Saturday, October 08, 2011

Cornering the market

This is a question posted by a reader in the comments to an earlier post. I thought it relevant enough to respond in a post rather than the comments.

I'm new to shopping for a condo. Of course, your blog is helping tremendously but, I'm left hanging on at least one subject. I see corner units appear to be valued more than interior units. One owner told me the SE corner is more valuable. because the ocean breeze blows gently from the SE and it keeps the air circulating when the windows are open. I heard the lighting is better on a SE corner unit and saw the difference between NE and SE corner units at dusk. I also noticed wrap around balconies on corner units are not all created equal, but normally offer more outside space than interior units in the same buildings. I am perplexed over the value of a corner unit versus an interior unit in the same building. Is it merely buyer/seller preference or is there a no-kidding tax appraiser or lender appraiser value placed on a corner unit versus an interior unit?

This is much discussed and a question which has no clear answer. As pointed out, corners come in all shapes and sizes. All other things being equal, a corner should command more than an interior unit. However, all things are rarely equal. Besides the issue of size, here are some questions a buyer or an appraiser must consider when comparing a corner unit to a non-corner (by no means a comprehensive list);

  • Is the balcony better than the interior units? Some interior units have better balconies than the corners like the double-wide interior units at Cape Winds. Some buildings like the Constellation have extra balconies in all units, corners and interior.
  • Are there more windows or extra balconies and do they make the unit more or less desirable?
  • Does it have a better garage? Often the prime garage units or extra garage spaces are assigned to the corners.
  • Is the privacy and/or view compromised because of a building next door or the pool deck just below? A southeast corner with a wrap balcony staring at the building next door might be less desirable than an interior unit in the same building.

I would generally prefer a southeast corner to a northeast because of the exposure to the southern winter sun. However, if there is a building immediately next door to the south, maybe not. The northeast corner in that particular building might have better views and more privacy. With our winds generally out of an easterly direction I don't see a significant wind exposure difference between northeast and southeast. In some buildings which have neighboring buildings on both sides the interior units might command a higher price than the corners. Ultimately, each corner unit has to be judged on it's features. There is no one-size-fits-all adjustment. I asked a local appraiser this same question last week. This is the response;

Adjustments for corner unit vs interior are obviously most relevant when a condo is new and there is a selection of units to choose from. For existing condos, I do not make an adjustment for end unit vs. interior, as, like you indicate – there are just not enough comps to extract a supportable adjustment.

There you have it. Thanks to the appraiser for the input. Draw your own conclusions. You probably know what you like when you see it and what it's worth to you. Hopefully the seller of that perfect unit is willing to accept what you're willing to pay. Good luck in your search.

"Under some conditions, it is rational for competitors to make their products as nearly identical as possible." __Hotellings law