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Hoa Special Assessments/condo And Affect On Marketability

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vsalvitti

Freshman Member
Joined
May 30, 2008
Professional Status
Appraiser Trainee
State
Pennsylvania
There is a downtown Pittsburgh hi-rise condo with a special assessment of $84,000 per unit...to replace all windows.
The property needs to be sold and the appraiser is having difficulty establishing whether or not to make an adjustment for this special assessment, which must be paid over a period of 6 months.
There are no sales of comps that were conveyed with this assessment in place. I can't imagine someone purchasing the property based on a FMV using other previous sales which didn't have the assessment. ..knowing they need to pay the assessment.
Should there be an adjustment?.... is this considered an improvement to the property? or is it a defect requiring a cost to cure?...don't know how to approach it. I do think it will definitely affect the marketability. There are other downtown condos that can be purchased without any assessments. Help need some ideas as to how to quantify an adjustment.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
In my opinion it's a minimum $84,000 adjustment BUT in reality it may end up being much more in the future because if the existing owners tell the HOA to go punt and don't or can't pay the assessment the entire project could lose half or more of its value simply based on no marketability and lenders not willing to finance.

At minimum I would not do the project unless the HOA or lender gave you a complete condo- certification including the budget. My gut feeling is this probably was litigation and a judgement placed against the property based on construction defects and the HOA may even be in bankruptcy .

I have only done one project like this and it was due to the units having a construction defect where the site was slipping - within three years the prices had all but collapsed because the owners did not or would not pay the special assessment and the $500,000 units ended up selling for about $200,000 because only cash investors purchased them to use as rentals. In the end ( took about 5 years ) The projects HOA was bankrupt and the no longer could take care of the common areas and the project was dead.

Personally I would just walk from the assignment because you don't have enough E & O to cover any involvement in future or existing litigation and no matter how or what adjustment you make it's nothing but an- assumption that future buyers or existing owners are going to pay the assessment ?
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
The property needs to be sold and the appraiser is having difficulty establishing whether or not to make an adjustment
Your profile indicates that your status is as an appraiser trainee. What is your actual status in regard to this assignment?
 

vsalvitti

Freshman Member
Joined
May 30, 2008
Professional Status
Appraiser Trainee
State
Pennsylvania
Your profile indicates that your status is as an appraiser trainee. What is your actual status in regard to this assignment?
I'm a licensed Broker-Appraiser in PA. I order and review appraisals for my employer on properties owned by our customers who have enrolled in a program. The appraiser called me to tell me about this challenge.
He asked my opinion, he has asked many other appraisers their opinion..and I'm curious as to what other opinions there are about this circumstance. There is no bank or lender involved. The property needs to be listed and sold.
 

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan
$84,000 special assessment for WINDOWS per UNIT?

How can there be that many windows where EACH UNIT is being assessed $84,000.

Smells fishy to me.
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
I'm a licensed Broker-Appraiser in PA
As a licensed broker-appraiser I would presume that you are familiar with USPAP and as such the Competency Rule. If not I have copied the relevant portions for your reference below:

The appraiser must determine, prior to accepting an assignment, that he or she can perform the assignment competently. Competency requires:
1. the ability to properly identify the problem to be addressed;
2. the knowledge and experience to complete the assignment competently; and
3. recognition of, and compliance with, laws and regulations that apply to the appraiser or to the assignment.

As such, my recommendation is that you spend the time and necessary fee to find someone that properly meets the Competency Rule rather than shopping around for random opinions on an on-line forum.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
At first blush, this sounds similar to an expenditure made Immediately after purchase. This would be a transactional adjustment in the order of adjustments.
However, I'd be concerned that the assessment's impact on value was more than just the assessment and, as such, I'd want to do some additional analysis to see if the adjustment (and there should be one) is more than the $84k.

What is the value range of the unit? If we are talking $300k to $400k, that assessment is huge. If we are talking $1,500,000 to $2,000,000, not as significant. One would think that the likely buyer of a $400k condo unit could not absorb an $84k assessment due within 6-months; therefore, the buyer in that scenario would be an investor who will discount the price in excess of $84k, get the windows fixed, and then immediately re-sell when the assessment is no longer a liability.

($84k for windows? Sounds like a lot of common-space window replacement in addition to the units' windows)
 
Last edited:

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Call Pete,

He's in the burg and knows everything.

$84k per unit makes me question the height of this building.

.
 

vsalvitti

Freshman Member
Joined
May 30, 2008
Professional Status
Appraiser Trainee
State
Pennsylvania
As a licensed broker-appraiser I would presume that you are familiar with USPAP and as such the Competency Rule. If not I have copied the relevant portions for your reference below:



As such, my recommendation is that you spend the time and necessary fee to find someone that properly meets the Competency Rule rather than shopping around for random opinions on an on-line forum.
This is not my assignment. The appraiser who accepted the assignment is a seasoned appraiser and very familiar with the area. He has consulted other appraisers. I am more curious about how to approach something like this; I am not performing the appraisal.
 

Howard Klahr

Senior Member
Joined
Oct 4, 2004
Professional Status
Certified General Appraiser
State
Florida
The appraiser who accepted the assignment is a seasoned appraiser and very familiar with the area.
"Seasoned Appraiser does not equate to competency in regards to the needs of the assignment. Competency includes not just geography, but property type as well as the circumstances that need to be addressed in the appraisal problem. The fact that the "seasoned appraiser felt the need to inquire with the client on how to perform the assignment says all that needs to be said about competency in regards to this assignment.
 
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