Crocodilian

Pick Your Poison: Fair Market Value, Orderly Liquidation Value or Forced Liquidation Value

@pj568
"In my opinion the real value of an appraisal is in the presentation of comparative sales."

Comparables _are_ best-- but in a fast-falling market, they don't tell the whole story. If you've got a sale on your block from three months ago-- well that deal might have signed six months ago (90 day closings are common).

So that price is six months old . . .

Pick Your Poison: Fair Market Value, Orderly Liquidation Value or Forced Liquidation Value

thank you for a great article. The mechanics of transactions matter, and the distinction between "orderly liquidation" and "forced liquidation" is a really important concept, and one with which very few people are familiar.

"They get there not by valuing them as condos, but by falling back on the value of the units as rental apartments,"

This is the obvious floor. With buyers and financing scarce, there will be more people looking to rent. The problem with all these new condo developments is the fees and taxes that are embedded in them (developers often stuck them with huge mortgages, and tax abatements for limited periods) . . . this makes net rental income far lower than the gross for a condo buyer who plans to rent for income.

Interesting historical note: Just such a scenario unfolded in New York during the 1930s. Many of New York's "best addresses" were build as co-ops during the '20s . . . with the Crash and the Depression, many of them turned to rentals. History could easily repeat here.

It will be interesting to see if apartment REITS (Avalon Bay & UDR come to mind) are able to take advantage of the condo bust buy buying cheaper than they could build. The price a buyer like that pays will indicate the true economic "floor" for condo values.