Zoning and FHA

[Abester]

If the position is that a property must be able to be rebuilt because of underwriting requirments, and underwriting requirements can negatively affect value because financing won't be available, then what other conclusion may be drawn? Appraisers are notorious for being wishy washy. The inability of a particular buyer to obtain financing with this particular lender DOES NOT affect that property's value.

 

[The Warrior Monk]

If the position is that a property must be able to be rebuilt because of underwriting requirments, and underwriting requirements can negatively affect value because financing won't be available, then what other conclusion may be drawn?

It's not actually underwriting; it's lending requirements.

The inability of a particular buyer to obtain financing with this particular lender DOES NOT affect that property's value.

You're shrinking the buyer set to 1. Everyone else is referring to a whole class of buyers; i.e., the set of buyers for a particular property. If the low residential rate is not available for a particular property, then it either shuts those buyers out of the market, or the ones that qualify for the higher rate pay less for the property.

 

[Abester]

the ones that qualify for the higher rate pay less for the property.

The seller does not have to agree to that. Maybe he'll finance it for them.

 

[Abester]

You're shrinking the buyer set to 1.

The first few posts were about rebuilding and the FHA requirement. It's not me that's reducing the data set. The value is the value, whether FHA is involved or not.

 

[RSW]

Ok, so you are saying that all properties purchased and that are used as comparables could be owner financed and that there would be no effect on value if all of the lenders suddenly stopped lending money. I don’t buy it! It is not practical to think that all sellers are able to owner finance their properties as the majority of them most likely financed when they purchased it. There may be a small segment of them that are able to owner finance. But, it would be a very small segment. The majority of homes purchased are backed by a mortgage which means the buyer is using someone else’s money to buy the property. Would they be willing to pay the same amount for the property if they had to pay for it out of their own pocket up front? That is the question. When the money flow is reduced by tighter lending requirements, then the number of potential buyers is reduced. Again, “Supply & Demand”. Granted, the buyer doesn’t have to buy the property. They can just walk away. There goes another potential buyer!

 

[CANative]

Sheesh. Appraise the property, use residential sale comps with similar zoning, report the rationale for your HBU opinion and move on.

In my limited experience this type of zoning is usually "good zoning" because it allows for a multitude of uses including residential. This type of zoning is good for a rural neighborhood because it allows for useful and convenient commercial and retail services in the neighborhood and contributes to it's "vibrancy."

I can only think of a very few circumstances where a municipality would not allow rebuilding a residence because they are simply not in the business of putting people out of their homes.

 

[Abester]

all properties purchased and that are used as comparables

No, sir. I'm saying the inability to rebuild tomorrow does not affect the value today.

 

[Abester]

Sheesh. Appraise the property, use residential sale comps with similar zoning, report the rationale for your HBU opinion and move on.

You are just as smart as Mike, (if not smarter!).

 

[RSW]

It does if lenders will not loan money on it as a residential property because it cannot be re-built!

 

[Abester]

Would they be willing to pay the same amount for the property if they had to pay for it out of their own pocket up front?

And herein is the answer to the housing bubble bursting............

What is the typical discount for cash rather than credit for real estate? I have not met a seller that cared from whence the buyer got the money. Are you saying that you make upward adjustments for your cash sales versus your financed sales? I have not been to that market. Please let me know where it is because I have investors in waiting.