Using Condominiums as Comparable Sales for a Single Family (details)

[AnonApprsr]

This is a question for a colleague. I gave my answer to him but, funnily enough, he wanted the opinion of other appraisers and asked me "I wish there was some way I could ask more appraisers about this, like a continuing ed class" and BAM here I am. God Bless the Internet.

OK so the Subject property is a Single Family Property, located in a larger development of mixed property types including condominiums and single family properties. These properties are both part of the same golf community, in fact sharing the same fees for the use of the golf course etc. The Subject, a Single Family is the first pond front SF Unit being sold and there are no in development (let alone out of development within 20 miles, but that's a different story) Single Family properties that have sold on this pond.

HOWEVER, directly across the pond are Condominiums that have sold, and are part of this golf community. They are by a different builder and are in a different "neighborhood" of the larger development as stated above. They are on the same pond, let me reiterate that.

The Subject property features covenants and the like that disallow the home owner from doing many things that fee simple land ownership usually entails. The owner of the SF pays a 250+- per month fee for "outside" maintenance, although you are responsible for the building itself. You can't build a fence, or a shed, or change the flower beds, or put a flag up or add outside lights ETC even though you own the land (without written consent from the "hoa". which hasn't happened in 5 years btw.) The town assessor does assess you for the land, of course.

The Condominium has a fee of 430+-, and includes exterior maintenance, and has, of course, no assessment from the town for land. Soooooooo, in this case, would you think it acceptable appraisal practice to use CONDOS as Comparable Sales for SINGLE FAMILY property? Just to muddle this up further, the sale prices for comparably sized units are pretty close. The proposed sale price of the Subject, and the closed sale price of two "across the pond" condos are within 20,000 dollars.

Is it ever OK to compare Condos to Single Family? Is it OK in this case, due to the apparent market indifference to the difference of property type?

Thank you.

PS - A previous appraiser for a yet unclosed SF property, the single family next door to the Subject property, used the condominiums as comparables. To be honest I'd consider you guys peers more than that guy, so here I am on my colleague's behalf. URGENT answers are appreciated as this is hitting the fan in real time.

 

[Walter Kirk]

Are the condos improved with similar style dwellings? Would a typical buyer consider the condos comparable to the subject?

 

[AnonApprsr]

Are the condos improved with similar style dwellings? Would a typical buyer consider the condos comparable to the subject?

The Subject Property is a ranch style detached, the condo is a colonial/contemp attached. Similar quality and condition. Condo is 2111+- SqFt, SF is 2061+- SF (above grade.) Basements are both unfinished. Both units' rights stop before the pond, in the SF you do not own the land up to the pond, there is a buffer. Similarly the use of the Condo's land ends before the pond as well, there is a buffer.

I personally don't think the market gives a hoot. I'd personally want to "own the land" but with those restrictions what's the difference? The fee and the taxes are the difference, a 430 vs 250 per month fee.

My colleague says "no ownership of land" makes the huge difference. He has, never in 20 years, used a Condo as a comp for a SF, or vice versa. I only have 10 years under my belt but have never done so either. Of course my question is "does the market even care?" and the proposed sale price, and the closed sale price of the condos kind of infers that no they do not. But that doesn't mean it's sound appraisal practice, or does it?

 

[Lloyd Bonafide]

I do sometimes compare SFRs to condos and vice-versa, if the market truly sees the properties as competing with each other. Especially with detached condos, or with attached condos vs. attached SFRs. Sometimes an adjustment for property ownership type is warranted, and sometimes not. One thing I make sure of is: if the subject is a condo, I want at least three closed condo comps.

 

[AngelEyes359]

Anon,

Very interesting thread. It's not something I've done in my relatively short 10 years but I have heard of others doing it and don't necessarily disagree with them depending on the circumstances. BTW what you decribe sounds like both properties are inside a Planned Unit Development/ PUD.

In certain circumstances, IMO, its the most accurate way to measure value if you have an anomalous subject. The counter argument is that is an apples and oranges comparison of property rights where one owns the land exclusively and one shares it. But since many detached condos have an exclusive area of use and many high density single family dwellings are so restricted by lot lines and ordinance and subject to home owner dues that there is no effective difference.

There is an experienced appraiser from Hawaii that posts here who claims he compares detached condos to singles frequently. Having visited a sister who has a detached condo located in a cul-de sac development in Kaui, I can understand the logic. The market appeal and utility are the same as a single family.

I think you could the take same question to an urban areas as well. I have a brother in-law that has a renovated attached single family house in the North End section of Boston. There are very few single families that sell there. When he refinanced, the appraiser used comparables sales of SF houses from the Beacon Hill section of Boston and came in very high. I told him, in view of the limited SF sales in his neighborhood, I thought the best way to gauge the woth of his property was with similar sized condominium dwellings but I was not sure if an appraisal that took that tact would ever make it through the underwriting process.

 

[AnonApprsr]

Yes, sorry, I should have been clear. They are both PUD. Oh and as a note, I appraised both the condos across the pond. I didn't have to use SF comps so I didn't come to this dilemma.

 

[EddieB]

Are there any off-pond SFR sold within the development that could be site adjusted? As you are, I'm concerned about market reaction to type of ownership and attached vs detached.

 

[KristyMGray]

You can always call the assessor's office and see if the issued condo zoning due to SFR meeting the max allowed at the time the projects were built. Some area have to require the builders to build under condo use due to limitations and laws. If something along this line was to have occurred at the time of build then absolutely it would be appropriate.

Additionally you should research if there are any rentals in the community. If the golf course or country club offers rentals for friends families and guest then your looking at a master community. Again it would be appropriate to mix SFR with condo and properly adjust. Due to having to adjust the appraiser should research Public Records for more detailed information on private off market sale transactions.

 

[AnonApprsr]

Are there any off-pond SFR sold within the development that could be site adjusted? As you are, I'm concerned about market reaction to type of ownership and attached vs detached.

They paid a six figure lot premium, this is the first single family to go on a pond.

 

[DTB]

We are trying to derive 2 variables, detached/attached and pond view values.

I would use pond/non pond condos to extract a % adjustment for view.

I would use non pond detached to extract % of attached/ detached element.

Blend of comps (SFR/ condo) should result in a credible valuation.