When Is A Bed & Breakfast

Discussion in 'General Appraisal Discussion' started by CANative, Dec 27, 2004.

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  1. CANative

    CANative Elite Member

    33
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    If the owner states that she is no longer operating the property as a bed and breakfast, has notified the Chamber of Commerce and officials at the city planning department that she is no longer interested in running a B&B, can I consider the property just a plain old SFR?

    The subject is kind of a white elephant (actually a pink elephant from the current paint job, yechh.) 100+ year old Victorian. It's an historic house and if you pull up the address on streets and trips you'll see it named as an Inn. It's very large, very original and not in very good shape structurally. However the interior is very nice and takes you back to the turn of the century. 6 bedroom and 3.5 baths. It was listed as a commercial property 4.5 years ago and did not sell despite a couple of price reductions.

    My feeling is that because the city now has superior transient accommodations this property has been by-passed in the B&B category. The zoning is multi-family residential and a B&B is allowable under a conditional use permit. If it stops operating more than 6 months, a new permit would have to be applied for. She just notified all of her plans a few weeks ago (about the time she started trying to refi it :blink: )

    There's a good market in this town for these old Victorians as historic SFR's. Probably a better market than for a B&B. I feel pretty comfortable appraising it as a SFR but feel the need to explain the situation I have just described.

    My concern is the income approach. As a SFR this approach would not be applicable as an investor would not buy a home of this size and price range for income and there is insufficient rental data to develop a reliable GRM. However, since it has had income historically as a B&B, how do I address this without invoking departure? Maybe I haven't asked the question correctly.
     
  2. Rich Heyn

    Rich Heyn Senior Member

    0
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    You may have provided the answer to this H&B use question.
     
  3. Elliott

    Elliott Elite Member

    5
    Apr 23, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Oregon
    Greg,

    Be careful. I've gotten to the point where I just don't do them.
    The last one I did, realtor & buyer say, "its not going to use it
    as a B&B". I do the residential appraisals. Three months
    after closing its a B&B.

    In my mind its a fraud to pull a residential mortgage and then
    operate it as a business.

    elliott
     
  4. CANative

    CANative Elite Member

    33
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    But, but, but....

    If the improvements are configured no differently than any other large, victorian home in the area (other than lav sinks in each bedroom), and the zoning allows for either use (not specifically for a B&B but since it has a history as an B&B Inn the use can continue if desired) and there is no pronounced demand for B&B's, can I disregard the prior business operation?
     
  5. Dale Smalley

    Dale Smalley Senior Member

    4
    Jan 15, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    I believe if you properly disclose the Scope is to appraise as a SFR and disreguard the B&B that should be ok. It may or may not be a B&B in the future. Maybe you get more $ as a SFR but they will only know after you do the appraisal. But there are are always those people trying to scam the bank because you get better rates and a higher LTV for a SFR.


    I know how they feel after the holidays. When are all these people going home?
     
  6. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    DALE ! NO!

    That's as bad as being part of the fraud to begin with. I got a similar order and I remembered the address some and called the borrower in Placitas, north of Albuquerque in a high $$ price range. I quizzed her about it and then blatantly asked if it was the one on the main drag that was a B & B. She said it had been one but that she had closed it down. I declined the order to the lender and explained that I felt it was part of a fraud scheme to get an "owner occupied" loan on a going concern that had been, was being and most likely continue to be used as a B & B. The LO swore to me that the borrower had stated under no terms would it remain as a B & B. I declined.

    Seven months later I drive by this place on my way to another appointment and here is the same sign that had been removed for a day.

    As an appraiser it is, IMHO, part of the job to disclose all about the property that is known and/or potentially known. I'm aware that it was a B & B and would report so in the SOW and then disclose what I've been told. There is no way I'm going to ignore a fact!

    Greg - did the city/county indicate that the license has been turned in? Have you informed the client about the past history of the property and location? Report what you know, observe and the analysis. Let the UW make the decision. You'd be covered then if you told all up front.
     
  7. Elliott

    Elliott Elite Member

    5
    Apr 23, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Oregon
    This is what has happened to me more than once....
    B&B request, but let's do it as a residence cause
    the buyer says they don't want to be a B&B (when
    the real reason is they found they can't get anybody
    to finance it). So gullable me does it as a residence.
    I disclose prior use, intended future use, how it has
    more bathrooms than closets.

    Next thing that happens is the MB throws out those
    disclosure pages or whites them out (this was before locked Pdf)
    and closes the loan. Review appraiser turns report into
    state because now its being used as a B&B.
    State investigates based on corrupted copy and
    is too stupid to figure out what really happened.

    Its just not worth the hassel.

    elliott
     
  8. CANative

    CANative Elite Member

    33
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    All parties knew about the property. I have disclosed all in the report and have written some lenghty comments about the current state of B&B's in this market. I have examined listings for the previous 3 years, at all price ranges, for both SFR and commercial. I have found that when these old houses are listed as B&B's under a commercial category at higher than typical prices for the location and improvement characteristics, the listings are expired or withdrawn. They appear later in the SFR category at a lower price and sell at typical exposure times.

    It is my opinion that there is no real investor interest in B&B's as a business. However, some find it fun to call their vintage house a B&B and operate it so during the peak winr country tourism season.

    There is no specific license for B&B's in the city. There is a conditional use permit. The permit for this subject is still active but the owner has informed the municipality and the chamber of commerce that the operation has been retired. The permit will remain in effect for the next 180 days. If the owner does not reactivate it by then, it will expire. If they desire to resume operations, they will have to reapply for a new use permit.

    If the house was a mobile home, the city allowed transient occupancy and the owner rented out the back bedroom and gave the people a bowl of cereal in the morning would that qualify as a B&B?
     
  9. eric cogswell

    eric cogswell Sophomore Member

    0
    Nov 1, 2004
    Professional Status:
    Licensed Appraiser
    State:
    Maine
    i grew-up in a B+B... My mother thought it was "warm and intimate" a way to meet nice people............I thought it was nothing but a big intrusion.... But anyway. The income is extra... Not a max profit business; just a way of life. Mostly non-conforming, the way their layed-out, if your going SFR. Small mom+pop motor-inn perhaps?
     
  10. eric cogswell

    eric cogswell Sophomore Member

    0
    Nov 1, 2004
    Professional Status:
    Licensed Appraiser
    State:
    Maine
    Beats me, Sorry to confuse you :eyecrazy:
     
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