Form 1025 - 4-Unit Condominium Unit?

[PropertyEconomics]

A.A.

Along with P.E.'s response I thought I'd chime in a little. You've overlooked that 1073 forms are designed for a sale of one unit for one market price for just that one unit. You have no way to take a group sale of four units for one (1) price and separate out what dollars belong to each unit. You can't just divide the price by four. Like the header of the 1073 says, "Individual Condo Unit Appraisal Report"

The above is why an attempt at using a 1025 form is being made. I think that is also a mistake. Either the condo conversion made it far enough that these are presently a legal condominium, or perhaps it did not make it that far (so far I believe no unit has ever been resold since the beginning of the condo conversion attempt) and this is still legally a 16 unit apartment complex with four owners. Personally, I don't think any of that has been properly determined yet. Either this is four separate condo units needing to be analyzed as a distressed "investor only" situation, or it is a 16 unit apartment complex needing to be analyzed under a partial ownership. Both nasty assignments.

IF any form were to be used, at the moment the only one I would consider would first demand that the current legal form of ownership be nailed down to prove that the condo conversion went far enough to be a successful conversion to a new legal form of ownership of condominium. Then I'd consider the old 06/1993 URAR form IF I actually had any bulk sales in the market place to use. Even then, that form still makes things very difficult when there are drastic differences between condition of the units either within the subject units or the comp units between one another.

More, all the "forms" are rife with references to "Market Value" and I suspect this client really has to have some other value, like Liquidation Value. The very fact any seller at this point is asking a world of buyers to enter into a complete cluster you-know-what of horrible condition units, legal nightmares, and what may be seriously delayed holding period before ANY public reselling of these units to nice, sweet, innocent SFR buyers can be attempted. Any appraiser slams right into "not affected by undue stimulus" with the Market Value definition. If a total disaster of a failed project with unknown future actions of other owners is not "undue," over the uncertainty that would cause, then I don't know what is. This assignment is literally SWIMMING in issues that could take weeks to iron out before any sort of attempt at opining a value could be made.

To reference the saying about having the cart ahead of the horse, I suspect this client doesn't understand they don't even have the barn doors open to get the cart out of the fricking barn yet! LOL!!!! I think some lender staff are in a head long rush to follow their procedures and they don't have a clue what a mess this is and / or are clueless about the appraisal requirements needed when entering into a failed project cluster you-know-what for their asset valuation they are asking for. Appraisers are not allowed to just toss around bunches and bunches of EA's and / or HC's willy nilly, without any credibility in so doing, just to make it look like some lender's staff followed procedures in a rush to please their upper managment.

P.E. How'd did I do on this post? :Eyecrazy:

Webbed I think you have hit many highlights of this assignment. One of the things that is of great concern to me is the speed ("in a rush" as you put it) with which this assignment apparently must be completed. Ron noted yesterday that he hoped to nail down the reconciliation last night, and in my mind again with all due respect, the scope of the assignment hasnt even been nailed down yet. There has been lots of talk of EAs and HCs and yet in the original post I dont see anywhere where the client asked for valuation of the property in which any EAs or HCs are warranted. I will grant you along the way there may be come EAs becuase not all is known about this particular condo group or association, however that being said, I see this as a rush to value which has extreme potential of being misleading.

I have stayed away from saying this for sometime now in this thread but Im going to go ahead and pop it out there and suffer the consequences. In the world of residential appraising faster and cheaper are the means of the day. Residential appraisers have many times fostered this notion, and here along comes an assignment that cant be done either fast or cheap and be done properly. My experiences are naturally more from the commercial side where an appraisal can often take two weeks or more to complete. I fear that many residential appraisers neither understand the complexity of this assignment nor the proper ways of completion of the assignment. Living in a form world can be dangerous for there are assignments that will not fit a form, and this one is just such an assignment in my opinion. Residential appraisers often fear narrative work because they have done very little of it or none at all. They have right to fear narrative reports if they havent completed one before, but when the assignment demands just such reporting you either do it or you decline the assignment. I have no idea how much Ron charged for this assignment and it is none of my business, however, my suspicions are that it was treated as a simple four plex assignment and that is how he anticipated completing it. Low and behold along come 12 other units within this "complex" and the complexity of this assignment grew by leaps and bounds. An appraiser then has one of three choices, complete the assignment and if its not what the client wants they will reject it or let him know (a very very dangerous plan of action if you ask me), call the client and renegotiate the time and fee based upon the true complexity of this assignment and do it properly, or finally simply call the client and state that the property as represented was not what you bid on and you are now declining the assingment.

USPAP requires that we complete an assignment in a competent manner that is not misleading. I have several issues with completion of this appraisal as four condo reports and then linking them together with a letter. First they can be separated one from the other, and if not fully read, they can be misleading. Secondly, the assignment was to appraise all four units together, as Webbed has pointed out the Individual Condo form wont handle such an assignment, and as Mr. DeSaix points out he is in agreement while it can be done, this is truly a non form type report and should be treated as such.

