The outside Condo Comp

[Gregory Beck]

I'm doing a condo in 2 hours that is in a large project of 200 units built in 1989. Very established and very seasoned.

I got 4 model matches all within 3 months and all sold within $10K of each other.

This is going to be easy....

But wait, I have to get a comp outside the project, I found some but all are all built by a different builders, different year built, different style etc.

If it was new construction, I could see their point.

Does this "Need an out of project comp" rule seem right in a Very established and very seasoned project ??

I agree with you. If you have a seasoned building with MLS Sales that is the market. The only time an outside comp is warranted is when the building is new construction and there are no MLS sales yet. Whoever started this outside comp garbage on an existing building with MLS sales is an idiot.

 

[Vermonter]

Here it is from the FNMA website:

wlmailhtml:{E07BF912-2268-4996-823F...ww.efanniemae.com/sf/formsdocs/forms/1073.jsp[url]https://www.efanniemae.com/sf/formsdocs/forms/1073.jsp[/URL]

Established Projects

For units in established condominium projects (those that have resale activity), the appraiser should use comparable sales from within the subject project if there are any available. Resale activity from within the subject project should be the best indicator of value for properties in that project. If the appraiser uses sales of comparable properties that are located outside of the subject neighborhood, he or she must include an explanation with the analysis.

This is what I always thought. With plentiful comps in the project, I don't see the point of including one outside....other than a client specific requirement of course.

Since you should be analyzing other sales in the competing market (outside the project) and hopefully commenting on them, IMHO there's no point to putting a comparably inferior sale in the grid and stating it's given no consideration.

 

[J Grant]

Since it's an UW req, we're stuck with it on lender appraisals. And yes, generally, comps in subject building/project are given the most weight...though in small buildings or a unit that's unique one has to go outside anyway.

But, the MV definition stressses an open and competitive market. While one building can make a market unto itself, it is not the standard of an open and competitive market. Client wants to see what competing units are selling for, even if they need adjustments up or down, it at least shows them a reference outside of subject building itself.

Sometimes appraisers don't look hard enough for a viable outside competing comp, they just stick one in to fufill the req and give it no weight. Often, a competive outside comp is out there, you may have to exapnd the search a bit.

Consider charging more...condo assignments can take more time, just trying to verify the building information is a job in itself. That annoys mre much more than trying to find an outside comp. The lender sends out a condo questionaire anyway, so they are getting the information twice, why do they need the duplicate information from us?

 

[fractal7221]

Sounds like underwriters/lenders that do not understand when an outside comp is appropriate. If its a new developmented or controlled market than an outside comp makes sense since there is a single entity dictating sales which may or may not be market value.

In an established condo with various sellers its not required by the GSEs and makes little sense to use outside sales if you have enough sales from inside the development. It would be like using SFR sales from a competing subdivision when you have enough comps in the subject's subdivision. I'm guess some lenders are just too lazy to have more than one set of guidelines for a product.

 

[Dale Smalley]

Why ruin a good cookie cutter day with extranious bs. You know if they are selling for X in the project that is what they are worth.

 

[Riick]

What/Which is a "high balance mortgage"?
A $65,000 - 98% LTV mortgage?
Or, a $650,000 - 40% LTV mortgage?

?

 

[Terraform]

They want it, give it to them. No sweat, the subject project units are a good indicator of value, however the client requested the additional sales from outside of the the project and little to no wieght has been placed on these sales for the following reasons....

 

[timd354]

well, yes..we are supposed to put ourselves in the buyer's shoes, aka principle of substitution. Would you agree that most buyers when they set out to buy a condo don't look only in one building? .

The answer to your question is that it depends on the market and it depends on the project. I have definitely appraised condo units located in some projects for which the typical buyer of a unit in that project would likely not consider purchasing in any other project. I have also appraised units in project where typical buyers would consider purchasing units in many other competing projects.

 

[AnonApprsr]

I was always taught to include at least one sale outside of the subdivision/subject complex. It makes intuitive sense to me.

 

[Tom Foster]

Yep, they can wave the condition. I had one situation where the nearest outside condo complex was 37 miles away from the subject. I had 3 model matches inside the subject complex and a few listings as well

Then, they asked where's the "Outside Comp" When I told them it was 37 miles away, they made the exception.