Form 1025 - 4-Unit Condominium Unit?

[Ariba]

I have a situation were the client is requesting an opinion of value on a 4-unit condominium building. There is a Condominium Declaration and each unit is a condominium with separate legal descriptions, tax assessments, etc. The clients want one value for the building (4 condominiums).

The intended use of the appraisal is to arrive at an opinion of value is for asset valuation, and not for a mortgage transaction. There is one loan on the property. The client will not separate or list the units separately.

Can this assignment be completed on Form 1025, Small Residential Income Property Appraisal Report, and disclosing/explaining everything in the addendum? Should I use the 03-05 or 10-94 Form 1025? I intend to use 4-plexes as comparables to render a opinion of value. These units are not inhabitable so the income approach is not applicable. The cost approach is not applicable either in my opinion since the building was constructed in 1946.

Also, how do I address the statement on the 1025 (3-05) Form which states "A two-to-four unit property located in either a condominium or cooperative project requires the appraiser to inspect the project and complete the project information section of the individual Condominium Unit Appraisal Report or the Individual Cooperation Interest Appraisal Report and attach it as an addendum." All I can find is an Individual Condominium Unit Appraisal Report (Test Form 1073)(November 2004) are there any another forms available?

 

[Mztk1]

Can this assignment be completed on Form 1025, Small Residential Income Property Appraisal Report, and disclosing/explaining everything in the addendum?

Sure. If this is asset management for an REO or lender so it is mortgage related. If not you can use one of the non-lender forms.

Should I use the 03-05 or 10-94 Form 1025? I intend to use 4-plexes as comparables to render a opinion of value.

If given the choice I'm going with the 2005 form. Don't have to worry about adding limiting conditions, etc, plus its easier.

These units are not inhabitable so the income approach is not applicable. The cost approach is not applicable either in my opinion since the building was constructed in 1946.

I am guessing you mean the units are "not habitable".

Also, how do I address the statement on the 1025 (3-05) Form which states "A two-to-four unit property located in either a condominium or cooperative project requires the appraiser to inspect the project and complete the project information section of the individual Condominium Unit Appraisal Report or the Individual Cooperation Interest Appraisal Report and attach it as an addendum." All I can find is an Individual Condominium Unit Appraisal Report (Test Form 1073)(November 2004) are there any another forms available?[/QUOTE]

That's what you do. You complete the project section of the "Individual Condominium Unit Appraisal Report" on the first page, and you attach it to your appraisal. If you have Total it is very easy. Just go into the condo form under a separate file, fill out the section you need, create a PDF (print to the PDF driver) only that one page, go into the multi-family report, hit the "Add" button, go to browse, and find the link to that PDF file and it will pop right into your report at the very end.

 

[Paul Isolda]

I would be careful about what you are using for comparables. If your subject is 4 condo units, these can be transfered independently. This is legally not similar to a 4 unit building. I did something like this years ago where the owner converted a multi unit building to condo ownership and tried to market the units separately but never got an offer he liked so he kept them as rentals. Legally, they are individual condos and not comparable to a multi family, unless you are finding multi's that would lend themselves to condo conversion. Then you could adjust for the cost of condo conversion. This is not an easy assignment, BE CAREFUL!

 

[Ariba]

I am guessing you mean the units are "not habitable".

Also, how do I address the statement on the 1025 (3-05) Form which states "A two-to-four unit property located in either a condominium or cooperative project requires the appraiser to inspect the project and complete the project information section of the individual Condominium Unit Appraisal Report or the Individual Cooperation Interest Appraisal Report and attach it as an addendum." All I can find is an Individual Condominium Unit Appraisal Report (Test Form 1073)(November 2004) are there any another forms available.

That's what you do. You complete the project section of the "Individual Condominium Unit Appraisal Report" on the first page, and you attach it to your appraisal. If you have Total it is very easy. Just go into the condo form under a separate file, fill out the section you need, create a PDF (print to the PDF driver) only that one page, go into the multi-family report, hit the "Add" button, go to browse, and find the link to that PDF file and it will pop right into your report at the very end.

not habitable, you are correct.

