Review of a Non-conforming property appraisal

[johnfu]

Hi,

I was doing an review for a purchase. The purchase price is $560,000 and the appraisal has an estimate value of $1,200,000. The property has been on the market for 980 days.
I did an research and found out that the subject property is a "nonconfoming" property and the original appraisal stated it is "legal" zoning and all the comparables in the original appraisal report were all "legal" zoning properties.
I disagree with the value in the original report but I wasn't able to provide comparables to support my opinion of value since there has been no sales of similar condition properties in the neighborhood.
I gave a value of $560,000 as my opinion of value in the review and it was based on the market reaction to the subject property since it was listed for almost 3 years and the value was not recognized by the market until recently.

Am I did the right thing? Or is there any other way to do this?

I appreciate all comments.

 

[CANative]

The reviewer is not required to replicate the steps completed by the original appraiser. Those items in the work under review that the reviewer concludes are credible and in compliance with the applicable development Standard (STANDARD 1, 3, 4, 6, 7, or 9) can be extended to the reviewer’s value opinion development process on the basis of an extraordinary assumption by the reviewer. Those items not deemed to be credible or in compliance must be replaced with information or analysis by the reviewer, developed in conformance with STANDARD 1, 3, 4, 6, 7, or 9, as applicable, to produce a credible value opinion.

 

[johnfu]

Thank you for the comments.
But since there is no comparables I can replace in the review appraisal.
I was given a value based on the purchase price or the value recognized by the open market.
Does that consider to be a credible value opinion?

 

[The Warrior Monk]

But since there is no comparables I can replace in the review appraisal.

Keep in mind that you are not doing just a review, you are performing a review and an appraisal.

I was given a value based on the purchase price or the value recognized by the open market.

Does that consider to be a credible value opinion?

You are required to follow SR 1 and 2 when developing and reporting an appraisal.

If you were performing an appraisal for a lender, would then lender accept the sole basis for an appraisal being the fact that the subject was listed for a certain price at a certain time, and a sales contract on that property?

 

[CANative]

There are more approaches and techniques than a simple direct sales comparison approach. This is a very difficult assignment. If you can't complete it or don't want to be hassled (that would be me) then withdraw from the assignment. That's the USPAPiest thing to do.

 

[Lee Lansford]

Thank you for the comments.
But since there is no comparables I can replace in the review appraisal.
I was given a value based on the purchase price or the value recognized by the open market.
Does that consider to be a credible value opinion?

Well, no.

If you are basing your opinion of market value based solely on the contract price, how does your appraisal conform to the USPAP?

 

[johnfu]

Thank you for your attention.
But the problem is the subject property is an atypical property and the zoning is non-comforming. I can't find any sales comparables which is non-comforming zoning either. If I use sales comparable approach to do this appraisal, how to make a adjustment? Because non-conforming zoning is the major fact impact the value.

 

[Lee Lansford]

Thank you for your attention.
But the problem is the subject property is an atypical property and the zoning is non-comforming. I can't find any sales comparables which is non-comforming zoning either. If I use sales comparable approach to do this appraisal, how to make a adjustment? Because non-conforming zoning is the major fact impact the value.

The situation is sort of similar to "water-over-the-dam" now that you have already communicated your review and opinion of market value, but...if I had been in your situation I would have communicated with the client the moment when I first knew that I could not develop and communicate a credible opinion of value...and, this is what I would have told the client.

As it now stands, you have an appraisal "out there" that is not credible.

 

[CANative]

What is it that is making the "property" non-conforming?

 

[johnfu]

Yeah, I know the easiest way to do is withdraw from the sssignmet. But my point is how to settle the problem and finish such assignment. Today, unfortunately, I have the problem. Maybe someday, other appraisers will have such problem too. The same question will be come out in the future. Why do we figure out the solution together now.