Sticky Condo Questions

[Steve Carter]

I received an assignment that's got me a bit perplexed. First off, I'm going to decline it, so this is somewhat of a question to help prepare for something similar in the future.

The request is to appraise a property that was, until a couple years ago, a house with a permitted accessory dwelling unit on 2.5 acre parcel. It has since been converted to a condo, but with a couple of twists.

1) in the declaration for establishing this 2 unit condo, it is made clear that the unit that includes the accessory dwelling unit (ADU), is restricted by the city's ADU code, which among other things restricts the size of the dwelling (800sf) and it's appearance as it relates to the main dwelling.

2) each unit is defined as being a specific sized lot and dwelling. The common element (undivided interest) is a driveway.

The request was to appraise the property much as it was before the fact that it is a condo was learned. Now, even though both units have the same owner, it seems to me this would require two appraisals.

So the questions that occur to me are: How do you appraise either unit as a condo, when to my knowledge, there is no other such animal within many miles (the owner calls this a rural condo)? How would you evaluate the market's perception of the restrictions imposed on the ADU unit? Why the heck did they do this?

Now some of you reading this may have another question. One that I had until I did some further research. First a little background on myself. I spent the first 21 years of my appraisal profession mostly in California. Where I was taught that a condo was "air space". This was reinforced by the reading of CC&R's a multitude of times, where a condo unit was defined by the "air space", as well as undivided interest in common elements. While I had appraised in Washington state before relocating here a few years ago, something had changed in my absence. The Legislators here passed a Condominium Act that at least in part changed what it means to be a condo unit. "Air space" is not a part of the definition. I was told that if the legal description says it's a condo, then it is, and the Condo form is in order. My assumption was that it still was just "air space", no land. Now I understand that here, (maybe elsewhere too?) that a condo can include the land on which the dwelling sits, as well as undivided interest in common elements.

So another question. How does Fannie Mae define a Condo Unit? I searched through some of their documents and could find on definition of a Condo Unit. Only that a Condo included units as defined by the declaration.

Now I'm also a bit concerned. Have I been doing things wrong here in Washington State? If a condo includes land in the unit description (which in this example it does), should it be completed on the condo form because the legal description calls it a condo, or should be considered a PUD?

As a staff appraiser for the first 15 years of my career, condo was defined by undivided interest in common elements and the definition of the unit as the "air space". These two almost always (if not always) went hand in hand.

In Washington state and in other states, is a condo defined solely on the undivided interest in the common elements?

By the way, when I asked the owner for information so that I could determine what I was dealing with, I was told not to worry about it, to just come and do the appraisal. Great hunh?:Eyecrazy:

 

[Carnivore]

Steve,

It sounds like you have all the elements of a condo development. I have seen some that give individual fee simple rights to ground; such as a parking space, pad for AC unit, storage building, and even boat slips. So it may seem unusual that does not mean it can not be done.

Having said that, what you may actually have is SFR detached w/deed land that shares a legal interest in a common area(driveway) with another property. That does not mean their severable. I would be interested to know how the Land under each unit is described in the deed.

You certainly have a hybrid SOMETHING. My guess is that they tried to sever this accessory unit from the main property and were not allowed to because of zoning or other municipal issues. Condo's are a common way of dividing up a large parcel and selling it individuals as a way around zoning.

Good luck!

p.s.: Why in the world would you decline this assignment. This is an oppurtunity to learn something new and maybe expand your business base.

 

[Don Clark]

We have at least 20 different variations of a condominium in my market. We have 2 unit condos(the entire condo is just 2 units), 3 unit condos, 4 unit condos, single family detached condos on their own lot(Just did 1 as new construction 2 days ago), high rise condos, low rise condos, old motels converted to condo units, apartment buildings converted to a condo, and a manufactured home park where each double wide on it's own lot is a condo unit.

A Condo is a form of ownership, not a building style!

I agree that even though there is one owner, there are 2 condo units. Each condo unit should be appraised individually. 2 units, 2 appraisals, 2 fees.

Where there are no similar properties within the entire market area I suggest using any property that is similar in style and use.

 

[Marcia Langley]

Ditto Don.

 

[Steve Carter]

Steve,



p.s.: Why in the world would you decline this assignment. This is an oppurtunity to learn something new and maybe expand your business base.

Because I don't have the necessary experience for this rather unusual and complicated property. At this point in my career, I'd much rather concentrate on the less difficult properties, especially from this particular client, who will not pay much more than a set fee.

 

[Steve Carter]

Where there are no similar properties within the entire market area I suggest using any property that is similar in style and use.

Don:

I'm clear on the ownership as being the issue. But the question is how do you identify the ownership type. I.e. what are the characteristics. I've used the undivided interest and "air space". I'd like to not assume that it's just the undivided interest in common elements that is the deciding factor. Can you confirm for me?

If I was to do this assignment, and with no sales of similar properties with the same ownership type, what form would you suggest I use? Am I "bound" by the ownership type to use the Condo form, even though the larger of the two unit's looks and smells like a 2500 sqft SFR on an acre of land?

 

[sunnycal]

Will the HOA dues be adequate for maintenance of the common areas?

 

[Jill Kinnaird]

2) each unit is defined as being a specific sized lot and dwelling. The common element (undivided interest) is a driveway.

I was taught that if a 'condo' has a deeded 'site' its a Landominium. Each would require a 1004 Form and would be compared to like kind Landominiums or attached single families. The property seems very unusual and I wouldn't think it could be compared to anything but a main house/guest house set up. Especially since the second unit is restricted to what I would consider to be as too small for a 'typical' Lando/Condominium. Also, the amount of land seems excessive for a Condo/Landominium. I wonder what the thought process was behind the 'split'. It doesn't seem like anyone bothered to determine its marketability.

 

[Couch Potato]

Although the property is clearly two units owned as condominiums as well as some common area, there is no reason the entire condominium development could not be appraised as a single whole in one report; assuming all the details are disclosed. The fact that a single individual owns 100% of the units makes all the difference in the world when it come to condominiums.

 

[Carnivore]

If there are two legals descriptions then one or both could be sold to other parties. The one fact that is probably difficult to change is severing one from the other. Although that may not be hard since its a vote of two! Then it goes back to zoning/municipal issues.