2,550 s/f Guest house?

[tomster]

I bet this has been discussed before in this forum, but I couldn't find any answers by searching for old threads-

I have an order to do a single family 1004 appraisal on a property with a 3,400 house that also has a 2,550 s/f "guest house", per MLS. It an area that is unzoned, and the property is on one tax id parcel. I notified the lender that it is a duplex, as the second house is too large to be considered an assessory unit. But after discussing this with one "chief appraiser", I got another call from another "chief appraiser" telling me that since both houses are on one parcel, it is not a duplex, but it is a guest house. Is there any definitive guideline that is used to determine if it is a duplex or a guest house? There are very few sales of properties similar to this, but there are few sales of any type in this area, and therefore I can't really say if there is market acceptance.

 

[sandpiperapp]

I had a similar property. 5500 sf main house that had a 5500 sf basement that was full walk-out at the rear with an in-door pool. Had a second house that was 2500 sf with a 2500 sf walk out basement.
Zoning allowed multiple residences and I did have other properties that had more than one building on a single lot, though none of them were equal in size.
Since zoning did not allow for rentals and the second house was vacant, I treated it as a guest house and adjusted for it as an amenity in the sales grid.
Since there is no zoning, how is the second house being used? If it is a rental I would treat it as a multi- family. If it is being used truly as a guest house, then I would treat it as an amenity. How you would come up with adjustments without any similar sales is the hard part.

 

[Ca Ar Independent]

I bet this has been discussed before in this forum, but I couldn't find any answers by searching for old threads-

I have an order to do a single family 1004 appraisal on a property with a 3,400 house that also has a 2,550 s/f "guest house", per MLS. It an area that is unzoned, and the property is on one tax id parcel. I notified the lender that it is a duplex, as the second house is too large to be considered an assessory unit. But after discussing this with one "chief appraiser", I got another call from another "chief appraiser" telling me that since both houses are on one parcel, it is not a duplex, but it is a guest house. Is there any definitive guideline that is used to determine if it is a duplex or a guest house? There are very few sales of properties similar to this, but there are few sales of any type in this area, and therefore I can't really say if there is market acceptance.

In my area this is depends on several factors and the lender's interpretation of said factors. We have an assessor "use code" that often indicates SFR or Duplex. Usually this is the least relevant. Some lenders want to know if there are separate utility meters for the structures and THEY determine this is the most important criteria. Whether the second "unit" is rented is not relevant. I also consider minimum lot size requirements for a permitted second residential unit. If the second dwelling is/would be permitted under SFR minimum lot size requirements, all is well. ARE there permits for the second structure? Our assessor notes such occasionally, although I've also appraised similar 5000sf plus main house with various sizes of "ag barn" "accessory structure" "guest house"etc, on properties with a "use code" of "Orchards & groves" or "range/pasture land".The prelim can also be useful in identifying the legal description of the property. In my area, usually SFR is identified as SFR in the prelim although recently I've seen Title companies changing the prelim to correspond with the current purchase/loan type. If your lender wants you to appraise a "legal duplex" as SFR then I would note such in the appraisal conditions and vice versa.

 

[NORTON]

duplex's are also on the same parcel, aren't they?

 

[Randolph Kinney]

I had a similar property. 5500 sf main house that had a 5500 sf basement that was full walk-out at the rear with an in-door pool. Had a second house that was 2500 sf with a 2500 sf walk out basement.
Zoning allowed multiple residences and I did have other properties that had more than one building on a single lot, though none of them were equal in size.
Since zoning did not allow for rentals and the second house was vacant, I treated it as a guest house and adjusted for it as an amenity in the sales grid.
Since there is no zoning, how is the second house being used? If it is a rental I would treat it as a multi- family. If it is being used truly as a guest house, then I would treat it as an amenity. How you would come up with adjustments without any similar sales is the hard part.

Per Fannie Mae as of September 27, 2011 page 545, Selling Guide:

Property Type - A one- or two-unit property that includes an illegal additional unit or accessory apartment (sometimes referred to as a mother-in-law,
mother-daughter, or granny unit).


