Question about condo vs. attached SFR

[444nutman]

Also...

Going back in time to compare projects may not be the best solution for you as these issues have only come about over the last year few years. To justify your argument you may want to compare similar projects with differing occupancy rates to extract an average price difference or percentage.

I agree. In my market 4-5 years ago, there may not have been much of a difference. Today's market in my area, many condo projects have a hard time getting financing. Some of the projects are now half apartments, and half condo. Most are not FHA eligible while attached non condos, the financing is easier to obtain. Lately I have not had to use condos for attached non condos so I don't know the exact difference but when doing MLS runs for neighborhoods, the condos are selling at a lower price than attached SFR.

To the OP is there anyway you could expand your search area for similar attached SFR versus condos sales. If you lack sales in your area, it could give you something to hang your hat on.

 

[Couch Potato]

No PUDs nearby. I actually used the same properties as the appraiser used but I made an assumption that owning the land and structure, and having easier financing options would be more valuable hence justify the higher price we negotiated with the seller. I have an easier time accepting owning the land isn't important in SoCal but financing issues are very real these days in condos. It's really hard to sell a condo that can't go FHA.

That would be the thing on which to focus. First document the condos used are not eligible for FHA financing, then document its adverse effect on financing. There is no practical difference between the two, but there can be a substantial value difference.

In terms of owning the land, the condo owner owns all the land in the development, he just shares the ownership with the other unit owners. In a PUD only the one little lot is owned. The condo unit owner actually owns more land than the owner in a PUD where the common area is owned by an association.

 

[KristyMGray]

The appraiser should have gone back in time to graph the $/sf relationships between the two neighborhoods, showing the difference. In order not to make an adjustment, the two trend lines would have to overlap, coincide with each other as of the effective date of the appraisal.

You can do that yourself. Just take +/-20% GLA as a screen, go back 5 years, use Excel, plot the individual data points of $/sf versus COE (date of sale).

The other graph to construct with the same data is to show the relationship of price versus GLA for the two neighborhoods.

You can also segregate the data into groups: regular sales and distressed sales.

This technique paints the picture.

Good hunting.

Awesome I am in Finance for manager and we just covered this.. I can see what your saying and it works. Not only does it work it makes me money! LOVE IT!!!!

 

[Smokey Bear]

I'm surprised - I moved to SoCal 1.5 years ago from the Bay Area, and it looks to me like everything here that was built after 1970 is PUDs. I hate them! Give me a Victorian any day!

Aside from that, I would never use a condo as a comp for an attached SFR, they're just not the same and I'm not going to spend the time trying to prove it either way. SoCal is dense enough that I can't imagine not being to find comps unless you're in BFE, and there isn't much BFE around here either.

So, to echo a poster above, what city is the property located in? And it wasn't clear to me in your OP, but is the subject a condo or attached SFR?

 

[Mike Kennedy]

And it wasn't clear to me in your OP, but is the subject a condo or attached SFR?

OP "an attached SFR in a PUD (subject owns the land the structure sits on and the structure)"

 

[Dale Smalley]

We have them here also known as a Townhouse vs a townhouse condo. They look the same but have a different type of ownership. In many cases they are considered a good comparables as buyers would condsider them both equally. In the end you still pay the same out of pocket expenses. Owning 1-3k of land vs a percentage of the entire project usally equals out as well.

 

[Couch Potato]

We have them here also known as a Townhouse vs a townhouse condo. They look the same but have a different type of ownership. In many cases they are considered a good comparables as buyers would condsider them both equally. In the end you still pay the same out of pocket expenses. Owning 1-3k of land vs a percentage of the entire project usally equals out as well.

With a healthy condo there really is not a significant difference, but with low owner occupancy the financing availability can make a big difference. I believe that is the fundamental issue in this instance. A similar problem can happen in a PUD if the association is in financial trouble. It is important to be aware of the health the whole development when choosing "outside" comparables of either type.

 

[Dale Smalley]

I think you are falling into the over analysing trap on the financing issue. I have not used this issue in a review but most of mine are from back in the day when everyone got a loan.

 

[Couch Potato]

I think you are falling into the over analysing trap on the financing issue. I have not used this issue in a review but most of mine are from back in the day when everyone got a loan.

In times gone by I might agree with the "over analyzing" comment, but it can be a very significant issue in today's market as lending gets ever tighter.

 

[Motown Matt]

An appraiser can only make an adjustment that is quantifiable (for mortgage appraisals). If you cannot extract an adjustment from the market, then no adjustment should be made. However, this doesn't give an appraiser an excuse for not doing the analysis by just saying there is no difference. If you can extract an adjustment, preferably within the past 1-2 years max, you certainly have a case. If you cannot extract a quantifiable difference between the 2 types, proven by market data, that people pay or don't pay the same for the 2, then the appraiser is correct. The reason for the difference is irrelevant, though a good idea to attempt to understand why. It may be because of financing, or some other reason.

Bottom line: it should never be the appraiser's "opinion" for an adjustment (or no adjustment). It should be justified that an adjustment should (or shouldn't) be made by market data (paired sales analysis, graphs, charts, etc). You cannot just use logic and reason in this particular case to say that most people will or won't pay more or less for one than the other.