2-4 family in Chicago

[CVal]

Hello,

I've got an illegal, garden level unit leased. I've seen this handled a couple of ways. Some are calling it finished basement and excluding it from gba, room count and income and I can understand why. I'm leaning toward including it in gba and room count and income, as its pretty typical to see landlords renting these in this market. Two of my sales sold this way. You can address the risk of losing the income, making a line item adjustment in the grid and maybe discuss the issue when deriving a grm. I would just like to hear some other opinions. Thanks. On a related issue, would most lenders crap their pants if the illegal box is checked?

 

[Lee Lansford]

If it is not a legal use, the basement unit does not meet the test of H&BU RE: legal.

The basement unit may well have value, but, I would not be including rent from an illegal use in the Income Approach.

We have to report the use being made of a property. Your reporting will include the fact that the basement area is rented but such is not permissible--I take it that you have possession or have seen the Zoning Certification, yes?

Right now I await an owner obtaining a Zoning Cert on what he purports to be a legal 4-unit as I am not about to appraise one of these Chicago nightmares lacking the Cert that tells what--exactly--is legally permissible.

 

[Tim The Enchanter]

Hope that's not my friends building in Bucktown.

 

[CVal]

If it is not a legal use, the basement unit does not meet the test of H&BU RE: legal.

The basement unit may well have value, but, I would not be including rent from an illegal use in the Income Approach.

We have to report the use being made of a property. Your reporting will include the fact that the basement area is rented but such is not permissible--I take it that you have possession or have seen the Zoning Certification, yes?

Right now I await an owner obtaining a Zoning Cert on what he purports to be a legal 4-unit as I am not about to appraise one of these Chicago nightmares lacking the Cert that tells what--exactly--is legally permissible.

Thanks Lee. Owner admits that he does not have the zoning cert. The basement unit is leased to a tenant but it is not legal. I know they could lose the income, but one of my sales had a leased garden unit and its not uncommon for the area. Thus, I was thinking of including the income.

 

[KHS445]

Frankly I would consider including multiple valuations and let the client decide how they want to proceed. First would be to consider the sales and income approaches using the subject's HBU (including legally permissible). Making sure to clearly state this valuation is based on what is legally permissible. I would then include the income and sales approach to value for the property based on its present use and configuration. Again clearly stating that these values are based on the present use and configuration, which are not legally permitted.

 

[Lee Lansford]

Thanks Lee. Owner admits that he does not have the zoning cert. The basement unit is leased to a tenant but it is not legal. I know they could lose the income, but one of my sales had a leased garden unit and its not uncommon for the area. Thus, I was thinking of including the income.

I much understand what is common, but, I would not include an income from something that is not permitted by zoning.

 

[CVal]

I much understand what is common, but, I would not include an income from something that is not permitted by zoning.

Thanks Lee