The outside Condo Comp

[ctapraser]

Absolutely. What I am saying is that in an existing mature development that has a sales history, the arm's length transactions within the subject community are the best indicators of value.

Even if you believe that an outside comp is necessary, do you give that comp more weight than sales inside the community? Of course not.

I do not understand why you would treat a mature condo community differently than you would a single family community. Buyers typically look in more than one SFR community when shopping, but when we appraise, if we have arm's length transactions within the community, we use those and do not add a comp outside the community.

Stupid UW, the new UW see older stips and try to apply them to all appraisals. Now they start asking for the same stips even if they don't aply. Sandpiperapp is correct, if you have all arms length transactions then the market is setting the value. Including sales outside the complex is (or at least should be) for a new comples where the builder is in control and can set the values. When I appraise a well established complex and there are no similar complexes within the subject's market area, I include the sales within the subject's complex and explain in detail...all sales are re-sales and not controled by a builder.
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[SANDY]

Unless the market for the subject complex consists only of units in the subject complex and the pool of potential buyers consists only of those that want to buy in the subject complex you have to use "competing" comparables.
Your good to go with only using subject complex sales as long as the supply and demand for condos consists only of the subject's complex. You know your market better than we do.
Obviousely, if as you say, there are no truly good comparables available outside of the complex, then the sales inside are going to be given most weight.

I understand your point of view but if your complex is so different from all others it makes me wonder if it might be an overimprovement or it would make me want to know if the potential pool of buyers was limited. I would want to see things like marketing times for sales in the complex, sp/lp, number of sales per year. If the sellers of the units in the subject complex are aware that they have a unique product there might be a tendency for over priced sales in the subject development. You would not be aware of these things without analyzing other sales outside the complex.

So if you can honestly say that there are no other similar competing complexes at all, would that not raise some other questions in the lenders mind -No?

 

[sandpiperapp]

Unless the market for the subject complex consists only of units in the subject complex and the pool of potential buyers consists only of those that want to buy in the subject complex you have to use "competing" comparables.
Your good to go with only using subject complex sales as long as the supply and demand for condos consists only of the subject's complex. You know your market better than we do.
Obviousely, if as you say, there are no truly good comparables available outside of the complex, then the sales inside are going to be given most weight.

I understand your point of view but if your complex is so different from all others it makes me wonder if it might be an overimprovement or it would make me want to know if the potential pool of buyers was limited. I would want to see things like marketing times for sales in the complex, sp/lp, number of sales per year. If the sellers of the units in the subject complex are aware that they have a unique product there might be a tendency for over priced sales in the subject development. You would not be aware of these things without analyzing other sales outside the complex.

So if you can honestly say that there are no other similar competing complexes at all, would that not raise some other questions in the lenders mind -No?

I want to state again that I include an outside sale in my reports, new or old construction.

In old construction, the subject's complex is the neighborhood. I feel the bolded part of the statement above is the market for the subject and proves a higher value for it's uniqueness. Those "over priced" sales are now market evidence proving a higher value, why would we drag it down with less similar outside comps.

When completing a SFR residential appraisal I specifically stay inside the subject's neighborhood to establish value. The only time we go to competing communities is when there is an abscence of sales.

A condominium may be a different form of ownership, but the principle of substitution remains the same. The neighborhood is just smaller.

 

[SANDY]

I want to state again that I include an outside sale in my reports, new or old construction.

In old construction, the subject's complex is the neighborhood. I feel the bolded part of the statement above is the market for the subject and proves a higher value for it's uniqueness. Those "over priced" sales are now market evidence proving a higher value, why would we drag it down with less similar outside comps.

When completing a SFR residential appraisal I specifically stay inside the subject's neighborhood to establish value. The only time we go to competing communities is when there is an abscence of sales.

A condominium may be a different form of ownership, but the principle of substitution remains the same. The neighborhood is just smaller.

