SFR - Affordable Housing Deed Restriction

[gregb]

Some income/sale restricted properties lose such restrictions if a lender forecloses. In that situation the lender is looking for a MV appraisal, regardless of the income/sale restrictions.

 

[J Grant]

Some income/sale restricted properties lose such restrictions if a lender forecloses. In that situation the lender is looking for a MV appraisal, regardless of the income/sale restrictions.

So the lender can sell it for whatever price they want to whomever they want regardless of income?

What happens to the person who buys the property from lender..will the deed restriction apply when they go to sell in future? (Does the exemption from deed restriction only exist for a lender who forecloses )

 

[Noreen]

I'm working an appraisal that has a deed restriction with the city related to affordable housing.

For the specific property I'm appraising, the restriction places limitations upon refinance and resale. Any new buyer must fall within the "Moderate Income Household" definition. This deed restriction expires in about 36 years on Sept 28, 2050.

I've been in the process with the city to determine the max amount the dwelling can be sold under the restriction. However, this may be purely academic from an appraisal perspective. The FNMA 1004 form (which is the requested form per the lender/client) clearly states a market value definition with "...normal consideration for the property sold unaffected by special or creative financing or sale concessions granted by anyone associated with the sale."

As such, I could simply ignore the deed restriction because the market value definition expresses this hypothetical scenario. This is not unlike a "Short Sale" scenario where lien-holder approval is not blended into the final opinion of value. I don't think that Cert 14 is implying lien-holder approval...or deed restrictions as a legitimate factor related to the market value definition.

And yet...I think its prudent to report the deed restriction. (See Cert 15) I'm leaning toward providing an opinion of market value (sans Deed Restriction) and make appropriate commentary in the Final Reconciliation regarding the restriction and note the max sale price allowable per the city...but only in the addendum. If the lender doesn't properly underwrite the loan with knowledge of the deed restriction upon resale...they could effectively loan more to the borrower than could be repaid upon resale. But that's not my responsibility...right?

Am I missing something here? What do you do in these scenarios?

I just finished one for the Commonwealth HOP (Housing Opportunity Program versus LIP (Local Initiative Program), one state, ones municipal. ( they just love their acronyms). Yes, you appraise the property for Market Value, THEY determine the impact on the deed restriction as on the terms of their original contract and financial position of the mortgagee at time of the transaction. The way some of these contracts are written here, you would have to be an actuary to be able to calculate the terms of some of these.

 

[residentialguy]

I just finished one for the Commonwealth HOP (Housing Opportunity Program versus LIP (Local Initiative Program), one state, ones municipal. ( they just love their acronyms). Yes, you appraise the property for Market Value, THEY determine the impact on the deed restriction as on the terms of their original contract and financial position of the mortgagee at time of the transaction. The way some of these contracts are written here, you would have to be an actuary to be able to calculate the terms of some of these.

If the property is not allowed to sell beyond 150k, then how could you report any probable price beyond 150k when it is not legally possible???

 

[Doug DeMars]

If the property is not allowed to sell beyond 150k, then how could you report any probable price beyond 150k when it is not legally possible???

Hey ResGuy-
If anyone has the MV definition tattooed on his arm...I know it's you!:new_smile-l:

A better question is...if the property is not allowed to sell at MV (due to the specific deed restriction related to a "sale price cap")...can you legitimately report the "capped" price as MV? Specifically the MV definition found on the most recent URAR form? Moreover, Certification 4 on the URAR essentially becomes void once MV exceeds the price cap. An appraiser is no longer using the Sales Comparison Approach. The opinion of value is solely based upon the deed restriction and has little or nothing to do with market evidence. In other words, the price cap is driving value...not the market.

(on a side note)
I agree that typical restrictions on real estate, such as zoning, CCRs, etc...are baked into the analysis for MV. The best selection of comparables generally have the same ingredients. Reasonable adjustments can be applied for differences in some restrictions (or consider that such differences are inconsequential) such as using non-HOA properties in juxtaposition with dwellings found in a HOA...or using "Condo" ownership townhouses in juxtaposition with "PUD" style townhouses...or using comps in one type of zoning vs. the subject's zoning, etc...

