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Condominium with commercial first floor

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William K

Thread Starter
Senior Member
Joined
Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
I must be having a brain cramp but I am appraising a single condominium unit in a new construction condominium complex. Total number of residential units in building is 6 - 2 on each floor and 2 commercial units on the first floor which I am being told will not be part of the Condo Association. The commercial units are being kept by the developer and they will either lease them or sell them but the condominium association will have no say over their use. My subject unit will be the 1st completed unit in the building and the other units are reported to be under contract and will be completed in the upcoming 3 months. My question is Should I have and report any concerns of the commercial units on the 1st floor of the building, in particular the fact they are not going to be part of the association? Does any one happen to know if Fannie or Freddie would take issue with this? Will they purchase loans on units in this type compex? Any help / comments would be greatly appreciated.
 

Thomas Fiehler

Senior Member
Joined
Jun 2, 2003
Professional Status
Certified General Appraiser
State
Ohio
I believe the condo form asks if there is any commercial property in the subject development and phase. I would just explain the situation in a well written addendum.
 

William K

Thread Starter
Senior Member
Joined
Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
I guess I am getting hung up on the fact that it is not going to be part of the "ASSOCIATION". Not in the any of the Condo Docs (bylaws, rules, regualtions, etc.), not even a mention that it exists! As I understand it the Fannie and Freddie guidelines are in reference to when a complex ( part of the assocation) has specific units or bylaws allowing for commercial space or rentals. In this instance the commercial is not part of the association, has no control by the association, has no fees collected by or provided to the association.
 

Obsolescent

Senior Member
Joined
Jul 6, 2004
Professional Status
Certified Residential Appraiser
State
Minnesota
I believe the condo form asks if there is any commercial property in the subject development and phase. I would just explain the situation in a well written addendum.

I agree. Where they part of the development on the date of inspection? I would explain that the project consists of street level commerical/retail and condos above. Then explain that it was reported that the street level commercial is to be separated later.
 

William K

Thread Starter
Senior Member
Joined
Sep 21, 2007
Professional Status
Certified Residential Appraiser
State
Illinois
Commercial was never part of the association and the residential units have had their Condo Docs already drawn up with no mention of the Commercial units. I have done several appraisals on units with which their is a commercial portion that is part of the association, I have appraised units where the association refers to the limits of use of commercial units in the project. In this instance it's as if the commercial doesn't even exist. It's as if the developer is saying "Don't look at that man behind the curtain". Maybe I am just being paranoid but I am finding it odd that the docs don't even address that the Residential condo association units are setting on top of seperately owned commercial space?
 

Abzntminded

Sophomore Member
Joined
Nov 21, 2007
Professional Status
Licensed Appraiser
State
California
My question is Should I have and report any concerns of the commercial units on the 1st floor of the building, in particular the fact they are not going to be part of the association? Does any one happen to know if Fannie or Freddie would take issue with this? Will they purchase loans on units in this type compex? Any help / comments would be greatly appreciated.


I would first contact the city building and/or planning dept and just verify what you're being told, and if they are aware of this being typical to the area. This is not that uncommon; often the developer likes the ability of leasing or selling the commercial w/out any resident input. Then write the addendum describing the ownership conditions, per your sources, and any effect (or unknown, or no effect) to value.

The investor can decide what they want to do. They may at least ask for the % of commercial in the GBA.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
I agree with all of the above pretty much. Make sure you verify the info given to you is correct. Then just explain in the report that the subject is located in a mixed use building, with commercial usage on the first level. And then explain that it is not part of the actual condo project. The key is the building itself has mixed usage but not the project itself. This is rather common in large cities.
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
If the percent of ownership total 100% with the six residential units, the developer may be correct, however, if the commercial units have percent of ownership in the common areas with the six residential units, I would question the answer. The absence of contribution to the association by the commercial units does excuse their participation or ownership in this mix-use complex. I would state if the subject shares a common wall or a floor with a commercial unit.
 

Brian Weaver

Senior Member
Joined
Apr 16, 2005
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Illinois
Get a copy of the decs and read how the ownership is being handled.
 
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