Condo Comps

[CANative]

In an appraisal of an attached condo unit are two outside (the development) sales always required?

 

[bnmappraisal]

Most of the time, in my experience, that boils down to the lender's requirements.

I do a decent amount of condo reports/yr in my market.

Perfect example - the 2 main a m c's I work with have multiple lenders (and I also work with many other a m c's and other clients). Certain lender's for said a m c's require "outside sales/listing/pending" for each report, others do not ... To be honest CAN, it's a game as to who requires what! Frustrating as all get out, but... Sadly, in my experience, it seems to be that way.

 

[Joe Flacco]

No not required. One outside project is required only when new or recently converted condo, subdivision, or PUD.

 

[J Grant]

I believe the requirement is one comp outside the subject condo building.

 

[Deleted member 77547]

It's usually a lender requirement. Otherwise, only if it is new construction with no resales where the developer established the price. In older developments where resales have taken place, not required.

Lenders generally require two outside sales of all condo developments regardless of age/resales. In older developments with plenty of resales, it never made sense to me because your best value indicator are units within the subject developments because market appeal, amenities, etc can vary widely between different developments.

 

[J Grant]

I don't have time to wade through the Fannie book to see if it is a requirement, I know that even on resale condo assignments, client always asks for one outside sale unless one was provided.

I can understand why...though often the best comps are in subject development, the MV definition references open market, and the open market is not comprised of only the subject development Typically buyers might look in several condos before choosing a unit. A seller also competes for buyers among area developments offering similar amenities.

 

[nstanbru]

I've always understood that F&F require 1 in, 1 out and the 3rd can either be in or out, for new construction. if your getting a 2 must be out request, it most likely is a lender specific ask.

 

[CigarDad]

The answer is depends. New development then yes 1 or 2 outside comparables. If existing then comparable sales from within the same neighborhood (including subdivision or project) as the
subject property should be used when possible.

Reference FNMA Selling Guide below.


B4-1.3-08, Comparable Sales
Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Requirements, Appraisal Report Assessment
December 15, 2015

Additional Requirements for New (or Recently Converted) Condos, Subdivisions, or PUDS
If the subject property is located in a new (or recently converted) condo, subdivision, or PUD,
then it must be compared to other properties in the neighborhood as well as to properties within
the subject subdivision or project. This comparison should help demonstrate market acceptance
of new developments and the properties within them. The appraiser must select one comparable
sale from the subject subdivision or project and one comparable sale from outside the subject
subdivision or project. The third comparable sale can be from inside or outside of the subject
subdivision or project, provided it is a good indicator of value for the subject property. Two of
the sales must be verifiable from reliable data sources, other than the builder. Sales or resales
from within the subject subdivision or project are preferable to sales from outside the subdivision
or project provided the developer or builder of the subject property is not involved in the
transactions.

To meet the requirement that the appraiser utilize one comparable sale from inside the subject
subdivision or project, the appraiser may need to rely solely on the builder of the property he or
she is appraising, as this data may not yet be available through typical data sources (for example,
public records or multiple listing services). In this scenario, it is acceptable for the appraiser to
verify the transaction of the comparable sale by viewing a copy of the settlement statement from
the builder’s file.

When providing builder sales from competing projects that are not presently available through
traditional data sources, the appraiser must verify the sale from the applicable settlement
statement and indicate on the appraisal report that the settlement statement was the document
utilized for verification. Additionally, the appraisal must include discussion and analysis of
sales concessions and upgrades for the subject property relative to concessions and upgrades
for each builder sale. (For special appraisal considerations regarding condo projects, see
B4-1.4-03, Condo Appraisal Requirements, and B4-2, Project Standards.)

Selection of Comparable Sales
The appraiser is responsible for determining which comparables are the best and most
appropriate for the assignment. Fannie Mae expects the appraiser to account for all factors that
affect value when completing the analysis. Comparable sales should have similar physical and
legal characteristics when compared to the subject property. These characteristics include, but
are not limited to, site, room count, gross living area, style, and condition. This does not mean
that the comparable must be identical to the subject property, but it should be competitive and
appeal to the same market participants that would also consider purchasing the subject property.

Comparables that are significantly different from the subject property may be acceptable;
however, the appraiser must describe the differences, consider these factors in the market value,
and provide an explanation justifying the use of the comparable(s).

Comparable sales from within the same neighborhood (including subdivision or project) as the
subject property should be used when possible. Sale activity from within the neighborhood is
the best indicator of value for properties in that neighborhood as sales prices of comparable
properties from the same location should reflect the same positive and negative location
characteristics.

Fannie Mae does allow for the use of comparable sales that are located in competing
neighborhoods, as these may simply be the best comparables available and the most appropriate
for the appraiser’s analysis. If this situation arises, the appraiser must not expand the
neighborhood boundaries just to encompass the comparables selected. The appraiser must
indicate the comparables are from a competing neighborhood and address any differences
that exist. The appraiser must also provide an explanation as to why he or she used the
specific comparable sales in the appraisal report and include a discussion of how a competing
neighborhood is comparable to the subject neighborhood.

 

[Tom D]

i do a lot of new & older townhouse condos in which case there usually aren't any comps in the project. my normal larger project experience has been to have 1 outside as the rule, be it a listing or sale. i have used a secondary, older, #4-6 comp in the project if it helps. better than going out again for the photo.

 

[Deleted member 128537]

I do lots of condos. If I have 3 comps from within the same complex I will use them to the exclusion of others. Then I don't include other comparable sales from other complexes. I just believe that is a better indication of market value. I never get a push back on this. Sometimes I will have a lender specifically want one from outside the complex. That's fine, but I still include the 3 comps from within the same complex and give little or no weight to the one outside.

I really hate it when I do not have a comparable from within the same complex. I will even go back and pick up old sales to include.

Then there area certain condo developments in my area that are so exclusive in my market that using a condo outside of that complex is just ludicrous. Then I will just use older sales and explain.