 

[J Grant]

Hey ResGuy-
If anyone has the MV definition tattooed on his arm...I know it's you!:new_smile-l:

A better question is...if the property is not allowed to sell at MV (due to the specific deed restriction related to a "sale price cap")

The property DR states it can not be sold above X$ capped price. It does not state property can not be sold at MV.

...can you legitimately report the "capped" price as MV? Specifically the MV definition found on the most recent URAR form?

The MV definition is "most probable price" , not "highest probable price". Therefore MV will be the most probable price YOUR SUBJECT PROPERTY can bring in the market with whatever conditions or restrictions it has. Aka, whatever price it brings below the capped price is the most probable price subject can command.

Moreover, Certification 4 on the URAR essentially becomes void once MV exceeds the price cap. An appraiser is no longer using the Sales Comparison Approach. The opinion of value is solely based upon the deed restriction and has little or nothing to do with market evidence. In other words, the price cap is driving value...not the market.

(on a side note)
I agree that typical restrictions on real estate, such as zoning, CCRs, etc...are baked into the analysis for MV. The best selection of comparables generally have the same ingredients. Reasonable adjustments can be applied for differences in some restrictions (or consider that such differences are inconsequential) such as using non-HOA properties in juxtaposition with dwellings found in a HOA...or using "Condo" ownership townhouses in juxtaposition with "PUD" style townhouses...or using comps in one type of zoning vs. the subject's zoning, etc...

Imo, consider resigning from this assignment as you seem to be struggling y with how it can be fulfilled as a MV purpose appraisal.

I have given back a few/decline certain assignments; exercising judgement when to decline or give an assignment back is part of competence.:new_

 

[Doug DeMars]

J Grant-

Good grief...it's these kind of comments that you make that drive me nuts...

The property DR states it can not be sold above X$ capped price. It does not state property can not be sold at MV.

The whole premise of this thread is to discuss if a specific deed restriction related to a price cap changes the nature of its market value. Your statement above reflects an opinion that the capped price = MV. This being the scenario where the property would clearly sell for a higher amount w/o the deed restriction. I suggest that if this is the case...one can no longer provide an opinion of MV (based upon language within the most recent URAR form) because the Sales Comparison Approach is no longer being applied.

IMO, consider resigning from this thread as you seem to be struggling with it.

 

[J Grant]

lol, good comeback on the resign, I will address issues after! I appreciate the wit!

 

[J Grant]

J Grant-

The whole premise of this thread is to discuss if a specific deed restriction related to a price cap changes the nature of its market value.

We can opine market value opinion for a property with a deed restriction, providing we have data / sales to do so.

Your statement above reflects an opinion that the capped price = MV.

That is not what I stated....I stated that whatever price a subject with a capped price could command would be it's most probable price, and based on that we would form our opinion of market value.

A price does not=MV. Properties bring certain prices in the market and from those prices we develop /communicate our opinion of market value.

This being the scenario where the property would clearly sell for a higher amount w/o the deed restriction.

So what? Yes it would sell for a higher price w/o the deed restriction. A property in dated condition would sell for a higher price if it were upgraded. WE appraise properties for what they are, warts and all, in "as is "appraisal. If a property's price is adversely impacted by a deed restriction, then the price a property can bring with its deed restriction is the basis of opinion of market value of it's most probable price .

I suggest that if this is the case...one can no longer provide an opinion of MV (based upon language within the most recent URAR form) because the Sales Comparison Approach is no longer being applied.

Why couldn't' you apply the Sales comparison approach? Use a sale of a deed restricted property , or more if avail as comps. If you have sale of non deed restricted property, apply the extracted adjustment. As long as you have credible sales data, you can develop a SCA.

See above comments. ..

 

[J Grant]

If the property is not allowed to sell beyond 150k, then how could you report any probable price beyond 150k when it is not legally possible???

The way Noreen did the assignment for housing authorities who apply their own table of impact on price sounds a bit different.

For a MV purpose "as is" appraisal, if 150k is cap price, there could not be a most probable price above 150k for that property. Therefore, the opinion of market value would be based on whatever prices these properties were selling for,..(whatever prices below 150k they were selling for)