Real Property Appraisals/Loss of parking Space

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Question
QUESTION: Hi John ...
I'm in the process of doing an appraisal retrospective to Aug 2008. The issue involves the loss of a parking space due to foreclosure.
Scenario: Developers purchase a 2,720 sq ft. two-story, masonry-constructed apt. bldg. built in 1899; it's a "6-unit building with front and back apts and 2 garden units". Not typical. It is located on a 23' x 100' lot and they purchased the 23' x 100' foot lot adjacent. They converted the building to a 6-unit condo building, 2 duplex units (using garden level and 1st floor) w/ 2BR and 2Bths, and 4 1BR/1Bth on the 2nd and converted attic space for a 3rd floor. They put in 3 parking spaces in the rear and needed to "borrow" a 1' x 18' track of adjacent land to accommodate the parking space which need to be 8 feet wide.
A buyer purchases unit on 1st floor and gets the parking space with the "borrowed" strip from adjacent lot. Economic crisis hits, and bank forecloses on adjacent property with the "borrowed" space. Bank wants the space back as that is the only way that they can sell the land to a developed, without that strip, it can't be developed. The parking space is guaranteed in the Title Policy, but it will be taken from the buyer. What is proper way to determine the value of the 8' x 18' parking space lost to the buyer? Sales of condos within building don't indicate a real premium of the parking, nor does it indicate a greater unit sq ft price by purchasing the unit with parking. I also forgot to tell you that the developers built a condo building in a zoning district that does not allow condos, plus they violated the parking ordinance by not providing a space for each unit. Any help is appreciated.

ANSWER:
Brett,

There is no way I can answer this question without writing a tome larger than "War & Peace". I don't know your area and I would need several days to analyze this case. You have a very unique situation.

My quick answer is that you will need to try to locate other sales in which there is lost parking due to some "event". Finding sales in which a property has been rendered un-developable because of some "event" would also seem to be appropriate. I think we both know that sales like this will probably be impossible to locate.

On the surface, from your comment: "Sales of condos within building don't indicate a real premium of the parking, nor does it indicate a greater unit sq ft price by purchasing the unit with parking.", seems to indicate that there is no change in value from the loss of the parking space.

I hope that you are working with an attorney, because there appear to be huge legal issues that we, as appraisers, cannot scope out. Whichever Title Co. that issued the Title Policy in which the space was guaranteed appears to have liability in that the Bank wants the space back. As such, the space is no longer guaranteed.

Other than what I have presented above, I cannot give you a quick "off-the-cuff" answer without knowing A LOT more about the case and your area.

John C. Carlson
Victorville and Diamond Bar, CA
www.jccrea.com
 



---------- FOLLOW-UP ----------

QUESTION: Thanks for your input John. Fortunately, the Scope of the assignment only covers the loss in value to the buyer of the unit that lost the parking space. The Title Company already knows they have erred in this case.
Our client is the legal department for the Title Company. The area is Chicago. The area is pretty dense and parking in these areas is always difficult to find ... so if you happen to rent an apt with parking or buy a condo with an assigned space you're in the clear. Otherwise, you would have to drive around looking for parking on the street.
Originally, we were hoping that all 6 units sold in a fairly short time frame, but research indicated that all 6 units had different unit square footages, the two duplexes sold with parking within weeks of one another - one was 905 SF and the other 829 SF, $349K and $357K, respectively. However the other units sold later and had between 350 and 550 SF of space, ... and only one sold with a parking space.
Finding sales of condos that lost parking due to an event will be fruitless ... as you've stated. However, would it be proper to find land sales in the area, derive a SF price for land, and than use that SF price to determine the loss of the 8' x 18' parking space?   I was also considering researching condo sales in the area with and without parking (within the same development), than derive a value for a parking space. Again, my research is retrospective to 2008. The MLS listings/sales I've researched from that year have not listed any condo with the SF of the unit. RE agents in Chicago can be lazy!
Thanks again for your quick response!   And did I mention that the client wants the job done NOW and is putting pressure on my boss to get the job done!

ANSWER: Brett,

You gave me a good laugh when I read: "And did I mention that the client wants the job done NOW and is putting pressure on my boss to get the job done!" As appraisers we always have to wade thru the poop.

