Special assessments

[chipper]

I was curious on how you handle condo special assessments on a refinance appraisal.

Condo
Value of approx $405K
There is a special assessment for the condos in that development for work that has already been completed.
Special assessment balance of about $30K for that condo
Borrower has not paid the full assessment off and is paying monthly
Sellers have to pay the assessment before the property can be sold.

Would the special assessment be deducted from the value when doing a refinance appraisal or how would you handle?

Thank you!

 

[Meandering]

I was curious on how you handle condo special assessments on a refinance appraisal.

Would the special assessment be deducted from the value when doing a refinance appraisal or how would you handle?

Sellers have to pay the assessment before the property can be sold.

If you are seeking "Market Value"
you have answered your own question.

Are you deducting the balance of any outstanding mortgage from a "market value"???


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[chipper]

If you are seeking "Market Value"
you have answered your own question.

Are you deducting the balance of any outstanding mortgage from a "market value"???


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The special assessment is being deducted from all the comps to determine the appraised value.

 

[Meandering]

The special assessment is being deducted from all the comps to determine the appraised value.

There isn't an "appraised value"

There is an appraisal to determine "market value".

So, if, the property is held by financial distressed owners, who can not pay off the assessment before a closing,
or,
if the assessment along with all other outstanding debt that are liens on the property, are higher than the sale price,
and the buyer has to pay the assessment to gain "clear title",

then yes, the assessment will impact the the selling price.

Now, how much will a buyer reduce the sale price in order to take on a property with an outstanding lien?

Well, that depends on the current market conditions, supply/demand and how motivated the seller is.

It will take a ton of research to identify properties that were sold with outstanding liens and what discounts to pricing were realized in those transactions in order to determine an economic impact different than comparable sales that were sold without outstanding liens.

And of course, the terms of liens, or the reworking of the terms of the liens, will come into play, but a good market to start looking at is the solar leasing market, and keep on going right through to the tax sale market, and other such sub-markets where liens do not transfer to individuals, but reside with properties without regard to "who" owns the property.


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[Dublin ohio]

The special assessment is being deducted from all the comps to determine the appraised value.

An appraisal opinion of value. Assumes a sale of subject property. Since assessment has to be paid before sale can take place. That becomes an expense to the seller. Just like a sales commision, etc. Does not change the value. Just changes net to seller. The assessment would probably be taken into account by lender in determining LTV. Of course. Special situations like Meandering states would be different

 

[ucbruin]

"Sellers have to pay the assessment before the property can be sold."

In the past, our property management company has advised our board not to create a special assessment as the association can't force the HO to pay it....

That's what I remember....

 

[J Grant]

Have other units in the building sold ? Their price reflects if the assessment had any impact on value. In a 400k price range, a 30k assessment is not that big a deal. Condos have periodic assessments to improve the building or for maintenance. Usually the improvements add to the building life or appeal so typically I do not see a negative impact but every situation is different so look at sales, listings, ask RE agents who sell in the condo

 

[Dublin ohio]

Have other units in the building sold ? Their price reflects if the assessment had any impact on value. In a 400k price range, a 30k assessment is not that big a deal. Condos have periodic assessments to improve the building or for maintenance. Usually the improvements add to the building life or appeal so typically I do not see a negative impact but every situation is different so look at sales, listings, ask RE agents who sell in the condo

Would only work if you had sales with and without assessment due at time of sale

 

[Renee Healion]

Special assessments can affect the marketability of all the units in the complex. Seems like a good time to look at trends in competing complexes. What I have seen is where the burden from spec assmt is really high, the prices there are lower than otherwise similar units elsewhere. Buyers look at their overall debt, as do their lenders.

 

[jay trotta]

I was curious on how you handle condo special assessments on a refinance appraisal.

Condo
Value of approx $405K
There is a special assessment for the condos in that development for work that has already been completed.
Special assessment balance of about $30K for that condo
Borrower has not paid the full assessment off and is paying monthly
Sellers have to pay the assessment before the property can be sold.

Would the special assessment be deducted from the value when doing a refinance appraisal or how would you handle?

Thank you!

It would appear you are asking two different question's, is your customer the Seller or Borrower ??