While it may not be overly popular with the OP or a few others here who are posting, quite frankly I think the appraiser is in over his head using his stated plan of action. I think the complexities of this assignment either demand a VERY WELL SEASONED residential appraiser or should be done by a Cert Gen with experience in analyzing bulk property sales, the effects of the other units on the subject units, the ability to ask the correct questions in order to have some knowledge of the legal issues here (including whether the condo project was successfully achieved), to READ the documents (which Im not sure has even been achieved by the OP - it could be the units cant be leased under the condo CC&Rs), and the ability to dial the client back into an understanding of the time and fee necessary to complete this assignment. I know there are several Cert Residential appraisers on this forum that could complete this assignment, including Webbed and Denis, and I am just as sure there are a number that should not be taking this assignment on.

I do not know where Ron fits into these groups, but I certainly hope he takes the time to read these posts and understand that there is a small group of people here, including myself, that are trying to keep your butt out of trouble and convince you that this assignment is far more complex than it appeared at first blush. Whether he takes the advice or not, is certainly up to him.

In any case, I sure wish him well and would help answer any questions that arise from this point forward.

 

[Ariba]

PropertyEconomics,

Yes, I have read all the post. I appreciate your input and that you want to keep my butt out of trouble.

All I wanted from the original post was is to establish the ground work on how to approach/proceed with this assignment. There certainly is no rush, I have all week to complete the appraisal assignment. You and others have convinced me to drop the 4-plex concept and go with four appraisals approach for the 4 condominium units and discount for bulk sale. Therefore, no Hypothetical Conditions or Extraordinary Assumptions are necessary. The fee is sufficient for the assignment, certainly not discounted.
:new_popcornsmiley:

 

[PropertyEconomics]

PropertyEconomics,

Yes, I have read all the post. I appreciate your input and that you want to keep my butt out of trouble.

All I wanted from the original post was is to establish the ground work on how to approach/proceed with this assignment. There certainly is no rush, I have all week to complete the appraisal assignment. You and others have convinced me to drop the 4-plex concept and go with four appraisals approach for the 4 condominium units and discount for bulk sale. Therefore, no Hypothetical Conditions or Extraordinary Assumptions are necessary. The fee is sufficient for the assignment, certainly not discounted.
:new_popcornsmiley:

Ron .. dont be so quick to think that EAs are not necessary. As you get further into this there may be a ton of them ... dont be afraid to use what you need .. I just didnt want you to HC away the condo aspect of your property because it does exist and there is no need to HC it away. In fact I think doing so may be misleading .. but the EAs could be numerous and Id use them freely for everything I assumed but didnt know to be fact.

Also I have never ever advocated four appraisals .. I have stated I think that is the wrong way to approach this problem. ONE REPORT .. FOUR UNITS .. thats how Id do it and Id write it in narrative format. I dont think four reports meets the needs of your client, their expectations, nor do I think its proper. It can be done, but it will be difficult to explain and subject to much criticism. One Report .. Four Units ... I continue to advocate this method.

You will not have to discount for bulk sale IF you can find sales of multiple units in similar condition to those which you are appraising. Multiple units would consider the bulk discount, if any, already within their selling prices. This is certainly a complex assignment ... and again I wish you well and offer my help in any way possible.

 

[hastalavista]

Also I have never ever advocated four appraisals .. I have stated I think that is the wrong way to approach this problem. ONE REPORT .. FOUR UNITS .. thats how Id do it and Id write it in narrative format. I dont think four reports meets the needs of your client, their expectations, nor do I think its proper. It can be done, but it will be difficult to explain and subject to much criticism. One Report .. Four Units ... I continue to advocate this method.

Just to be clear, I never advocated four appraisals either. I said, "Could it be done in a form with a cover letter? Sure, it could." The type of form I did not specify. I'm sure there is one out there which could be massaged enough to work (adequate but not optimal).

I don't see this assignment as four appraisals. I see it as one appraisal. Thinking about this assignment as four appraisals may lead to development and/or reporting deficiencies.

I also couldn't complete this assignment in a week. But, I'm not known for efficient work habits!!! :laugh:

Frankly, I wouldn't do it by myself based on my license level (I'd want to do it with a CG) and the nature of the client- a federally regulated institution (I presume). But that is a business decision, Ron, and just because I would not do it does not mean you cannot do it.

 

[Parker]

My first thought was, why is he using a form? Your post is right on. Too many residential appraiser fail to think beyond 'form filling'.

Anyone writing their first narrative report need look no further than USPAP for a step by step guideline on how to do it. Indeed, many appraisers should do their first reading to that very essential tome.

 

[PropertyEconomics]

My first thought was, why is he using a form? Your post is right on. Too many residential appraiser fail to think beyond 'form filling'.

Anyone writing their first narrative report need look no further than USPAP for a step by step guideline on how to do it. Indeed, many appraisers should do their first reading to that very essential tome.

With due respect Parker, most or many residential appraisers have never used anything but a form and thinking outside the form box is more difficult than it first appears for those appraisers. When you have been exposed to nothing but forms there is no way for you to know even what to think.
I appreciated the original question, and I appreciate that this thread has not been personal against anyone. To further foster that continuance I, as have Webbed and Mr DeSaix and others have offered good advice in an attempt to get the OP to think outside the box. Its been a good discussion and I dont fault anyone for that which they dont know nor that to which they have never been exposed. Its how we all learn.