike asking a broker what they think of the subject project, asking them why these other projects sell at different pricing is information you can actually use in your analysis.

Rank the other projects for their dominant attributes, whether it's location, view, proximity to transportation or specific to the building quality and condition. Then figure out where the subject fits into that range and use sales from the projects that most closely bracket the subject and go from there. I'd even list the projects (including your subject) in a column by order of these various elements - you can make the subject stand out in the list by bolding it. Having done that you can now deal with the inside sales you do have to see which of them - if either of them - are a better indicator of the market value within the context of this market segment.

Your written explanations and analyses will be the thing in this assignment. You might consider writing a paragraph for each of the competing projects before getting into ranking them. Remember, you want to work in a logical order from macro to micro so that you're reader will be able to follow your reasoning.

 

[Tdotap]

No offense but your mentor knows better than this because unless I hated someone I would never give this assignment to anyone who had less than 10 plus years and even though I have been 30 years I would run and not walk because noboday is going to pay the fee .

This is a regular appraisal issues by an AVM for a standard fee. I can easily accept the purchase price in the agreement from 2012 which would satisfy the condition for financing but I just wanted to know what would have to be done in the case the lender returns the report with a request for a current market value. I just think it's imposibe to conclude a solid opinion of value when 0 market data support exists for the subject building.

 

[Tdotap]

I would say your first step is to try to figure out what the different projects nearby have been doing and what the reasons are for their respective price differences. Unlike asking a broker what they think of the subject project, asking them why these other projects sell at different pricing is information you can actually use in your analysis.

Rank the other projects for their dominant attributes, whether it's location, view, proximity to transportation or specific to the building quality and condition. Then figure out where the subject fits into that range and use sales from the projects that most closely bracket the subject and go from there. I'd even list the projects (including your subject) in a column by order of these various elements - you can make the subject stand out in the list by bolding it. Having done that you can now deal with the inside sales you do have to see which of them - if either of them - are a better indicator of the market value within the context of this market segment.

Your written explanations and analyses will be the thing in this assignment. You might consider writing a paragraph for each of the competing projects before getting into ranking them. Remember, you want to work in a logical order from macro to micro so that you're reader will be able to follow your reasoning.

The bank definitely does not pay for that scope of work. How would I go by accepting the original sale price from 2012? Any condos in the area sell for more at this point.

 

[George Hatch]

The bank definitely does not pay for that scope of work.

Please do us all a favor and refrain from saying that it's impossible to appraise this property and that there's zero data. Neither are true. The process I just described is not the only way to appraise the property, but it is one way. It will take another hour or so to perform.

If you don't want to do the work it would take to actually appraise the property then you are definitely not the right appraiser for this assignment and should return it to your client so they can assign it to someone who (hopefully) will put together a reasonable analysis. And no, citing the 2012 value as your sole support for the value 6 years later is not an answer, either; so stop asking us how to make that look good.

FYI, If I agree to an assignment then I do the work it takes to get through it regardless if I think the fee is sufficient. MANY appraisers do that.


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