Hypothetical Condition?

[Tom D]

So what did you decide.

 

[PushinValue]

Does the restriction stay in place in case of foreclosure?

 

[Zoe]

This is not a permanent deed restriction. There is no sale for the first year. A permanent deed restriction will affect the use/ property rights forever and thus would impact value. A one-year temporary sale restriction not much, if at all.

Okay, what is your solution Queen?

 

[Zoe]

Client is the lender. It is new construction that was just completed and now doing a refinance transaction. So yes the lender/client is looking for a value as of the effective date.

Very important point. You are smart.

How do I know what value will be 1 year from the effective date? Did you talk to your E&O lawyer?

I promise you they won't charge you to ask them the question you posed here. They want to cover you and them.

 

[Zoe]

Current assignment is a new construction duplex. Upon inspection, the owner/builder provided me with the certificate of occupancy. On the certificate it stated under special stipulations and conditions that the owner/builder can not sell within 1 year of issuing certificate of occupancy. This is common in our market when properties are built by the owner/builder and did all the work themselves. So my main question is would I have to use a hypothetical condition to report a opinion of market value?
Since market value is
Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer.

If the subject property can not legally be sold as of the effective date of the appraisal do I need to use a hypothetical condition to report a opinion of market value, which is based on the theory of what it would sell for as of the effective date. Since it legally can not be sold is it misleading to report a opinion of value without the use of a hypothetical condition?

Really appreciate any insight. Local appraiser saod I'm over thinking it and that since it's for a refinance transaction it doesnt matter. I told him that is irrelevant as I'm am reporting a opinion of market value regardless of its a sale or refinance transaction.

Client wasn't helpful either and had to explain more and waiting to hear back but was hoping to get some input from other appraiser's.

Thank you

This is the question posed.

 

[Tom D]

Does the restriction stay in place in case of foreclosure?

The lender doesn't care, because in a foreclosure that stip means nothing. It probable not on the deed, just an agreement. Most foreclosures occur more than a year after purchase, so that will not be an issue if a short sale.

 

[Carnivore]

This is the question posed.

Interesting question and my thoughts go to the law. 1. Has this ever been tested in a court of law. Is it even constitutional. My thoughts are what if the buyer agrees, closes and then a month later he passes away. 2. Now What? Well it goes into Probate.

I understand why builders and local governments might want to have this type of restriction.

 

[Terrel L. Shields]

How do I know what value will be 1 year from the effective date?

You mean you do not know how to do a prospective value appraisal?

 

[RSW]

What about this part of the definition of market value: : ...the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

 

[Zoe]

You mean you do not know how to do a prospective value appraisal?

Sir that is not my choice. That is my client's choice.