Condo VS Townhomes

[J Grant]

Yes, I've also made zero adjustments for TH vs condos, but again, the price points and amenities should be similar. The comps and data reveal adjustments of lack of adjsutments.

Comparing rents of TH to condo is one method, but of less application when it is for owner occupant use...plus one has to look at impact of maint fees and return of rent, ease of renting, restrctions, etc.

Some condos have strict rental plicies, others lenient. Townhomes are typcially easier to rent, but in heavily owner occupied properties, the rental amount is less relevant. Do the obviuos and look at sale prices.

 

[GonzoBlue]

In this case, there are only 10 units in subject's development. Only 2 are rented. I do not know anything about the leases as of yet, and can not get the home owner who runs the HOA to call back. Even if the leases were newer, I am concerned that only 2 are a questionable sample, yet are a sample. Better than nothing!

 

[GonzoBlue]

I think I've been given an unreasonable request in attempting to compare subject, with all of it's issues, with town homes of the areas. The agents supplying their very superior and newer, superior designed TH comps here to push an unreasonable value should not have made it's way down to me as a valid request. Every one here gave me a lot of help in ideas and ways to approach it. I'll attempt to find a similar conditioned TH of 3 beds, but think I did not miss much there. At first, in not knowing which were TH and which were condo's, similar anything from the entire market was not found. Both agents state there are NO similar property, and that I do agree with. I will look again and strengthen my comments toward this in the report. Again, thank you to all for your help.

 

[Terrel L. Shields]

I'm finding this to be a violation of a few select USPAP guidelines.

I don't see that as an issue if you disclose everything...

When faced with an appraisal problem, many appraisers pull out their books and spend hours trying to interpret vague standards. I prefer to spend the afternoon visiting local open houses, talking to agents, buyers, and sellers

I prefer open bars to open houses...nothing like a good stiff drink to clear the cobwebs between the ears...

My experience with townhouses and condos was mostly in a retirement village and in the "condo" (that's actually a townhouse) where my helper lives. I never felt the "land" issue amounted to much as it was not possible to separate the land value from the contribution of the amenities (pool, golfing, private club, etc.) When I worked for the developments engineering office we never really thought of them as radically different and they were pretty much thought to be worth the same at that time (1970s) Nothing in my appraisal career suggests otherwise although I don't work that area often.

 

[Mike Kennedy]

There's nothing misleading if the report (a) discloses the differences between the subject and a comparable property, and (b) correctly analyzes the differences so results are credible.

If the market doesn't have any reaction for the differences and buyers choose them equally, why are they not substitutes (or, if there are no other alternatives, why are they not the best substitutes)?

I own a 1,500sf townhouse, which is located in a PUD development (so this is an SFR). It is on a site of 1,000sf; that site area includes a 100sf patio and my front yard, which is only 5-feet from the sidewalk (which may exist on my lot as well). I also have a 2-car garage on my site.
My dues are $150/month, and include roof and exterior maintenance and common insurance + HOA amenities. The HOA project has common areas (no pools/etc.).

I own a 1,500sf townhouse, which is located in a Condo project. My ownership rights include the interior of the unit, exclusive rights to the 100sf rear yard patio, and there is a built-in garage which is also exclusively mine. My unit is set-back about 5-feet from the sidewalk.
My dues are $175/month, and include exterior maintenance, insurance, and my association dues for the amenities (no pools/etc.).

Other than the ownership-type, there are no significant differences between the units or the projects.

Questions:
Is it possible these two different properties might compete for the same buyer?
If so, would they be comparables suitable for analysis in an appraisal?

I'd answer yes to both.

If the subject was a condo, and other recent condo sales were available, should the appraiser only use the condos?
Sure, why not. But if the appraiser thought about it, and decided to mention in the report that the subject also competes with townhouse-style homes in PUDs, wouldn't that be a good idea (assuming it is true)?

If the subject was a condo, and no other recent condo sales were available, should the appraiser reject the SFR townhouse properties as comparables because of the difference in ownership?
No; I certainly wouldn't. If they are substitutes, I'd use them. What is my alternative: to use dissimilar condos or go back in time? Why not use what's available, presuming they are substitutes for the subject (which is what the typical buyer would do)?
(edit to add: I'd use the current SFRs and older condos; if my analysis is correct, the value indicators should be consistent and point to a credible value).

Excellent post.

 

[Don Clark]

I am in need of aid in dealing with approach to a sticky situation. I would like to know what other appraisers would in this situation. My subject is an atypical condo in that the project only has 10 units. The GLA of the units are all 1,425 and all are 3 beds and 2.1 baths. 90% of the condo projects in the city are in larger developments and offer much smaller GLA. 98% are smaller, up to 1,200sf and none are 3 bedroom units at this time. The subject is atypical in both GLA, bed count and project size for the city. I chose to remain with like legal status's in comps and not mix.

