Developer Sales

[Marc Lamb]

I just wanted to verify what I have heard in CE Courses given by various (Mc Kissock, Appraisal Institute) regarding developer sales as comparables. I know that this forum is very insightful and informative on these type of topics.
The issue at hand (believe me this is the condensed version) is that I have three reviews all from the same condo complex. The appraiser utilized almost all developer (i.e. condo only a single developer who converted the complex from apartment use about a year ago) sales. There are no MLS listings or MLS sales, and no re-sales. The appraiser did utilize a sale from outside the complex ( I will not for this discussion get into that) but utilized four developer sales and a pending developer sale on all three appraisals.
I have always in reports I have done only utilized a single developer sale (now in a S/F subdivision developer sales from 3 different developers in abscence of re-sales) due to the fact that to do otherwise is letting a single entity set the market.
As I mentioned in several CE classes there has been discussion of this circumstance. In every class it was basically said that only one developer sale is permissable per Fannie Mae. I couldn't find anything, but given my knowhow circumventing the web-site that doesn't mean much.
My question is two-fold. Am I correct about the only one developer sale and if a link is available for printed verification that I can pull out when the phone calls come.
Thanks everyone for any opinions and help.

 

[Mztk1]

No. Per Fannie, one sale should be from within, one must be outside, and the third can be either in or out. Here's the text:

For properties in new subdivisions or for units in new (or recently
converted) condominium or PUD projects, the appraiser must
compare the subject property to other properties in its general market
area as well as to properties within the subject subdivision or project.
This comparison should help demonstrate market acceptance of new
developments and the properties within them. Generally, the
appraiser should select one comparable sale from the subject
subdivision or project and one comparable sale from outside the
subject subdivision or project. The third comparable sale can be from
inside or outside of the subject subdivision or project, as long as the
appraiser considers it to be a good indicator of value for the subject
property.

 

[timd354]

Another thing to consider about the use of developer sales (I am assuming here that these reviews are reviews of appraisals on loans for the purchase of units from the developer and not resales) is whether or not the appraiser confirmed the sales data with an independent source, such as the public records, etc. Obviously, unverified data for comparable sales provided by the seller cannot considered to be reliable

 

[Marc Lamb]

Jim, Thank you for your response. I am still worried about using only sales froma single grantor (seller). Like I mentioned if there was a developer, and either a re-sale or another developer (not in play in this matter) then I would utilize 2 from within. But I specifically can remember (instructors etc.., place etc..) about only 1 developer sale.
The problem is that when compared to other projects this one is off the charts, so any sale or sales outside the complex anywhere in the County (not to mention the immediate areas) do not support sales in the project.

 

[Mztk1]

If the builder's closed sales cannot yet be verified, get as much info as you can...contracts, contracts date, HUD-1, etc. You can get the title company and verify the closing dates and sale prices through them. In the worst case scenario (or just knowing how title companies have been shady lately) you can use them as comps #4 and #5 and include 3 outside comps as primary. But you need to something from the inside, even if it is only 2 pendings, to prove marketability.

 

[Marc Lamb]

Tim the report states Public Records and HUD Statement. Again with no none developer sales or outside listings for re-sales, my alarm buttons are going off. I am researching right now and out of 60 deeds I have examined in the project only 2 are local buyers and most are from out of state and the report states that the developer indicates 95% owner occupancy.

 

[Marc Lamb]

Jim all the closings were handled with the same Title Company out of the county, an attorney's office in South Florida. Se my earlier reponse about only 1 local buyer.

 

[timd354]

Marc, I can smell a funny smell blwing north from Florida all the way up here to Maryland....can you verify the comparable sales through the public records...if not, I think that there may be a problem

 

[Pamela Crowley (Florida)]

Hi Marc,

Sorry I didn't see this one sooner. Please call me tomorrow and we'll discuss this. 321 514 7703

 

[Mztk1]

Mark, I wasn't responding to anything except whether you were correct that only one developer sale could be, or should be, used. The answer to that is "you are incorrect". And I posted the Fannie comment. One in, one out, one from either that the appraiser believes is a good indicator of value.

It is difficult to read, but it sounds like you are saying the appraiser used five sales, 1 closed from outside, 3 closed from inside and one pending from inside. Technically there is nothing wrong with that. Is the value conclusion not credible? Would ANY value conclusion in this project be credible based on the data available?

Reading further, it sounds like your buyers are not well informed, or perhaps they are straw buyers. You are merely doing a review. You may just want to conclude that though the reports are technically correct, and though the value reported is as well supported as possible and as credible as possible, because of the quality of data and the lack of true market competition, and the fact that all buyers are from outside the local area, no value conclusion, using any of the data currently available, would be worthy of belief.

At least to me, that is what it sounds like you are saying.