Condo VS Townhomes

[GonzoBlue]

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.

 

[J Grant]

Can you report the value pressure from lender to anybody in the bank or AMC rep (if the assignment is from an AMC) It could be a reason to decline assignment.

That said, I have in past reports, where a condo and townhome offered similar amenities and design/appeal, used a TH sale as a 4th sale (or 4th and 5th comp sale) . I included them because I felt it led to credible assigment results, not because anyone pressured me. So if you include them, make sure that you percieve them as good comps and susbsitutes for subject.

You still need 3 closed condo sales...find some older or further away ones with similar sf as subject, maybe 2, and then a smaller one in immediate area to adjjust up.

It is not a USPAP violation to mix sale types, but you can't be misleading, so make sure you disclose condo vs townhome and make any adjustments the market indicates between the two.

 

[Tim The Enchanter]

Condominium is a legal form of ownership. Townhome is just a style.
That said, you should have comps with similar land or lack thereof,
and similar style as much as possible.

 

[KD247]

...I chose to remain with like legal status's in comps and not mix. ... The lender says that the buyers in this market do not know the difference between condos and town homes and do not care. ......

I'd consider your analysis to be incomplete if you didn't test that idea and show that the data proves it wrong. Bracket the subject's important characteristics and approach value from every angle you can think of. What's it going to take, an extra hour? In any case, it'll be easier to provide support for your opinion than to prove that you are logically correct.

 

[GonzoBlue]

Condo's vs. Townhomes

In my case the use of word townhome means CID developments where the rights include land and the condo & subject does not. Further, my using any town home from in this city raises the price benchmark by a minimum of $50,000. The person who developed subject's 10 unit "condo' project really created a problem for it's self and one could argue an super adequacy for this market. However, current conditions in the development are so bad that the rating of the complex has fallen to below average in my opinion. Talk about obsolecsence. The complex of 10 units are all the same floor plan. It is located on a corner to an intersection, 4 lanes in each direction. All 10 units face the busy street & traffic lite intersection. HOA does not follow Sterling Davis rules and let the common club house delapidate to very bad conditions. The exterior and roof are rotten.Tthe 2 sections of interior complex streets have pot holes every where. Half of the iron fencing is down. And to boot, there is NO on site parking for guest. Each unit has a 2 car garage only. Guests have to park across the street as there is a red zone on both corners of subject's parcel. Listing agent is trying to push for a sale price that would equate to the highest price found in the development in 2006! we declined since then and so has the development. The unit it's self is time dated and appears as it did in 1980 when built The last reasonable price, apart from subject's last purchase price, which was $30,000 higher than it's neighbor, was at $150,000. The neighbor and subject both sold with on 1 month apart in 2009. Subjects price at $180,000 was odd to see and it was an rental investment. Current contract price is above $230,000.

Lender is saying that my use of only condos with 2 bedrooms and smaller GLA is an issue. However, that is all this market is offering. I can not make up data to fit their desires! So, lender wants me to use Town home comps of 3 bedrooms and similar GLA to base and establish value from, yet those include land in their bundle of rights. As with a response from a fellow appraiser, he has used a "land to air' property before, with full disclosure, and only as support for this primary data. All the parties are pressing me here. Lender, lenders review appraiser, AMC and agents. Buyer must have good credit or some thing. I'm totally shocked to see such BS taking place. Please provide any comments even if brain storming. Can I ask how to enforce getting paid in this venue or do I need to switch to another section in the forum? I've turned into a charity case after 25 years in, as I refuse to compromise ethics. The horror stories are out weigh the standard by a good 80%. I've had to badger and threaten weekly to get paid for services, even where I was praised for a job well done. And how often can you say you are thanked for your efforts?

 

[hastalavista]

I would (and have) used townhouse style PUDs as comparables for townhouse style condos in markets where they are competitive and substitutes. Indeed, sometimes, they can be the best substitutes.

I don't know if your assignment's challenge is townhouse vs. condo, or the subject's project-condition vs. other projects (PUDs or condos).
Do the smaller condo units used as comparables in the first report have similar project-condition defects and, if so, how did you adjust for those differences?

Regardless, I agree with KD, and you seem to have indicated (my bold in your quote) that, on the surface, the lender's request may be reasonable:

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.

So I'd recommend rather than try to find reasons to exclude the townhouse properties on the grounds of "bundle of rights" which may not be (and which you imply to a degree is not) a significant factor in this market, to simply do the comparison and show that, the non-condo townhouses sell for $50k more; which would create an unimpeachable reason to (a) not use them, or (b) if you do use them, to adjustment them $50k.

Good luck!

 

[GonzoBlue]

part of the problem with testing the data to show price differences between townhomes with land and condos with air space is that the county's MLS has intermixed data classifications. Condos are found in the Townhome area and vice versa. I had to hand sort the data with help of the title company. The city zoning lists both types and SFR all as MDR, medium density residential. They do not have zonings for condos and then these of PUD. Subject was listed as a townhome in MLS and not as a condo which it is. I can not separate the data in MLS, run the search to produce the results with out calling title to discover which developments have land and which are true condos! ( I disclosed the mix of classifications etc in my appraisal) It would be a large scale under taking. I have accomplished 75% of that for this assignment that paid $400.00, if collectable....Time on this one assignment has been over 30 hours if you include lenders allowing both agents to pose "general appraisal questions" which the AMC was in support of. Things are changing fast here with AMC bucking for the lenders desires. Most of the AMC coordinators are not appraisers and fall for all sorts of realtor & broker BS, which I am asked to respond to.

 

[Michigan CG]

First of all, Condo is a form of ownership. We have "condos" here that look like SFR. Doe the units have land.....not ownership but do they have yards? Are they all on one floor or is the property multi-level.

What USPAP violations do you see?

 

[GonzoBlue]

Condo's vs. Townhomes

Thank You to all who are responding. I greatly appreciate it!

 

[GonzoBlue]

No yards and they look like attached condos and even old 70 era townhomes. Yard area is only a small patio measuring 20 x 10 feet.