Condo Budget Analysis

[DTB]

So the pre-development appraisal of the same project is just as inaccurate or irrelevant? It would seem that all large scale development assignments must not be able to be properly performed. How do lender's manage to complete transactions. It seems that the income portion of everyones appraisal training is just woefully inadequate. All those appraisers out there that can perform a simple analysis of a financial statement.

1) The thread is about a single condominium unit not about appraisal the entire development, pre or post construction/conversion.

B) Your simple financial analysis is just that, simple/cursory. If it isn't in depth and spread out over several days/property visits, it is "woefully inadequate". Sure you got all the engineering reports done on the building(s)? Might be bad to miss one. Or does that get scoped away?

3) Still waiting to view some of the mundane, simple analysis that the heavy hitters are spoutin' about. :Eyecrazy:

Lotta CGs, designated members, USPAP gurus breakin' bad lately. Times must be tough.

 

[timd354]

One deos not need to attend Condo/HOA meetings to learn about what occurred. Records about all activities are available through the association.



The form also has a check box to indicate whether the appraiser performed research on the sale history of the subject and comparables. That does not eliminate the requirement to perform such analysis.

That is beacuse such analysis is required by USPAP and I am sure that the lender/client and/or Fannie Mae would come back on any appraisal that did that. However, you cannot cite any USPAP requirement or any requirement in the Fannie Mae guidelines requiring that the appraiser analyze the Condo ***'n/HOA budget in the appraisal of an individual condominium unit. If I am incorrect, then I am sure that you can refer me to the specific requirement in either USPAP or the Fannie Mae guidelines.

You really ought to try to provide some actual proof of your assertions, which to me appear just to be incorrect. AllRegs provides a nice search function for the Fannie Mae guidelines on the efanniemae website to help you seach for what does not exist.

 

[Howard Klahr]

Mike,

Especially in today’s environment when a property is located in a shared/common project the impact on the individual unit is directly impacted by the operation of the overall project. With the high level of foreclosures and defaults, non-payment of association fees, litigation, insufficient reserves, inability to lease, etc all influence the value of the individual unit.

All of the necessary information to perform a proper analysis is readily available. If you choose to not perform this basic inquiry that is your choice. To argue that it is outside the scope of work is just ridiculous.

 

[timd354]

Unlike your unsupported assertions, here is more actual support for my assertion that such an analysis is not part of the required SOW in a typical fannie appraisal for a single condominium unit. This is a copy of the Fannie Guidlines for Condominium Project Approval (red highlights added by myself):

XII, 203.08: Requests for Project Review (05/20/05)
The lender may request review of an established project by sending certain documents to the applicable Fannie Mae project standards office. Before submitting this request, the lender may contact the project standards office to discuss the project. This will not only help us to understand the nature of the project, but also will help the lender put together a complete application package.
The key document in requests for project review of established project is the Application for Acceptance of Established Project (Form 1091). This form is designed to provide an organized presentation on the entire project as well as on the individual units. An underwriter who is experienced in evaluating projects should supervise the completion of this form. The following information is covered in detail by the form:
•A description of the project;
•A project analysis and an appraisal for a representative unit in the project; and
•An analysis of the project’s operating budget, including annual income and expenses.


Tell me Howard, if Fannie believes that an analysis of the project's budget is part of the SOW for a single unit appraisal, then why does Fannie Mae require an appraisal of a single unit and a separate analysis of the budget in order to approve a project?

 

[Howard Klahr]

That is beacuse such analysis is required by USPAP and I am sure that the lender/client and/or Fannie Mae would come back on any appraisal that did that. However, you cannot cite any USPAP requirement or any requirement in the Fannie Mae guidelines requiring that the appraiser analyze the Condo ***'n/HOA budget in the appraisal of an individual condominium unit. If I am incorrect, then I am sure that you can refer me to the specific requirement in either USPAP or the Fannie Mae guidelines.
You really ought to try to provide some actual proof of your assertions, which to me appear just to be incorrect. AllRegs provides a nice search function for the Fannie Mae guidelines on the efanniemae website to help you seach for what does not exist.

You're right I really ought to try that sometime:

Fannie Mae Single Family 2007 Selling Guide
Part XI: Property and Appraisal Guidelines
XI, Chapter 3: Special Appraisal Considerations (06/30/02)
XI, 301: Units in Condominium Projects (11/01/05)

A condominium project is one in which individual owners hold title to units in the project along with an undivided interest in the real estate that is designated as the common area for the project.

