Cohousing-L Mailing List: Re: Appraising common facilities

[David L. Mandel (75407.2361]

Louise of Jewell Hill asked how to get appraisers to consider also the value of
common houses.

Accounting for common facilities in appraisal of a cohousing project really
shouldn't be a problem and if it seems to be, it's a sign that the lender who
employs the appraiser may not really be interested in your business.

Of course an appraisal of a cohousing unit would take into account the value of
the common facilities. A unit owner owns a share of them (or of the entity that
does) and enjoys the right to use them. It's no different from a condominium
project that has a club room, swimming pool and tennis courts. The appraisal a
lender would give of a unit there would be higher than for an equivalent project
that lacked those amenities.

A problem with cohousing in the past has been that it's new and appraisers
therefore have a hard time determining it value, since the most common method
they use is to compare what they're appraising to similar homes and their recent
sales prices. We did run into this, and some appraisals came out ridiculously
low; so we looked elsewhere. When we found lenders who were clearly interested
in us, the message seemed to get through to their appraisers. We helped make the
case, pointing out the obvious demand, and we got appraisals that worked.
(Appraisal is a very inexact science, very much subject to lobbying. So be
pro-active and working with the appraisers.)

This should apply both at the construction loan stage and at the final mortgage
stage. And we definitely did have trouble at the construction stage, mostly
because it was in the deepest trough of banking/housing market recession here
(1991-92). Only two banks showed serious interest and one of them folded before
we got very far. The low appraisal we got at that stage was the bank's
self-protective posture. Fortunately, we succeeded because the Sac. housing
agency that was helping us make some units affordable for low-income buyers also
stepped in with a supplementary construction loan and allowed us to defer
payment for the land -- a total $745,000 advantage.

On the bright side, even this one bank would not have looked our way if we did
not have 20 solid buyers (out of 25) lined up. Take that advantage today, plus
the improved market plus the growing list of successful cohousing projects you
can cite, and I am pretty confident things should be easier for others than they
were for us.

I hope this gives some help and encouragement. Good luck,

David Mandel, Southside Park Cohousing