Condo Project With More Than 25% Commercial Space

[Tumbuktu]

Are there any special comments (or things not to do) needed on the part of 'Appraiser', if condominium project has more than 25% commercial space. This is regarding a refinance assignment of one such condominium.
Guidance and feedback would be appreciated.

Below is the relevant excerpt from Fannie Mae Selling Guide.

B 4-2.1-02, Ineligible Projects (11/03/2015)
Fannie Mae will not purchase or securitize mortgage loans that are secured by units in certain condo or co-op projects if those projects have characteristics that make the project ineligible ..........
If a lender determines that a project does not meet all of Fannie Mae’s project eligibility requirements but believes that the project has merit and warrants additional consideration, the lender may request an exception Ineligible ...

... Project Characteristics
The total space that is used for nonresidential or commercial purposes may not exceed 25% ....

[Pages 697 - 700; Fannie Mae Selling Guide- January 31, 2017]

 

[J Grant]

Are there any special comments (or things not to do) needed on the part of 'Appraiser', if condominium project has more than 25% commercial space. This is regarding a refinance assignment of one such condominium.
Guidance and feedback would be appreciated.

Below is the relevant excerpt from Fannie Mae Selling Guide.

B 4-2.1-02, Ineligible Projects (11/03/2015)
Fannie Mae will not purchase or securitize mortgage loans that are secured by units in certain condo or co-op projects if those projects have characteristics that make the project ineligible ..........
If a lender determines that a project does not meet all of Fannie Mae’s project eligibility requirements but believes that the project has merit and warrants additional consideration, the lender may request an exception Ineligible ...

... Project Characteristics
The total space that is used for nonresidential or commercial purposes may not exceed 25% ....

[Pages 697 - 700; Fannie Mae Selling Guide- January 31, 2017]

The only thing you can do is call and alert your client.. On the appraisal itself, it is what it is...over 25% commercial units. Whether Fannie or other entity would accept or decline is out of your hands, that is a lender issue for them to deal with.

I would describe what the commercial space consists of ( stores or office space etc), and then comment on its impact on marketability. The condo management or HOA would hopefully be able to tell you who owns the commercial units, are they part of the condo or separate, do they pay any HOA dues into condo etc.....I've never dealt with a residential condo with that high a percent of commercial space....the ones I have done topped out at 5% commercial space,

 

[Tumbuktu]

What is the best way to alert the lender or should I even alert the lender. Of course I cannot write such a thing [above quoted excerpt from Fannie Mae Selling Guide] in the report. This is my dilemma. I will appreciate guidance on it.

My job was to prepare the report, which I have done and submitted to the client. I have also clearly pointed out the Residential/Commercial Ratio of the project in the report. I am just trying to figure out my limits as an appraiser in such a situation.

The residential condos in the project are primarily for 'Recreational Use' or 'Second Home', as all of them have a rear view of 'Texas Motor Speedway'. [Photograph Attached]

 

[Tim The Enchanter]

I would e mail or call and tell them what an odd duck they have.
I guess if you like NASCAR it would be cool.

 

[JTip]

Spoiled 'mericans want their Nascar condo and the tax write off too.

Sell the $75k big-dik diesel four-door truck and the wife's quiver of pink AR-15s and buy it with cash.

Pretty cool though. I wouldn't mind a weekend in one to check off the bucket list.....

 

[Howard Klahr]

Are there any special comments (or things not to do) needed on the part of 'Appraiser', if condominium project has more than 25% commercial space.

Your only obligation is disclosure, not to be misleading and to address marketability.

The residential condos in the project are primarily for 'Recreational Use' or 'Second Home', as all of them have a rear view of 'Texas Motor Speedway'.

It is not likely eligible for Fannie/Freddie but that it not your concern

The issue here is one of comparables. Clearly, the units within this type of project create their own market and pricing will be tied to the venue. Although called residential units, they really function more like a private viewing box for sporting events. You may want to look at other venues that offer similar residential condo components.

Hope you got the appropriate fee for this assignment and good luck.

 

[Tim The Enchanter]

You may want to look at other venues that offer similar residential condo components.

If such a thing exists. I'd guess more likely all comps come from the subject project.

 

[gregb]

Have you verified that the commercial portion is part of the residential "project." They may be separate projects.

 

[JTip]

Have you verified that the commercial portion is part of the residential "project." They may be separate projects.

Good advice.

I bet they have a sales office with staff that would be eager to help you with verification. Maybe squeeze in a tour of the spec unit (get some balcony pics for us).

 

[Howard Klahr]

If such a thing exists.

http://www.mlive.com/lansing-news/index.ssf/2014/03/lansing_lugnuts_apartments_bas.html

http://urbanland.uli.org/planning-design/making-sports-oriented-mixed-use-work/

These were from a cursory google search and I know that there are college football stadiums with residential condos as part of the project.

more likely all comps come from the subject project.

Its not about specific comps for the appraisal but rather demonstrating marketability of concept.