Fraud?

[kidkool69]

A condo is offering a 2 year lease back to buyers. It is zoned for short term rental. There seems to be a grossly inflated value when looking at surrounding sales in competitive neighborhoods. Although the "comps" that were sold recently by the builder seem to support value. The price/SF is 60% higher than most sales in area.
Is this legal if its disclosed?
It seems to me like a kickback if the seller promises to pay almost 75,000 over 2 years.
I have requested the sales contract and have not seen it yet. I found out from the real estate agent that they were offering the leaseback. Something doesnt feel right. I would appreciate any advise. Thank You..

 

[Restrain]

Remember that you are appraising the property, not the contract. Report all you know about the contract and attempts to obtain the contract. Then select the most appropriate arms-length sales and appraise the property, letting the chips fall where they may. Do not say that there is fraud in the contract or use any other inflamatory statements.

 

[Couch Potato]

It is not illegal to lease the property. It is not illegal to lease a property you just sold.

Keep in mind you need to value the condo and value the lease. When you adjust the comps for the value of the leases, they should line up with those in other neighborhoods. Likely the sales also include furniture which needs to be accounted for in your adjustments. I do hope you are charging enough. Short-term rental appraisals take a lot of extra work. Search out good data on vacancy rates. The two-year leases likely assure zero vacancy, and therefore are not at market rates.

Be sure to clearly describe the property and the neighborhood. Fannie Mae might disqualify the project from purchase. Be sure the client can't blame you when things go south.

The best advice on doing short-term rental appraisals is DON'T.