What is the discount that should be applied for a unit in a condo complex where one owner has more than 10% of the complex?

Asked by coltstander, Sacramento, CA Sun Nov 10, 2013

We are currently looking at a property in a condo complex where one person owns more than 10% of the complex. Due to Fanny/Freddy, we will need to get a exception for our funding terms.

What is the discount we should use for such a property when compared to comparables in the neighborhood.

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, ,
Sun Nov 10, 2013
The seller will probably not give you any discount. They will sell it for market value for the complex. I am sure there was a sale in the last 6 months in the complex and that is what market value will be above. The financing isn't really a problem with the property itself so no seller will give you a discount.

Alex Greer
Loan Officer
NMLS #1056079

1 vote
, ,
Mon Nov 11, 2013
You are correct, there will be a problem getting a mortgage in that complex, it could drive the prices much lower.

There is no rule of thumb on that, the market will determine that.
1 vote
Annette Law…, Agent, Palm Harbor, FL
Mon Nov 25, 2013
Prices will be held down when all purchases MUST be for cash.
Here in Florida, that is not uncommon due to the numbers of 'land lease' condos that exist.
But that not so bad....
However, what I have observed, the majority owner will be able to control prices...and as a consequence acquire more units....until...(and you really wanna watch this)...


When the MAJORITY owner compels you to sell, you can end up with pocket lint.

Find out what the laws are in CA.

Your question pertians to discount. Just like powerlines, or views or busy street, the statistics have already computed these issues into the value.
0 votes
coltstander, Home Buyer, Sacramento, CA
Mon Nov 25, 2013
Thank you! You've all helped add some clarity to this situation.
0 votes
Eileen Bermi…, Agent, San Francisco, CA
Mon Nov 25, 2013
There are no discounts applied in San Francisco when it comes to one entity, or one individual, owning a large percentage of a building. There are, however, lending restrictions. Some lenders will not lend to buyers purchasing a property in, for example, a three-unit condo building where one person will own two of the three condos after close of your escrow.

When purchasing a property wherein one entity owns a large percentage of units, it's best to do your due diligence. Find out who this owner is, and try to determine whether there is any risk to you if you take on this individual or entity as an HOA partner.

Web Reference:  http://www.insidesfre.com
0 votes
JR Thrasher, Agent, San Diego, CA
Tue Nov 12, 2013
That is not how you value a house. Look at recent sales in the complex. The "discount" will be determined by the amount the past sales are under similar homes in the area without this problem.

J.R. Thrasher
0 votes
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