Thank you for your suggestion on how to handle the Individual Condominium Unit Appraisal Report, since you can have only one major form in WinTotal.

 

[Mztk1]

not habitable, you are correct.

Thank you for your suggestion on how to handle the Individual Condominium Unit Appraisal Report, since you can have only one major form in WinTotal.

FHA requires you include the first page the MFH report in a 2 family where at least one of the units is a manufactured house.

2 Family MFH may sound odd to an appraiser in Colorado, but in Florida you are more likely to run into them. So I am well versed on the "Add" button.

Good luck

 

[Lee Lansford]

...client is requesting an opinion of value on a 4-unit condominium building. There is a Condominium Declaration and each unit is a condominium with separate legal descriptions, tax assessments, etc. The clients want one value for the building (4 condominiums)...
...I intend to use 4-plexes as comparables to render a opinion of value...

I assume that your subject's H&B Use is as individually owned dwelling units. I further assume that the H&B Use for the "comps" are as single-entity, 4-unit, properties.

If my assumptions are correct, how are you going to resolve (analyze) this significant difference in H&B Use?

 

[Ariba]

I would be careful about what you are using for comparables. If your subject is 4 condo units, these can be transfered independently. This is legally not similar to a 4 unit building. I did something like this years ago where the owner converted a multi unit building to condo ownership and tried to market the units separately but never got an offer he liked so he kept them as rentals. Legally, they are individual condos and not comparable to a multi family, unless you are finding multi's that would lend themselves to condo conversion. Then you could adjust for the cost of condo conversion. This is not an easy assignment, BE CAREFUL!

I assume that your subject's H&B Use is as individually owned dwelling units. I further assume that the H&B Use for the "comps" are as single-entity, 4-unit, properties.

If my assumptions are correct, how are you going to resolve (analyze) this significant difference in H&B Use?

That is why I will be using hypothetial conditions.

 

[hastalavista]

The intended use of the appraisal is to arrive at an opinion of value is for asset valuation, and not for a mortgage transaction. There is one loan on the property. The client will not separate or list the units separately.

Ron-

Is the client a private party or some financial entity?

(my answer below assumes that it is a private party):
You could do it on the old form- I would not do it on the new form. I'd prefer to do it on no form.

However, if the intended use of the appraisal is to value the subject as if it were sold in bulk, why would you need an HC? Why not just value the subject as 4-condos that make-up one condo project and discount it for the bulk sale? :new_smile-l:

The only reason I can think of using an HC is if you are going to value the subject as if it were a fourplex. Are you certain that is what the client really wants? That doesn't seem to be consistent with the asset valuation purpose of the assignment?

 

[PropertyEconomics]

Ron,
From looking at your photos this was formerly a fourplex property that was "condoed" but no work was ever completed, or that is how it appears.
I certainly dont know your market, but my question would be can the condo documents be squashed and the property returned to a fourplex? From what you have shown, I would have serious questions (in my market anyway) if the highest and best use were for condos. I am working now on a job that is very similar in which more than 10 units were rehabbed for condo use, however, no articles were ever filed, yet even so the original appraisal was completed as though the documents were in place (no extra ordinary assumptions or hypothetical conditions were used) and the value was WAY over that which a similar sized apartment complex would support. Im guessing the value as condos will approximate a 50% over valuation of the property and I will also guess that I will be the bad guy to break the news to them.
Only you know the nuiances of your market and your analysis will tell you the highest and best use of the property.
Going forward I think we will find more and more of these projects that have failed because they never should have been contemplated in the first place. Now it is time for the honest and ethical appraisers to step forward and show just how wrong the original analysis was, why the property remains having a highest and best use for fourplex use, and if any HC were involved I would think it would be that the condo documents can be defeated and made invalid.
I think both you and your client are on the right track with this one, but your analysis will have to be thorough and well supported.

Good luck.

 

[Lee Lansford]

That is why I will be using hypothetial conditions.

What are your HCs?

If you are proposing that what exists (4 individual units) is actually something else (a single, 4-unit, building), and given my understanding of what you have been requested to provide, I believe that you are heading down the wrong road.

I suggest you review Denis' prior post.