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How To Value An Hoa?

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kaner

Freshman Member
Joined
Apr 26, 2009
Professional Status
Certified General Appraiser
State
Colorado
I'm looking a mixed-use property. Part commercial, part residential, all units are condominiumized, all units are members of the HOA and pay HOA dues. The main commercial owner/tenant is 51% of the building area and 51% of the HOA. The HOA is controlled and ran by this owner.

So they pay 51% of the HOA to themselves, then reimburse their self for all maintenance and repairs. The 51% commercial owner/tenant does not have a "reserves for replacement" line item, but the HOA that they manage does.

Has anyone ever valued an HOA? Not a unit within an HOA, but the actual HOA? They have an operating statement and are related to property, while not actually owning any property, so are there any real property rights even associated with it? If the HOA is turning a profit (NOI), we can apply an income approach, right?
 

nstanbru

Senior Member
Joined
Feb 19, 2009
Professional Status
Certified General Appraiser
State
California
Are you saying you have been asked to provide a value opinion of the HOA?
 

kaner

Freshman Member
Joined
Apr 26, 2009
Professional Status
Certified General Appraiser
State
Colorado
Not necessarily, but has anyone ever been asked to value an HOA? They have assets, income statement and it would not exist without the directly related property, so I believe it would actually be an interest in real property, and not business or intangible value. An HOA cannot be bought and sold and traded without the underlying real property.
 

Rlong

Member
Joined
Jan 31, 2002
Professional Status
Certified General Appraiser
State
Colorado
Might it not be an undividable component of the underlying real estate? It would possibly be different if you were talking about a pool and clubhouse the HOA could theoretically sell of to a private entity to run. But I don’t see how what your talking about could have a “market value” separate from the whole.
 

nstanbru

Senior Member
Joined
Feb 19, 2009
Professional Status
Certified General Appraiser
State
California
Not necessarily, but has anyone ever been asked to value an HOA? They have assets, income statement and it would not exist without the directly related property, so I believe it would actually be an interest in real property, and not business or intangible value. An HOA cannot be bought and sold and traded without the underlying real property.

I could be way off on this, but IMO, an HOA would be akin to a board of directors of a company. The "company" is the association comprised of the unit owners with the leadership being the board members selected by the HOA members.
 

kaner

Freshman Member
Joined
Apr 26, 2009
Professional Status
Certified General Appraiser
State
Colorado
By only using the commercial tenant's operating statement, and not including the HOA that they pay into, but also manage, am I short-changing the value to the commercial unit?
 

jay trotta

Elite Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
OP; "I'm looking a mixed-use property. Part commercial, part residential, all units are condominiumized, all units are members of the HOA and pay HOA dues. The main commercial owner/tenant is 51% of the building area and 51% of the HOA. The HOA is controlled and ran by this owner.

So they pay 51% of the HOA to themselves, then reimburse their self for all maintenance and repairs. The 51% commercial owner/tenant does not have a "reserves for replacement" line item, but the HOA that they manage does."

Just my opinion; do you have a conflict of interest here ? Is there a co-mingling of funds ? RFR none and the Balance does ?
 

kaner

Freshman Member
Joined
Apr 26, 2009
Professional Status
Certified General Appraiser
State
Colorado
Not a conflict of interest, just wondering if the HOA in and of itself has real property value, and if that value is isolated to the HOA entity or if it should be added to the value of the commercial unit. It's more a theoretical question based on some recent assignments I've been working.
 

jay trotta

Elite Member
Joined
Feb 8, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
Not a conflict of interest, just wondering if the HOA in and of itself has real property value, and if that value is isolated to the HOA entity or if it should be added to the value of the commercial unit. It's more a theoretical question based on some recent assignments I've been working.

Not a commercial guy here; curious how it could be considered "Real Property", when it appears to jiggle "Business" - Gross (HOA) / Debt / No result (HOA to themselves, then reimburse their self for all maintenance and repairs) "0" contributory value ??
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
I'm looking a mixed-use property. Part commercial, part residential, all units are condominiumized, all units are members of the HOA and pay HOA dues.

Is title of the underlying land vested in the HOA? Or in some other owner? Who is the title owner of the parts of the building not owned by the unit owners? The HOA? the Commercial Unit owner? or both the HOA and the commercial unit owner?

The main commercial owner/tenant is 51% of the building area and 51% of the HOA. The HOA is controlled and ran by this owner.

So now I'm confused. Is this an HOA or a Condo Association? I could see the commercial tenant owning 51% of a condo association, but not of an HOA, herein may be where your questions arise, as an HOA is a stand alone entity with voting rights to property owners, while a Condo Association shares ownership rights in some or all of it's property.

So try again.
Is this an HOA or a Condo Association?
Who owns the underlying land?
What rights does the Association legally hold?
Notice I did not ask you about income?

.
 
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