Incomplete condo development

[pslagel]

I have an FHA appraisal on a 2007 townhouse, zoned as condominium, that meets FHA requirements, however the development itself is not complete and per the homeowner has been "temporarily suspended". The lender is asking me to comment if the subject conforms to HUD's minimum property standards. I have disclosed the above but they sent it back wanting the specific wording that it "conforms to HUD's minimum property standards". My question, does the developments unfinished state disqualify this townhouse from meeting FHA's min. standards? Thanks.

 

[Joyce Potts]

The answer is NO, in my opinion. I'm seeing this go on all over the place in Orlando. For the completed projects, so many units are either in foreclosure or have lawsuits over construction or other issues, there's a major deficiency in the reserves.

Are you getting the picture?

 

[Lee Lansford]

...the development itself is not complete and per the homeowner has been "temporarily suspended"...

Tell us more.

Are you telling us that there are 500 units in the project and 1 unit is unsold and incomplete or...et cetera?!?!?

 

[Craig Farr]

If the condo meets Minimum Property Standards, say so. If the common elements aren't completed, say so, and make the appraisal Subject To completion.

Anyway, who the heck would buy a condo in a development that has stopped construction? I just did a REO in such a place and found none, zero, nadda, zilch comps.

Why would a lender make a loan on such a risky deal? Oh, how silly of me, I just remembered that the lender just wants a commission and doesn't give a horse's patoot about the borrower or the appraiser or anybody else in the world!

 

[pslagel]

The project is about 50% complete, however the clubhouse, pool and other amenities are not complete. There are 2 listings in the development and I had to go back to December 07 and November 07 for sales with support from sales outside the development. They even showed on sale from 3/08 for a unit this is not complete yet.

 

[timd354]

I have an FHA appraisal on a 2007 townhouse, zoned as condominium, that meets FHA requirements, however the development itself is not complete and per the homeowner has been "temporarily suspended". The lender is asking me to comment if the subject conforms to HUD's minimum property standards. I have disclosed the above but they sent it back wanting the specific wording that it "conforms to HUD's minimum property standards". My question, does the developments unfinished state disqualify this townhouse from meeting FHA's min. standards? Thanks.

I would comment on whether or not the subject unit meets HUD/FHA minimum property requirements....I believe that this is what underwriter really wants, but is too stupid to know how to frame the question.

I would never, ever comment on whether or not a condominium project meets HUD/FHA minimum standards. Under FHA protocols, it is not the appraiser's job to determine whether the project is FHA compliant, but that is the job of the lender and requires analysis that is outside the SOW of the appraisal.

 

[pslagel]

Thanks for all your help on this!

 

[VegasWayne]

Doesn't the FHA have a list of approved condo projects which can be searched on their web site? An incomplete project would probably not be on the list. You may want to check this out and include it in the report. They will occasionally insure a loan on an unapproved project so this won't automatically disqualify the property.

 

[timd354]

The project is about 50% complete, however the clubhouse, pool and other amenities are not complete. There are 2 listings in the development and I had to go back to December 07 and November 07 for sales with support from sales outside the development. They even showed on sale from 3/08 for a unit this is not complete yet.

I am just curious about a couple of things. First were the prior sales in the subject's project contracted and sold before the problems in the subject's project surfaced? Second, did the comparables from outside the project come from a similar project where the construction was halted with amenities not completed? If not, what kind of adjustment did you make for this factor and how did you determine the amount of the adjustment? Just curious.

One thing for sure, I would not have touched this assignment without a fee of at least several thousand dollars so I could do all of the proper due diligence (such as determining the likelihood of the amenities ever being completed and the effect of that likelihood on value, etc).....this type of assignment undoubtedly has the potential for huge liability for the appraiser.