The listing agent advertised the subject, which is legal condo, as a Town home in MLS. List price was based on townhomes of similar GLA and even a few duets were offered as comps. Town homes here include land in their bundle of rights are in a higher price range that condos. The lender says that the buyers in this market do not know the difference between condos and town homes and do not care. They only care about what amenities are offered, which is more true than not. Even so,....I'm finding this to be a violation of a few select USPAP guidelines. Have any of you been asked to do something similar and how did you handle the request and pressure to amend the report. (And No, subject is not any where close to actually being worth the contract price per neighborhood, development, and unit condition; which happens to be time dated)

The agents and lender are asking me to use townhomes in comparison and simply adjust for land value so that I can "Make Value". Appraisal did not meet the contract price. The lender argues that he subject is more similar to the townhomes in GLA & utility and there fore, should be appraised that way, per market reaction. I stand by only appraising and using what is legally permissible.

This mixing sounds like a large miss representation even where reasoning and all facts are disclosed. I've never used mixed property types in an appraisal, period. Is using a town home ever acceptable in your experience? To me this an example of apples to oranges and not to be done. Advise Please.

A Town Home or Townhouse is an archatectural type. A condo is a form of ownership(3,500th time I have posted this). Agent can call it a Townhouse as a style if the like. But, you must report it as a Condo on a condo form if for secondary market purposes.

 

[Sunshine in VA]

I am in need of aid in dealing with approach to a sticky situation. I would like to know what other appraisers would in this situation. My subject is an atypical condo in that the project only has 10 units. The GLA of the units are all 1,425 and all are 3 beds and 2.1 baths. 90% of the condo projects in the city are in larger developments and offer much smaller GLA. 98% are smaller, up to 1,200sf and none are 3 bedroom units at this time. The subject is atypical in both GLA, bed count and project size for the city. I chose to remain with like legal status's in comps and not mix.

The listing agent advertised the subject, which is legal condo, as a Town home in MLS. List price was based on townhomes of similar GLA and even a few duets were offered as comps. Town homes here include land in their bundle of rights are in a higher price range that condos. The lender says that the buyers in this market do not know the difference between condos and town homes and do not care. They only care about what amenities are offered, which is more true than not. Even so,....I'm finding this to be a violation of a few select USPAP guidelines. Have any of you been asked to do something similar and how did you handle the request and pressure to amend the report. (And No, subject is not any where close to actually being worth the contract price per neighborhood, development, and unit condition; which happens to be time dated)

The agents and lender are asking me to use townhomes in comparison and simply adjust for land value so that I can "Make Value". Appraisal did not meet the contract price. The lender argues that he subject is more similar to the townhomes in GLA & utility and there fore, should be appraised that way, per market reaction. I stand by only appraising and using what is legally permissible.

This mixing sounds like a large miss representation even where reasoning and all facts are disclosed. I've never used mixed property types in an appraisal, period. Is using a town home ever acceptable in your experience? To me this an example of apples to oranges and not to be done. Advise Please.

I can tell you I see many Fannie Mae repurchase demands because the appraiser compared townhomes to a condo.

 

[Lee Lansford]

...

I'm always more interested in the actual appraisal problem, figuring out how the market reacts to a property, than I am in deciding how my analysis can be crammed into the URAR.

...

In appraisals for use in residential lending, it seems to me that there are more appraisers entrenched in the latter camp than the former.

 

[Lee Lansford]

I can tell you I see many Fannie Mae repurchase demands because the appraiser compared townhomes to a condo.

And I can tell you that Fannie makes many demands for many reasons--some good, some not so good.

If the market provides the appraiser with answers to the problem to be solved, the appraiser is wise to look to the market. Or, the appraiser can just make it up and be certain to conform to "guidelines" .

 

[J Grant]

I can tell you I see many Fannie Mae repurchase demands because the appraiser compared townhomes to a condo.

When this is the case, I would surmise that it was done inappropriately. An appraiser can compare a condo to a TH, the question is, should they? They should if market indicates it as a subdstitute. If the market does not, but appraiser drags the comp in anyway, the report is vulnerable later to challenge.

I only compare a TH to a condo as a comp when the market indicates it ( and usually as comps 4 and 5 unless there is compelling reason not to have 3 condo sales on report) . One market indicator is reasonable similar prices. If condos of a design style where townhomes are similar design subsitutes sell in a reasonably equivalent price range, it is likely the typically motivated buyer would consider either. If the condos are selling for 275k and the townhomes are selling for 285k, that is reasonably close. But if the condos are selling for 275k and the townhomes are selling for 330k, that is a pretty far gap and unlikely that the 275k range buyer would pay that.

I could be wrong, but I'd love to see those reports for repurchase demands, I would expect to see a number of signifcantly higher price sales dragged in as comps.