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Condo with no existing HOA

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vargasteve

Thread Starter
Junior Member
Joined
Jan 21, 2002
Professional Status
Certified Residential Appraiser
State
California
I'm appraising 8 condos that just happen to be owned by one individual who has not maintained a 'proper' HOA, there is no existing sinking fund for repairs, or work schedual. The owner just pays for repairs & maintenance as the issues arrise. As expected there are minor maintenance items that need attention, and the driveway asphalt badly needs replacement (?perhaps a $50K item). There are GREAT comparables in the area for estimating value. It brings up several significant issues

1) Without owner financing, it would be impossible to get a lender to fund on any of the units. & how do I address this on the appraisal.

2) What is the effect on market value, and how can I address this so I can produce a final product that properly takes into consideration the issues at hand.
 

Dave Doering

Sophomore Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Missouri
My question regarding this scenario is: Is it truly a condo if it is not legally constituted as a condominium which includes a condominium agreement, restrictive covenents and a provision for the operation, use and management of the common areas. It sound to me that you are perhaps looking at a multifamily property that is not legally constituted as a condo and therefore not suitable in its present legal configuration for individual unit ownership.
 
Joined
Jan 16, 2002
We'll need more info to unraveled this one.

Are there other units in the same project, besides the 8 you mentioned ?
If not, then you also have 100% tenant occupancy. So far, it sounds like what Dave said in his posting.

There is that section within the condo report that asks about "unusal characteristics or other information know to the appraiser that would affect marketability", etc. Just state what it is and let lender worry about it.
Property is apparently not under responsible ownership.
 

Dave Smith

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Wisconsin
Steve:

What state? Is there a recorded declaration and are there condo bylaws? If they are recorded its probably a condo. If they aren't recorded it probably isn't a condo.

Wisconsin statutes are clear as to what constitutes a condo and what documents must be in place for it to be a legal condo.

Joe hit it on the head. Find the section at the top of the second page and explain it. As for comp adjustments, good question.

It seems to me you would do the normal adjustments to the comps to arrive at a value that sets the market value as if there are condo docs, addressing the condition of the project in the process. Then narrative the questions and qualifications about value if the project isn't a project. Then let the lender decide what they want to do.

Keep us posted.
 

vargasteve

Thread Starter
Junior Member
Joined
Jan 21, 2002
Professional Status
Certified Residential Appraiser
State
California
Interesting case - the 8 units I'm appraising were the models for a large 400 unit project - they are detached from the project ( built in 1970's) and have nothing to do with it at this time ( approx .5 mile away from the 400 units), however they are exact model matchs. This 8 unit project was vandalized, appliances stolen, even a fire. Then a fence was put up around it and it was sold as is to one owner. So, the ball got dropped on the CC&R's which were no doubt developed, but never were instated.
 

Dave Smith

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Wisconsin
It sounds like a vandalized white elephat to me :!: :D
 
A

Anonymous

Guest
We have thousands of condo's in this area with no formal HOA. Most of these are two family vacation properties but I have seen some small multi-family condo's without management. If the deed says that it is a condo you must treat it as such. The lack of formal management should be noted. Needless to say all deffered maintence in the common areas should be highlighted.
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Hey Walt,

I see you've been to the NJ shore recently.. Don't you just love those 2 unit condos with no association dues??? Bugs the hell out of the underwriters when there are no HOA dues, no management agent, no association.

Just did a really neat one in Ocean City. Five detached houses/condos on one site, all units had private rear decks that merged into a large common rear deck with an inground pool. Each unit had a boat slip and one small slip for a jet ski. This one had dues. $500 per month. Each home, 1M plus. Must be nice....


Ben
 

Stone

Elite Member
Joined
Feb 1, 2002
Professional Status
Certified General Appraiser
State
Wisconsin
I just got an order for a two unit condo. Both sides are rented out. Ugh. It will be nothing but fun trying to find comps for this one, as I have not done a property with this exact situation before.
 
A

Anonymous

Guest
Ben,
I own a house in Ocean City, a fee simple twin. The building inspector did not believe that it is not a condo. Many shore towns are allowing single family and two family zoned lots to be developed as condo's. The developers make more money on less land. They of course neglect to explain the responsibilities of condo ownership and the towns take no responsibility for these monsters. Wait until some of these properties need roofs or siding, its going to be fun!
 
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