HBU for Rental Analysis

[Dublin ohio]

I disagree...that's a separate issue.

In what way. The OP is asking about a rental analysis. So you would include the unit that can't be legally leased in the rental analysis?

 

[ZZGAMAZZ]

Sounds like the unit can't be legally leased. Not a permit issue.

That was the crux of this thread: Does the response of the local market trump HBU? Perhaps a 5th test that supercedes the traditional four is needed. Interesting IMO that this critical factor isn't discussed in any CU course of which I'm aware.

 

[George Hatch]

The only way to answer that question is to look for sales data with unpermitted units to see how their pricing compared to the properties that had no extra unit.

You're really not even asking an HBU question here. You're asking how the market is treating this attribute.

 

[Zephyr999]

In what way. The OP is asking about a rental analysis. So you would include the unit that can't be legally leased in the rental analysis?

What makes it not legal to lease?
Hey OP, does the property have an occupancy permit for the unit?

 

[glenn walker]

God I cant take it LMAO

 

[ZZGAMAZZ]

What makes it not legal to lease?
Hey OP, does the property have an occupancy permit for the unit?

A buliding permit to modify a detached garage into a "Recreation Room" was issued at an unknown point in time since original construction in 1925. I stated my Assumption in the report that the current full kitchen and bathroom would not have been integral to the Recreation Room; and I didn't even ask the Planning Department about occupancy because one can't occupy a Recreation Room.

 

[Dublin ohio]

A buliding permit to modify a detached garage into a "Recreation Room" was issued at an unknown point in time since original construction in 1925. I stated my Assumption in the report that the current full kitchen and bathroom would not have been integral to the Recreation Room; and I didn't even ask the Planning Department about occupancy because one can't occupy a Recreation Room.

So the following is based on the extra unit only being a "recreation room"?

So.... the conversion can't be legally leased because the current use as a tenant lease isn't legal.

 

[George Hatch]

One again we're getting into the distinction between "w/permits" vs "permissible". Which sometimes they mean similarly in the market but sometimes they don't.

As a hypothetical, if a jurisdiction is effectively allowing a use to continue and the market is seeing that, their expectation may be that the jurisdiction will continue to allow that use to continue indefinitely. In that case what's probable in the market (market value) can be different than what a lender will accept (mortgage value).

How many times have we seen a lender require the 2nd stove and fridge to be removed before they'll do the loan? What does anyone think happens to that space after escrow closes? The stove and fridge get moved back out of the garage and back into that space, which then gets rented or otherwise occupied as the separate living space.

 

[ZZGAMAZZ]

One again we're getting into the distinction between "w/permits" vs "permissible". Which sometimes they mean similarly in the market but sometimes they don't.

As a hypothetical, if a jurisdiction is effectively allowing a use to continue and the market is seeing that, their expectation may be that the jurisdiction will continue to allow that use to continue indefinitely. In that case what's probable in the market (market value) can be different than what a lender will accept (mortgage value).

How many times have we seen a lender require the 2nd stove and fridge to be removed before they'll do the loan? What does anyone think happens to that space after escrow closes? The stove and fridge get moved back out of the garage and back into that space, which then gets rented or otherwise occupied as the separate living space.peee

I have occasionally referenced the long-term tendency of a specific jurisdiction to fail to enforce planning or zoning standards, based upon past peer perspective in the AF, but in retrospect it could be very slippery slope for an appraiser to reference an appraisal decision upon actions of a jurisdictional authority, if no data actually exists to demonstrate the JA's performance, especially because any meaningful data about that behavior couldn't possibly exist.

 

[ZZGAMAZZ]

God I cant take it LMAO

Big G, why are you so silent on this post? Does market behavior in response to a residential lease trump the HBU analysis? (Can we overlook the fact that the "legal permissibity" of a property is based upon the assumption that building permits serve a purpose to the public rather than just a way to obtain revenue, e.g., occupant's safety.) I'm trying to embrance the question that GH posed in Post# 18 that might already address this question, and which might answer my OP:

Can the appraisal rental analysis include potential market rent from a unit that first was converted, with permits, into a "Receation Room," presumaby without allowing kithen and bathroom, and that subsequently was converted, presumably witihout permits, into a fulliy-functional guest unit, aka ADU?