The more "you" narrow your view of what the market or neighborhood is, the more careful you have to be about whether your view is accurate. If you want to use only sales of exact make/model sales of Mercedes cars to confirm their value you can sure as heck do that as long as BMW's, Lexus's an other similar competing cars do not exist or cease to exist.

I hear what you've been saying and agree with your "venting" but there are reasons for using and analyzing outside competing sales even when they are less comparable than model matches inside. And you may not become aware of those reasons if you don't analyze them.

Same reason I sometimes have to include comparable sales that are superior or inferior to the subject as 4th or 5th comps. Sometimes you have to demonstrate/illustrate to the client that the subject is just not worth what the realtor,sales contract or whoever thinks it's worth and you cannot demonstrate that without showing them the data that proves it. There is usually some utility to be found in all of the data analyzed as part of any appraisal assignment.

 

[sandpiperapp]

No Sandy, I believe you are including data that is unneccessary. The narrower our search for comps, the more similar our comps will be and the more accurate the market's reaction to the subject will be.

Once again, we do not need to grid competitive neighborhoods when we have ample information within the one we are appraising.

Appraisal theory should be the same for condo's and single family residences.

 

[Doug DeMars]

For a long-established project with a long-time re-sale history, unless there was a need (i.e., lack of current appropriate market data within the project; a requirement--vs. a 'guideline'--of the assignment) to include something from outside of the project, I would not do so.

Ditto. In general the "rule" to include comps outside of the subject complex is only for the sake satisfying a lender/client requirment. Doing so has not merit upon itself. Only a seasoned appraiser can decide if expanding their search beyond the subject complex and including comps in 1 or more other competing projects is necessary.

My favorite is the opposite situation. You have a 3 or 4 unit condo complex and the lender guideline wants at least 2 sales within the development/complex. OK...last sale was 4 years ago bubba....

 

[Thomas Fiehler]

If you were to read FNMA's guidelines on appraising condos (unless it's changed in the recent years) IF you use a sale outside the development then you must explain why.

 

[residentialguy]

I understand your point of view but if your complex is so different from all others it makes me wonder if it might be an overimprovement or it would make me want to know if the potential pool of buyers was limited.

I think I just threw up in my mouth a little bit.

 

[DTB]

No Sandy, I believe you are including data that is unneccessary. The narrower our search for comps, the more similar our comps will be and the more accurate the market's reaction to the subject will be.

Once again, we do not need to grid competitive neighborhoods when we have ample information within the one we are appraising.

Appraisal theory should be the same for condo's and single family residences.

Exactly!

It doesn't matter where the potential buyers BEGAN their search if there are sufficient sales of comparable units within the subject development. Those units were exposed to the market and this is what the meeting of the minds resulted in.

Perhaps some potential efficiency condo buyers also considered living in a VW Microbus, should one include that in the report as well?

 

[J Grant]

No Sandy, I believe you are including data that is unneccessary. The narrower our search for comps, the more similar our comps will be and the more accurate the market's reaction to the subject will be.

Once again, we do not need to grid competitive neighborhoods when we have ample information within the one we are appraising.

Appraisal theory should be the same for condo's and single family residences.

This is true only if one is correct in considering a subject condo a "neighborhood". I don't think it meets that criteria, it is too narrow. A neighborhood, in SFR or townhomes , is often the subject subdivision. There are enough different homes and townhomes within the subject subdivision that competition and choice are available. Also, SFR neighborhoods do compete against other neighborhoods, and are subject to similar influences...an appraiser may narrow their search to comps in subjec subdivision for the grid, but still has to address, elsewhere in report, area marketability and appeal.

Is one subject building a "neighborhood"? Just because it is a good source for comps, does not make it a neighborhood. The neighborhood is area aound and including subject building, that the typically motivated buyer would consider purchasing in. The typically motivated buyer starts out comparing several areas or buildings within an area, and focuses down to a particular unit when making a purchase . Few buyers are so attached to one building that they would not buy a substitute unit in a very similar/competing building in same/equivalent area.