The appraisal of an individual unit in a condominium project requires the appraiser to analyze the condominium project as well as the individual unit. The appraiser must pay special attention to the location of the individual unit within the project, the project’s amenities, and the amount and purpose of the owners’ association assessment since the marketability and value of the individual units in a project depend on the marketability and appeal of the project itself.

XI, 302: Units in PUD Projects (11/01/05)

A planned unit development is a project or subdivision that consists of common property and improvements that are owned and maintained by an owners’ association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners’ association must require automatic, nonseverable membership for each individual unit owner, and provide for mandatory assessments. Zoning should not be the basis for classifying a project as a PUD.

The appraisal of an individual unit in a PUD requires the appraiser to analyze the PUD project as well as the individual unit. The appraiser must pay special attention to the location of the individual unit within the project, the project’s amenities, and the amount and purpose of the owners’ association assessment since the marketability and value of the individual units in a project generally depend on the marketability and appeal of the project itself.

 

[timd354]

Mike,

Especially in today’s environment when a property is located in a shared/common project the impact on the individual unit is directly impacted by the operation of the overall project. With the high level of foreclosures and defaults, non-payment of association fees, litigation, insufficient reserves, inability to lease, etc all influence the value of the individual unit.
Assuming that you have a sufficient number of recent comparable sales from within the project, the effect on value of an individual unit will be accurately reflected in the sales comparison approach.

All of the necessary information to perform a proper analysis is readily available.
No its not, some associations are willing to provide that information to an appraiser, some are not. Some other will only provide the information upon the payment of a substantial fee, which the lender/clients are generally not willing to pay.

If you choose to not perform this basis inquiry that is your choice. To argue that it is outside the scope of work is just ridiculous.

If it is not outside of the SOW, then how come out of all of the appraisers posting on this thread, not one has stated that a lender/client has ever required this analysis?

 

[DTB]

Mike,

Especially in today’s environment when a property is located in a shared/common project the impact on the individual unit is directly impacted by the operation of the overall project. With the high level of foreclosures and defaults, non-payment of association fees, litigation, insufficient reserves, inability to lease, etc all influence the value of the individual unit.

.

Certainly those factors are manifest by the comparables (sold,pending, active and expired) within the develoment.

And your point was...

I didn't need a budget analysis to recently appraise a unit with multiple first payment defaults, 70% investor ownership and a 1.5M special assessment to value a single unit. All my comps had the same influences, no? And yes the values are tanking!

Still waiting for someone to show us the analysis being done. :mellow:

 

[TJSum]

With the vast majority of condo appraisals, most if not all of the comp data will be taken from the project itself, that is where the marketability is proven.

HK, so when you conduct this analysis, how many condo meetings minutes do you consider adequate if you do not attend the meetings? Do you read through just the minutes of the last meeting, the last several, the past year, etc?



Sorry for the repeat, I am a slow typer... Good catch TimD "information is readily available"...

 

[timd354]

You're right I really ought to try that sometime:

Fannie Mae Single Family 2007 Selling Guide
Part XI: Property and Appraisal Guidelines
XI, Chapter 3: Special Appraisal Considerations (06/30/02)
XI, 301: Units in Condominium Projects (11/01/05)

A condominium project is one in which individual owners hold title to units in the project along with an undivided interest in the real estate that is designated as the common area for the project.

The appraisal of an individual unit in a condominium project requires the appraiser to analyze the condominium project as well as the individual unit. The appraiser must pay special attention to the location of the individual unit within the project, the project’s amenities, and the amount and purpose of the owners’ association assessment since the marketability and value of the individual units in a project depend on the marketability and appeal of the project itself.

Howard, where exactly does this say that the appraiser is required to analyze the project's overall budget? I don't see it. It says that an appraiser must "pay special attention" to......."the amount and purpose of the owners' association assesment."

The amount is easy....it is $zzz per month. The purpose is usually pretty easy too, sometimes it pays for the utilities and heat of the individual units, sometimes not, it always pays for the operating expenses and reserve funds for the project. Sometimes there are special assesments, sometimes not, etc, etc. Still, there is no requirement for the appriaser to provide an analysis of the project budget in the appraisal report.

Nice try though

 

[Howard Klahr]

You're right... the question on the form was placed there just to fill up space.

In regard to the information being readilly available, the law in all 50 states requires all association documents be available to the property owner. There is no fee for this access. But one would have to actually ask to receive.