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Little Fish

Beach Lover
Oct 9, 2007
134
7
Atlanta, GA
Today, I noticed a "horror story" posted on one of the PCBDaily forums regarding an investor, who purchased a preconstruction unit in the Origin building at the Towne of Seahaven in PCB. Apparently, when it came time to get financing for the loan, the bank(s) wanted additional equity due to a decline in the appraised value of the unit. The investor's unit appraised for only 62% of the contract price. I've posted the link below:

http://pcbdaily.com/phpbb2/forums/showthread.php?t=50

Anyone out there know what happens when an appraiser estimates the value for a preconstruction unit going to closing? Does an appraiser consider the contract prices for all similar units in the building, or focus on sales of existing properties?

Little Fish
 

SHELLY

SoWal Insider
Jun 13, 2005
5,763
803
Today, I noticed a "horror story" posted on one of the PCBDaily forums regarding an investor, who purchased a preconstruction unit in the Origin building at the Towne of Seahaven in PCB. Apparently, when it came time to get financing for the loan, the bank(s) wanted additional equity due to a decline in the appraised value of the unit. The investor's unit appraised for only 62% of the contract price. I've posted the link below:

http://pcbdaily.com/phpbb2/forums/showthread.php?t=50

Anyone out there know what happens when an appraiser estimates the value for a preconstruction unit going to closing? Does an appraiser consider the contract prices for all similar units in the building, or focus on sales of existing properties?

Little Fish

Interesting read and costly lesson to learn.

The bank loaning the money can use anything they want to appraise the value...if 'John Smith' doesn't like the number, he can just go to the next bank, and the next, and the next. Welcome to the "New World of Credit" John!
 

Mango

SoWal Insider
Apr 7, 2006
9,699
1,368
New York/ Santa Rosa Beach
Today, I noticed a "horror story" posted on one of the PCBDaily forums regarding an investor, who purchased a preconstruction unit in the Origin building at the Towne of Seahaven in PCB. Apparently, when it came time to get financing for the loan, the bank(s) wanted additional equity due to a decline in the appraised value of the unit. The investor's unit appraised for only 62% of the contract price. I've posted the link below:

http://pcbdaily.com/phpbb2/forums/showthread.php?t=50

Anyone out there know what happens when an appraiser estimates the value for a preconstruction unit going to closing? Does an appraiser consider the contract prices for all similar units in the building, or focus on sales of existing properties?

Little Fish

On pre-construction or new construction, an appraiser does an appraisal off the plans originally, but then has to recertify the value prior to closing, if the appraisal is older than 4 months.
An appraiser must always use sold properties.
I have seen them add contract sales price to support the comps, if in line with the sold comps, but not as a basis for the value.

Further, if recertifying, they can not in good faith recertify a property at it's original value if they know that in the time difference between the two there has been a large % drop in value.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,763
803
Here's an interesting quote from <apparently> the developer's shill:

"One thing that the appraisers can’t take into consideration when doing their appraisals is the fact that every condo (yes, even the studios) comes completely furnish and rental ready. This means couches, tables, sheets, dishes, silverware, everything. The buyers have to buy nothing to get their condo ready for the rental program or whatever they intend to use it for. One more value that many overlook is the fact that everything is already in the condo. Not only do you not have to purchase furniture, but you don’t have to move it in either. You don’t have to put the dishes away, make all the beds for the first time, arrange everything, etc. You spend a weekend moving $25k worth of furniture up stairs/elevator and tell me how fun it is. It’s great you don’t have to do it here."

So there's your answer John....now pay up.

It's a small price to pay

.....for a gulfview like this: http://pcbdaily.com/images/101207_seahaven/lg/11.jpg

.....our multi-million-dollar Toon-town model: http://pcbdaily.com/images/101207_seahaven/lg/16.jpg

....and our primed and professional around-the-clock rental/sales staff: http://pcbdaily.com/images/101207_seahaven/lg/2.jpg



.

.
 
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Busta Hustle

Beach Fanatic
Apr 11, 2007
434
34
the old contractual "specific performance" issue here...

Developers who delivered everything they promised except a market value product...how many words rhyme with litigation?:dunno:
 
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Little Fish

Beach Lover
Oct 9, 2007
134
7
Atlanta, GA
Mango:

Using the example of John Smith at Origin... If John Smith had postponed his closing date so other comparable units closed prior to his, would the appraiser use the comps from Origin closings to determine value?

Obviously, Shelly has a good point about shopping until you get what you want, but I'm wondering if he had other options.

Little Fish
 

Beachbummette

SoWal Insider
Jul 16, 2005
5,742
209
Birmingham and Watersound
Mango:

Using the example of John Smith at Origin... If John Smith had postponed his closing date so other comparable units closed prior to his, would the appraiser use the comps from Origin closings to determine value?

Obviously, Shelly has a good point about shopping until you get what you want, but I'm wondering if he had other options.

Little Fish

If they are going conventional loans the appraiser has to use comps that have sold within a certain radius of said property and can only use comps up to twelve months old.
 

SHELLY

SoWal Insider
Jun 13, 2005
5,763
803
Obviously, Shelly has a good point about shopping until you get what you want, but I'm wondering if he had other options.

I think the Mortgage Brokers with their Appraisers on speed dial that will 'Hit the Number" have pretty much closed up shop too. :dunno:


.
 
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jlweathers

Beach Lover
May 2, 2007
96
0
Interesting read and costly lesson to learn.

The bank loaning the money can use anything they want to appraise the value...

this is simply not true - the bank does not use anything to value the property - they request the services of a qualified 3rd party to value a property. their are strict guidelines related to banks & independent property valuations - particularly know that the secondary mortgage market has largely fallen to pieces.

A property appraiser will first use recent comparable sales to value a property - initially this will include closings which have occurred within the most recent 6 months (ideally) & is within reasonably close proximity to the subject property (in our market about 5 miles; in others say rural this can vary greatly). additionally, a good appraiser should also look at current listings...if a property within the same/comparable complex is listed for much less than your original pre-construction contract...well your purchase price is not really supported by the data. & why should it be...you could simply default on your contract & purchase the newer listing.

in today's market getting good appraisals is extremely difficult. an appraisal is nothing more than an opinion of value based on a set of assumptions which is in turn based off of empirical data. so, the value is only as good as the data driving the assumptions...in this market comparable sales data are very limited; in terms of both quality & quantity. exacerbating this problem is that now appraisers are CYA & may take an ultra conservative approach to avoid any potential exposure to liability.
 

jlweathers

Beach Lover
May 2, 2007
96
0
Mango:

Using the example of John Smith at Origin... If John Smith had postponed his closing date so other comparable units closed prior to his, would the appraiser use the comps from Origin closings to determine value?

Little Fish

yes, developers will typically close as many "cash" sales as possible to support provide comps. but see my prior post - a prudent lender will also require comparable sales from competing projects.
 
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