Hypothetical Condition or not

[George Hatch]

If you have an existing condition for the property and an existing value trend, then in lieu any indications to the contrary the assumption is that the existing use and the existing market trend will continue to exist as of that future date.

It's when the condition doesn't currently exist that some people (like me) will argue that we're getting into an if/then hypothetical. IF it's built, IF the build is per plans and specs, IF it's complete as of that date, IF the projected supply/demand and pricing structure are in place, THEN the value as of that future date would be $x.

Now my view on it represents the minority opinion (most of those elements don't currently exist and may never come to exist as such, so those elements are hypothetical). The party line is that as of that date it will exist to that's what makes it an EA.

Regardless of which side of that argument you're taking what's important isn't the HC or EA labels being used to characterize the nature of the reasoning that's involved, but the description of the reasoning itself so that the reader can understand the context upon which the analysis and conclusion is based.

 

[Dublin ohio]

I have entered grandpa mode. I honestly can't remember if the verbiage on a FNMA form back in '13 referred to a hypothetical condition on the 'subject to' checkbox or not. That is the last time I looked at an FNMA form in earnest. My memory blows.

Here's todays

 

[Surf Cat]

If you are doing an appraisal for a prospective market value, subject-to plans and specs, is that considered a hypothetical condition? Im probably over thinking this, but would appreciate any feedback.

You mean proposed construction, subject to plans and specs. Not "prospective value" right?

If so, then yes, that would be considered a hypothetical condition.

I really like these type of assignments. Because if the builders don't do what the plans and specs specify, and don't get a certificate of occupancy (if required) from the planning department, then all bets are off.

Make sure the plans are signed and stamped (approved) from the building department.

Make sure to get the materials list with the cost breakdown. This is important for the cost approach and your quality rating as well as for the selection of sales as comparables.

Good luck!

 

[Terrel L. Shields]

If you are estimating the value as of today then a future construction is a hypothetical. But if you are valuing it as of a date in the future when it is supposed to be finished (say six months or a year), then it is an extraordinary assumption that it will be finished and existing as of the date of value. That came straight from Mark Lewis.

 

[andrew81]

Was that the phraseology back in 2013? Was hypothetical even mentioned? Or am I losing it?

I have entered grandpa mode. I honestly can't remember if the verbiage on a FNMA form back in '13 referred to a hypothetical condition on the 'subject to' checkbox or not. That is the last time I looked at an FNMA form in earnest. My memory blows.

Last time the form was updated was 2005.

 

[Terrel L. Shields]

You mean proposed construction, subject to plans and specs. Not "prospective value" right?

Probably the OPs intent. "Prospective value" is a value and date of appraisal sometime in the future. EA
Lenders usually want the HC that the property is to pretend it is already built and what's it worth then today?

 

[J Grant]

If you are doing an appraisal for a prospective market value, subject-to plans and specs, is that considered a hypothetical condition? Im probably over thinking this, but would appreciate any feedback.

Are you sure this is a prospective (f true effective date ) appraisal? In which case, the eff value date would be 10 months from now or whatever the client's instruction of a future date is.

Most new and proposed construction is an HC subject to completion per plans and specs, which we might go back to in the future and sign off on when it was completed. But they are usually a current eff date valued with the HC that it is complete as of X today or a similar current eff date when we inspect the site or the plans and run our comps etc.

 

[George Hatch]

Many assignments for FRTs involving proposed construction or remodels or other major hypotheticals require the future value opinion.

 

[J Grant]

Many assignments for FRTs involving proposed construction or remodels or other major hypotheticals require the future value opinion.

I've never been assigned one - idk anyone who has but will take your word for it - the client would need to provide the future prospective value date -

it would be a prospective future value date -

the HC would be completed construction as of that future date if it is plans and specs today.

 

[Surf Cat]

Many assignments for FRTs involving proposed construction or remodels or other major hypotheticals require the future value opinion.

If this is the case, then this assignment would be way over the head of the OP, whom is asking a basic hypothetical condition question. Unless, their mentor is assisting them.

We've been ditched by the op anyways, as usual.