Common House vs Condo Clubhouse: Do you Dare Tell the Appraiser that One is about Substance and the other Fluff?

While it has been arguably necessary, it is also unfortunate that cohousing projects are most often sold to appraisers and banks as nothing less–and nothing more–than a condominium.

You’ve cut costs and squeezed expenses, and your appraisal is still a barrier to getting a loan. It’s looking like there’s nothing left to do short of axing the common house. Without a common house, is it still going to be cohousing? At the same time, the clubhouses in new condo developments have pop-your- eyeballs-out expensive light fixtures, state-of-the-art humongous TV (or TV’s), and the latest in celebrity-endorsed exercise equipment. It’s pretty obvious that they’ve spent some money! What’s the rub?

First of all, appraisers have learned to value condo amenities–including the clubhouse–from a status and vanity perspective. What is most important is whether the eye candy will push someone over the line from rent to buy. Common appraiser wisdom has led to an expectation that condo amenities had better be high falutin’ and fancy to justify the viability of the entire development. Whether these amenities are useful (or not) isn’t the central question, and there’s actually a perverse incentive to make clubhouses less than utilitarian. Like today’s dedicated (and most often empty) dining rooms, clubhouses look most pristine and pretty when nobody ever uses them. In markets where vacancy rates are especially low, seeking maximum marginal rent has led to a veritable amenities arms race, which has put pressure on condo developers to try and keep up.

Imagine a common house conceived with such pretentiousness in mind! Unlike a clubhouse, a common house is both a social and economic asset, rather than a sunk cost related to marketing; as such, there are vast differences between them in design, use, purpose and practicality. Nevertheless, when clarity is lacking the whole thing just doesn’t look right relative to a space aspiring to be something akin to the lobby of a fancy hotel.

While it has been arguably necessary, it is also unfortunate that cohousing projects are most often sold to appraisers and banks as nothing less–and nothing more–than a condominium. These worries about raising red flags translate into valuation of the common house using the same assumptions that color appraisals of condo amenities.

Maybe these assumptions are no longer even relevant. Do most people today even want amenities that are largely about conspicuous consumption and the show? It is very possible we’re all a little less shallow since 2008, and if so, the blanket keep-up-with-the-Jones assumptions have actually become a bias. While the value placed upon having the most-est of anything requires some re- examination–if we are to keep believing that there is universal veracity in this economics precept–we can in fact be assured that a majority of people actually value what they have the least of today, and that’s time.

Simply relating the contributions of the common house in reducing the time (and expense) of feeding ourselves–including the acquisition, planning, preparation, cooking, and all clean up associated with food–we are able to see how the common house radiantly uniquely shines! The marginal utility that the common house provides goes well beyond food of course, where its’ presence makes sharing resources, equipment, information, knowledge, and wherewithal patently natural. The freeing-up of time that the common house enables gives us greater opportunity to actually participate in our own lives and in the lives of the ones we love, the presence of which is positively correlated with our health and well- being. From a societal perspective, having the time to participate in civic and community life, including everything from parent teacher meetings to a gathering of the Park People, makes the our lives more stable and secure, and that’s good for everyone.

Already, appraisers and banks can see how access to transit provides similar time and cost saving effects that are beneficial for individuals, families, communities and society. It is actually true that in Denver, CO (where I live) that proximity to transit can add up to a 30% premium in residential valuations!

When will we be ready to take the leap and give appraisers and banks the opportunity to value common houses across the country fairly, correctly, reasonably, and for their true asset value? Stay tuned for why very soon may be the perfect time to take the leap and be proud to say it’s not just a condominium, it’s cohousing…more coming.

Category: Common House Design

Tags: Affordability, Common House, Design, Finance

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