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Purchasing An Investment Condo, But Asked To Appraise A Unit In The Same Condo?

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Bill75

Junior Member
Supporting Member
Joined
Dec 18, 2015
Professional Status
Certified Residential Appraiser
State
Texas
Here is my concern. There are 230 brand new condo units being built and should be finished by the end of December 2017. The development is located right by my "office" and I'm purchasing a unit for an investment because I know it's about to be the next hot market in my area. I know there are four preferred lenders the developer is using in this development, I'm on all four of their panels which means I will probably get a lot of bid requests on most of these 230 units. My question is, will this be a conflict of interest to appraise other units in the development? I can pay cash, but I know I'm about 20K over market because I purchased an addition parking space because I know parking will be an issue. I'd rather get a loan and pay half and "hope" it doesn't appraise at contract and force the developer to drop the contract price 20k and I would essentially get the additional parking space for free.

The thing is, the developer's son was in my fraternity and I kind of know him and I don't want to make it awkward if I were to appraise sales and they don't meet contract.

I could be missing out on an opportunity to cash in with appraisal assignments, but on the other hand, I kinda don't want mine to appraise either... what to do...

If anyone has any insight to this, It would greatly be appreciated as I just got my first order to appraiser a unit in the development, but I declined. Thanks in advance.
 

Mark K

Elite Member
Joined
Jan 27, 2004
Professional Status
Certified Residential Appraiser
State
Indiana
Buy a condo OR appraise the units. Chose one or the other.

I think appraising the condos wouldn't be a big problem even considering the connection to the son, but if you combine owning a unit AND having a relationship, the actual, or at least the appearance of, a conflict of interest could be a problem that I wouldn't want hanging around.

It would be very easy for an outsider to think that you have a vested interest in seeing the value of the units appreciate if you own a unit in the complex.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
You should be well informed about the project. As long as you 1) perform any appraisals impartially, 2) don't 'push' the values, and 3) provide dequate comparables from outside the project, don't see an issue.
 

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Buy a condo OR appraise the units. Chose one or the other.

I think appraising the condos wouldn't be a big problem even considering the connection to the son, but if you combine owning a unit AND having a relationship, the actual, or at least the appearance of, a conflict of interest could be a problem that I wouldn't want hanging around.

It would be very easy for an outsider to think that you have a vested interest in seeing the value of the units appreciate if you own a unit in the complex.
Does that go for appraising improvements in the subdivision where they live, as well?
 

TRESinc

Elite Member
Joined
Dec 1, 2011
Professional Status
Licensed Appraiser
State
Ohio
You should be well informed about the project. As long as you 1) perform any appraisals impartially, 2) don't 'push' the values, and 3) provide dequate comparables from outside the project, don't see an issue.


exactly. much like charity, ethics start at home.
 

Vermonter

Senior Member
Joined
Mar 21, 2007
Professional Status
Certified Residential Appraiser
State
Vermont
Does that go for appraising improvements in the subdivision where they live, as well?

Not necessarily, but the value of an investment property vs your personal home could look very different in the litigation world. The builder being a frat brother just adds to it. We've all been in situations where we weren't sure if the was a conflict, but it's sometimes better to err on the side of caution and avoid the potential mess.

Remember, it's not that you can't give an unbiased opinion of value if you own in the development or know the builder, it's the appearance of a conflict that could burn you.

From what the OP stated, I would probably decline if in this same situation.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
OP_ I'd rather get a loan and pay half and "hope" it doesn't appraise at contract and force the developer to drop the contract price 20k and I would essentially get the additional parking space for free.

The thing is, the developer's son was in my fraternity and I kind of know him and I don't want to make it awkward if I were to appraise sales and they don't meet contract.


These two things make it a bad idea. Neither of these are present if an appraiser appraises in the subdivision where they happen to live.
 

Bill75

Junior Member
Supporting Member
Joined
Dec 18, 2015
Professional Status
Certified Residential Appraiser
State
Texas
Thanks for the info guys. You guys are pretty much confirming what I thought all along. Just wonder this is even legal to appraise in a complex you are purchasing a unit, or is it just a morality unbiased thing I'm dealing with?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Of course it is legal to appraise where you buy. But the fact that you are already having doubts with your own price purchase and hope the appraisal comes in lower, as well as worrying about if your friend who is builder's son might have issues if you appraised below contract indicates in this particular case there are conflict of interests and personal concerns present that make it a bad idea .

Even if you try to remain unbiased these concerns could cause problems. This family will build other projects in future, tell them you'd love to help them on the next one- they will respect your decision.
 
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