An aside for a second. Got a call from some flunky at a railroad last week. She said they had 40 lots next to the railroad in a "middle-of-the-desert" city of Barstow. I asked about parcel numbers, how large the lots were, why they needed the valuation, zoning - you know, all the "unimportant" stuff. She allowed as how she didn't have any of that info and wondered why I needed it as three other appraisers had given her quotes without the info. I told her it was as if I said that I had a car in my driveway, it is red in color and has 4 tires, how much would you pay me?  She said: thank you & hung up on me. Such is life.

OK, back to your issues. I think the methodology you laid out - looking for condo sales with and without parking will get you to an indicated value. Difficult to say if that translates into the "damage" loss in your case. But.....it is an indicator! Sans anything else, you can hang your hat on that as one indicator.

You also said the smaller units sold, one without a parking space. Did the one that sold without the parking sell for a lower price? If it did, and there weren't any other factors, why wouldn't that indicate the value of a parking space in your project? Understood that it is a smaller unit, but a parking space is a parking space.

Glad this assignment is yours and not mine. Good luck.

By the way, real estate agents are lazy here also.

John C. Carlson
Victorville and Diamond Bar, CA
www.jccrea.com




---------- FOLLOW-UP ----------

QUESTION: John ...
You stated: "You also said the smaller units sold, one without a parking space. Did the one that sold without the parking sell for a lower price? If it did, and there weren't any other factors, why wouldn't that indicate the value of a parking space in your project? Understood that it is a smaller unit, but a parking space is a parking space."

I was looking for a pattern in the sales ... here's what I got:
1) Duplex w/parking - 905 SF sold for $357K, or $395/SF
2) Duplex w/Parking - 829 SF sold for $349K, or $421/SF (SUBJECT PROPERTY)
3) Condo w/o parking - 551 SF sold for $250/SF or $454/SF
4) Condo w/parking - 568 SF sold for $267.5K or $471/SF
These sales all sold within 2 months of each other and were the first 4 sales ... then ...
5) Condo 508 SF w/o parking sold for $196.5K or $387/SF sold 2 years later
6) Condo 394 SF w/o parking sold for $160K or $406/SF short sale and 2.5 years later.

This is what I'm dealing with ... that's why I thought it would be better to search other condo sales not in the building to see if I could find a pattern ... any more thoughts?

Brett

And I wish YOU had this problem!!!   ;-)

Answer
Brett,

I am SOOOOO Sorry. Somehow I missed your follow-up. I apologize for the late response.

From looking at the data you have presented, Comps 3 & 5 and Comps 4 & 5 appear to be reasonable "paired sales" for the parking vs. no parking issue.

Using these paired sales it appears the parking space is worth $53,500 to $71,000. (Comp-3 @ $250,000 minus Comp-5 @ $196,500 and Comp-4 @ $267,500 - Comp-5 @ $196,500) There may be other issues that have to be subtracted/added first before you do the final calculation.

On the surface, $53,500 or $71,000 for a parking space appears high to me. You will have to determine if any other issues should be adjusted before the paired sales subtractions.

This is the best I can input from your data. Let me know what your final conclusion was.

John C. Carlson
CA Certified General Real Estate Appraiser
Victorville and Diamond Bar, CA
www.jccrea.com  

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John C. Carlson

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Any questions regarding commercial and/or residential appraising, appraisals or real estate valuation such as: appraising as a profession, valuation techniques, comparable sales selection & analysis, the new HVCC and how it affects appraisers & Borrowers. Also, questions like: "Why did my appraisal come in low & what can I do about it?" I cannot answer questions about comparable data in areas in which I do not practice. I have expertise in most areas of So. California.

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31-years both commercial and residential valuation experience. State of CA Certified General Real Estate Appraiser, licensed to appraise all property types. FHA Approved. Specialized expertise with historic, architectural & luxury residential property valuation. Experienced in industrial building and small commercial property valuation. Experienced Reviewer of appraisal reports and expertise with intensive forensic reviews to uncover fraudulent appraisal reports. Expert Litigation and Expert Witness experience.

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Associate Member of the Appraisal Institute. Associate Member of the Certified Fraud Examiners.

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Numerous posts to Blogs. Please "Google" "John C. Carlson Real Estate Appraisals" where a list of responses I have made will show up.

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Numerous classes by the Appraisal Institute since 1978 in the practice areas in which I specialize

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First Republic Bank Wells Fargo Bank California Bank & Trust Preferred Bank Numerous Attorneys.

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