Obligation To Take Future Offsite Conditions Into Account

[bodenstein]

An attorney that we work with on occasion asked my associate the following question, and I'd appreciate your thoughts and input:

"I have a potential case where the home purchased had a panoramic view of a mountain. There was a big condo development planned for the space between the house and the mountain that was not yet started at the time the home was purchased. After purchase, the condo building is built, my clients entire view is destroyed, they now stare at the back of the condo complex, house is worth far less.

If the appraiser knew of the coming condo development, should that have been noted in the report and also taken into consideration in that value even though the condo building had not yet been constructed. Or do you only have to report on the existing conditions and existing value?"

Thanks in advance for your thoughts on this.

Jerry Bodenstein

 

[Michigan CG]

As of the EFFECTIVE date of the appraisal the home was worth $X because at that time the view was there. However, it is my opinion the appraiser committed an error of omission as they knew that the view would disappear and significantly reduce the value of the property.

The questions that need to be asked are, are we sure the appraiser knew about the incoming condo project? Did the seller know about the incoming condo project? Why didn't the buyer know about it?

 

[JTip]

Check with listing/selling broker that sold it to him. I bet they knew 'bout it.....

 

[J Grant]

An attorney that we work with on occasion asked my associate the following question, and I'd appreciate your thoughts and input:
"I have a potential case where the home purchased had a panoramic view of a mountain. There was a big condo development planned for the space between the house and the mountain that was not yet started at the time the home was purchased. After purchase, the condo building is built, my clients entire view is destroyed, they now stare at the back of the condo complex, house is worth far less.
If the appraiser knew of the coming condo development, should that have been noted in the report and also taken into consideration in that value even though the condo building had not yet been constructed. Or do you only have to report on the existing conditions and existing value?"
Thanks in advance for your thoughts on this. Jerry Bodenstein

The market value opinion definition states a well informed and well advised buyer...so if the condo development was one where area RE agents knew of it, and were advising buyers about it/and or in the news mentioned etc...then the hypothetical sale buyer and seller of the appraisal would know about it as well informed/well advised buyers...EVEN IF THE ACTUAL NAMED BUYER ON CONTRACT DID NOT KNOW

I can't stress this enough, appraisers must remember appraisal creates a hypothetical presumed transaction as of eff date, where buyer and seller per the value definition are both well informed and well advised, acting prudently etc...which is why our MV opinion can differ from a price in a contract where a "real" individual buyer/seller may not be well informed or well advised or acting prudently.

Was the condo development in the news/on MLS enough that an appraiser working in that area should have known about it (competence). . Was it on subject listing or on similar listing comments in area? Certainly if appraiser knew about it, they should have disclosed and commented on it, and analyzed its affect on value if the pending condo construction that would block view was of common enough knowledge that well informed buyers would know about it

I have seen similar information here disclosed in listings, agents want to make sales but they don't like to get sued/. I've had similar issues from time time (in my area it is usually a building going up that will block a water view, and I comment about it analyze value impact...I hope of course there was not an appraisal I did where I should have known something was going to block view and did not...but that is area competence if a significant development is development has been going up in an area wit views being blocked...vs public land or park land or low rise zoning where building is limited or not allowed and a view would remain open/protected..

Hope this buyer is going after the RE agent too if agent knew and did not inform buyer.

 

[Mark K]

Mountains in New Jersey? Come on now, this is a trick question, right?

To answer, IMO, the appraiser absolutely should have mentioned it in the report, assuming he was aware. The New Jersey Mountain view probably added value, maybe significantly.

I don't think he should reported a value "subject to" the condo building existing.

Appraising it with the Extraordinary Assumption that the view would remain unobstructed would have been a good idea, IF he was aware of the project.

 

[Terrel L. Shields]

Mountains in New Jersey?

Well... they make little bitty mountains too. So the condo only has to be two stories tall.

 

[J Grant]

Mountains in New Jersey? Come on now, this is a trick question, right?

To answer, IMO, the appraiser absolutely should have mentioned it in the report, assuming he was aware. The New Jersey Mountain view probably added value, maybe significantly.

I don't think he should reported a value "subject to" the condo building existing.

Appraising it with the Extraordinary Assumption that the view would remain unobstructed would have been a good idea, IF he was aware of the project.

The last EA makes no sense. If an informed buyer would have been expected to know/been advised about the condo pending development, they would likely either have paid less for the subject (or not have bought it, if the reason for buying it was the view).

 

[Mike Kennedy]

Mountains in New Jersey? Come on now, this is a trick question, right?

To answer, IMO, the appraiser absolutely should have mentioned it in the report, assuming he was aware. The New Jersey Mountain view probably added value, maybe significantly.

I don't think he should reported a value "subject to" the condo building existing.

Appraising it with the Extraordinary Assumption that the view would remain unobstructed would have been a good idea, IF he was aware of the project.

Examples:

Mountain View homes for sale NJ
http://www.sothebysrealty.com/eng/sales/nj-usa/mountain-views-lotf

also
http://www.realtor.com/realestateandhomes-search/Mountain-Lakes_NJ/features-vw

also
http://www.landwatch.com/Sussex-County-New-Jersey-Farms-and-Ranches-for-sale/pid/25012842

also
http://www.mountaincreek.com/resort/mountain-creek-story

 

[Meandering]

An attorney that we work with on occasion asked my associate the following question, and I'd appreciate your thoughts and input:

"I have a potential case where the home purchased had a panoramic view of a mountain. There was a big condo development planned for the space between the house and the mountain that was not yet started at the time the home was purchased. After purchase, the condo building is built, my clients entire view is destroyed, they now stare at the back of the condo complex, house is worth far less.

If the appraiser knew of the coming condo development, should that have been noted in the report and also taken into consideration in that value even though the condo building had not yet been constructed. Or do you only have to report on the existing conditions and existing value?"

Thanks in advance for your thoughts on this.

Jerry Bodenstein

The question is,

Did the market know the condos were going to be built, and built in such a way as to monopolize the mountain view? Were there newspaper articles? Newspaper articles are public notice. If you're trying to make a case that any potential buyer of any property with a view will run down a government official to verify nothing is planned to be built that would obstruct the view, I believe you will have a hard time convincing anyone that is how the market operates.

Residential lending appraisals do not forecast future value changes. Even with known coming zoning changes. There is just a requirement to note what is known and if the zoning changes will impact marketability or value, but not to value the property as if the zoning changes had occurred. The value opinion in the residential lending appraisal is as-is, as of the effective date. So, in my humble opinion, if there wasn't any newspaper coverage prior to the sale of the subject about the coming condos, then the homeowner had an obligation to track down any potential of future development on their own.

Caveat emptor.

.

 

[The Bob]

Ask the attorney this:

Since the appraisal was done after the contract was written, could the buyer have backed out of the contract if the appraisal mentioned the potential loss of view?