Loan Eligible for Purchase or Securitization by Fannie Mae?

Yes, provided that:
• The illegal use conforms to the subject
neighborhood and to the market.
• The property is appraised based upon its
current use.
• The borrower qualifies for the mortgage
without considering any rental income from
the illegal unit.
• The appraisal must report that the
improvements represent an illegal use.
• The appraisal report must demonstrate
that the improvements are typical for the
market through an analysis of at least three
comparable properties that have the same
illegal use.
• The lender ensures that the existence of the
illegal additional unit will not jeopardize
any future hazard insurance claim that might
need to be filed for the property.

Essentially, even if allowed by zoning and legal, you need to demonstrate that your property is typical and accepted by the market by showing comparable properties.

 

[incognito]

Duplexes are by nature and definition attached, and generally have 2 water and power meters. You have an acessory unit.

 

[prasercat]

Since there is no zoning restrictions to consider, look at how it is being used currently and then consider how a typical homeowner in the subject neighborhood would use such a structure - it could be very different. The market is what would give it value, not how the individual owner decides to use it. It may be an over-improvement and functionally obsolescent. It may only need some slight modification to make it not be an overimprovement (a more appropriate improvement). It may have more than one part to it; such as, a useful added garage area and a useful home office (although, 2500 square feet is normally too big for such a singlular use, in most cases). Since there is no zoning, perhaps a rather significant business enterprise could be run out of this accessory building. Is that something that makes sense in regard to the market?

As another praser mentioned, you will need to take not if the accessory structure is on the same utilities, septic, etc. and report it. Naturally, being on the same utilities doesn't prevent it from having a rental use.

Mother-in-law homes (or guest homes) are generally in demand, since, no matter the market, most homeowners have older living parents they need to care for and the best option is to have them live on their property, preferably, in a separate unit for added privacy. Hopefully, you can find a comp with a similar "guest home".

 

[sandpiperapp]

Per Fannie Mae as of September 27, 2011 page 545, Selling Guide:

Property Type - A one- or two-unit property that includes an illegal additional unit or accessory apartment (sometimes referred to as a mother-in-law,
mother-daughter, or granny unit).


Loan Eligible for Purchase or Securitization by Fannie Mae?

Yes, provided that:
• The illegal use conforms to the subject
neighborhood and to the market.
• The property is appraised based upon its
current use.
• The borrower qualifies for the mortgage
without considering any rental income from
the illegal unit.
• The appraisal must report that the
improvements represent an illegal use.
• The appraisal report must demonstrate
that the improvements are typical for the
market through an analysis of at least three
comparable properties that have the same
illegal use.
• The lender ensures that the existence of the
illegal additional unit will not jeopardize
any future hazard insurance claim that might
need to be filed for the property.

Essentially, even if allowed by zoning and legal, you need to demonstrate that your property is typical and accepted by the market by showing comparable properties.

The property I appraised was a super jumbo private portfolio loan so Fannie requirements were not an issue.

 

[Randolph Kinney]

Sorry, quoted you instead of the OP. Please disregard.

 

[George Hatch]

Zoning is a subset of "legally permissible". The only reason you're asking that question to begin with is to perform the HBU analysis; and the only reason you're doing THAT is to identify the basis upon which the property is most valuable as a means of identifying the dominant attributes of the property, the relevant units of comparison - as a means of identifying your comps.

If the local jurisdiction allows the structure to be there and also allows it to be rented out then those permissibilities speak to the potential usage of the property independent of the County's label for that use. The County could call the 2nd unit a jail and that probably wouldn't have any impact on the types of buyers or their usage or their chosen basis of comparisons.

Identify the types of occupancy that are permissible and go from there. From the description it looks like your comps are going to be other 2/lot properties. The lender may want you to stuff it on an SFR form - which is dumb but basically allowable under the GSE programs. Don't allow that clumsiness to interfere with your valuation. Those forms are the napkins, not the valuation process.