The Vue Charlotte’s Ace in the Hole: Floor Height Adjustments

On the typical appraisal form that appraisers use, there is a section for adjustments. The purpose of this section is to adjust values of a comparable unit up or down based upon certain criteria. Two areas where adjustments are commonly made are the square foot adjustment and the floor height adjustment.

If the unit your condo is being compared with has more square footage than yours, then that unit’s price needs to be adjusted down by some price/square foot. Say we have Vue unit 1 with square feet of 1000, being compared with Chapel Watch unit 2 whose square feet is 1100. The appraiser would assign some value to the square footage, let’s say in this example it was $100 per square foot, so unit 2’s price would need to be adjusted down $100 x 100 sq feet or $10,000. The reverse would be the case if the Vue’s square footage was lower than Chapel Watch’s by the same amount. In that scenario, the Vue’s price would be adjusted upward $10,000 so that the comp was apples to apples.

Another area where adjustments are made is floor height. And here is where the Vue can really kick-in some added value. I think common sense tells us a higher floor unit is more valuable than a lower floor unit. I believe when we bought in mid-2000 the values were approximately $10,000 per floor. If you bought on floor 21 instead of floor 20 you paid $10,000 more or thereabouts.

So now you have your 30th floor unit being compared with say a 10th floor unit at some other complex. Assign a value to the 25 floor difference, and you have your adjustment. What might an appraiser do? Say an appraiser assigns a $10,000 per floor difference. The comp on the 10th floor would need to be adjusted upwards $200,000 (20 floors x $10,000 per floor) to have an apples to apples comparison.  And here you can see how the Vue, if it can obtain the right floor height adjustment value, would be able to justify that a unit is worth the contract price. The key is the appraiser plugging in the right floor height adjustment value to get it there.

What is the value of floor height in uptown Charlotte? I do not know. Early appraisals of the Vue basically said there was no way to assign a floor height value to the Vue because there were not enough sales in the building to do so. Current appraisals are assigning a very generous floor height value which are helping boost them to the contract price.

Who is correct? The complexities of this are beyond my expertise, so I have to revert back to common sense. If the values of these units were the contract prices we paid back in 2005, we would be seeing lots of new sales in 2011. We are seeing virtually no closings either from those who contracted in 2005 or those shopping the Vue Charlotte in 2011. This tells me using simple economics that the prices are too high. Basic supply and demand. Eventually, the market prices will prevail; the Vue’s unit prices will most certainly be substantially lower; and the appraisers assigning contract value to these units will have some explaining to do.

Have feedback? Please share with Vuebuyer10@yahoo.com.

P.S. I received a mail this morning (which I really appreciated receiving!) from a buyer’s agent who had this to say:

Dear Vuebuyer10,

In your last post, you stated: If the unit your condo is being compared with has more square footage than yours, then that unit’s price needs to be adjusted down by some price/square foot. Say we have Vue unit 1 with square feet of 1000, being compared with Chapel Watch unit 2 whose square feet is 1100. The appraiser would assign some value to the square footage, let’s say in this example it was $100 per square foot, so unit 2’s price would need to be adjusted down $100 x 100 sq feet or $10,000. The reverse would be the case if the Vue’s square footage was lower than Chapel Watch’s by the same amount. In that scenario, the Vue’s price would be adjusted upward $10,000 so that the comp was apples to apples.

To which I respond: Not exactly. The Vue’s price would be need to be adjusted by some percentage of the price/square foot times the amount of the square footage difference
between the two units. Hope that clarifies.
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