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Re-Sale Deed Restriction

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Tim Schneider

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Member
Joined
Feb 8, 2007
Professional Status
Certified Residential Appraiser
State
Wisconsin
OK, I'm stumped. Appriasal for lending purposes, it is a sale. Subject is a FNMA owned foreclosure, contract addendum states subject can not be resold for more than 68K for a period of 3 months from date of close. Purchase price is $53K, MV coming in at $75K (after being checked by my CR supervisor). However, can it really be worth more than it could be sold for, even if the deed restriction starts once it is closed on? How have others dealt with this problem? Any repsponses ASAP would be great!
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
Good question, my guess would be NO, until that restriction expires.

In our area, we have something similar where the local government sets aside "affordable housing". They set the price, period. Many appraisers go out and do not even know the restriction exist and appraise using normal market comps. Wrong, one has to get the comps from the agency of homes with similar set pricing and restrictions.

Long story short, if you effective value is when the restriction is in place, then the ceiling has to be $68,000 or lower.
 

Wendy

Senior Member
Joined
Feb 23, 2004
Professional Status
Certified Residential Appraiser
State
Florida
Throwing an idea out.....

Is the effective date of your appraisal is prior to the re-sale restriction going into effect? If so, problem solved!
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
The time period is so short that most potential investors would have no problem waiting it out. That would mean that it is most likely that someone would pay more than the $68K right now in anticpation of future benefits that would ocurr in 3 months; much like any investment property.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
OK, I'm stumped. Appriasal for lending purposes, it is a sale. Subject is a FNMA owned foreclosure, contract addendum states subject can not be resold for more than 68K for a period of 3 months from date of close. Purchase price is $53K, MV coming in at $75K (after being checked by my CR supervisor). However, can it really be worth more than it could be sold for, even if the deed restriction starts once it is closed on? How have others dealt with this problem? Any repsponses ASAP would be great!

Mr. Schneider,

Deep breath..... Now breath again! LOL... I am surprised your CR does not get the concept. You and your CR are forgetting that you are opining value based on the definition of Market Value. Where in that definition does it say you are appraising the real estate as if the contract between this one seller, and one buyer, sets the market for the real estate as of your effective date? Your value is that of a hypothetical seller(s) and a hypothetical buyer(s) described by the Market Value definition. Not some hypothetical sale contract or the real one.

Stop appraising the private sales contract. Appraise the real estate per the definition of Market Value.

Webbed.

P.S. I suppose the contract also says that the deal is off if the buyer cannot obtain financing... right? Most of them do. So if this completely sale fails for some reason, we are saying the private party contract momentarily altered the market value over a contractual agreement that never came to fruitation? Definition of Market Value: Typical buyer, typical seller... not this buyer and this seller. Nor their contract.
 
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Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
I missed that too when I saw the words "deed restriction".
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
Good question, my guess would be NO, until that restriction expires.

In our area, we have something similar where the local government sets aside "affordable housing". They set the price, period. Many appraisers go out and do not even know the restriction exist and appraise using normal market comps. Wrong, one has to get the comps from the agency of homes with similar set pricing and restrictions.

Long story short, if you effective value is when the restriction is in place, then the ceiling has to be $68,000 or lower.

T.J.

You're mixing governmental police powers into this? Fannie may be an 800lb gorilla of financing... but not police powers. If we allow ourselves to start saying a private sales contract between two specific parties, in existance at the time of our effective date, alters the definition of market value we are opining to........ then every purchase you have ever worked on has had a contract of sale that altered the hypothetical sale taking place under that definition we use.

Come on, the definition is based on an unencumbered arms-length transaction. We cannot adopt logic that says every private party contract makes the market value what the contract is for. Governmental powers are different when they are an affecting factor.

Webbed.
 
Last edited:

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
I missed that too when I saw the words "deed restriction".

Mr. Butler,

Missed what? I assume the current recorded deed has no such restriction on it. At what point did we begin to consider intended anticipated deeds that have never yet been recorded, or their coming restrictions that are not currently in existance? I thought this was a "current" appraisal and not a "prospective" one with a HC such a deed has been recorded.

Webbed.
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Some deed restrictions have long lifes and continue in perpituity. This poster is talking about a one time restriction which can be ignored for value purposes. But a deed restriction that is always going to be with the property can indeed affect its value and needs to be considered.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
Some deed restrictions have long lifes and continue in perpituity. This poster is talking about a one time restriction which can be ignored for value purposes. But a deed restriction that is always going to be with the property can indeed affect its value and needs to be considered.

Mr. Butler,

This one will affect the real estate. After it is recorded and exists. Today, it does not exist. An appraisal for a refinance in a month may very well have to look to see if some discount may occur due the the deed restriction at that time. While the current buyer may perhaps be discounting a wee bit for risk due to the current sellers demands, the current sellers demands do not alter our definition of market value today that assumes hypothetical seller and buyer as it describes. Not a hypothetical seller demanding such a contract item.

Webbed.
 
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