4 Or 5 Units?

[DanBuck]

I got a difficult situation. Basically, before going on inspection of appraisal bank tells me property is 4 units which also seemed that way from one of the records. Upon inspection I get into 3 units. I decided that Id have to come back for the 4th unit due to the face that some of these props were fixer uppers and I wanted to make sure that last unit is usable.

Now I'm seeing from building records that the property is legally a 5 unit and is actually taxed as so. On the building records it says it has 5 kitchens. I called the building dept and assessor and this is the information that they have as well.

I bring this up to the borrower and he says he knows of only four units. Now, perhaps there's a possibility that he knows there's more, which is why he didn't get me into all areas of the house upon the first inspection, and maybe is pulling some stunt- but he says "he'd be happy if it were a 5".


I'm not sure what to do from here do I tell the bank anything yet(they don't like being bothered), Currently, Im trying to get another inspection (for that so called 4th unit) which is being delayed by the borrower. Do I just write up appraisal as a 4 unit with ext. assumption that there's 4 units and assumption that the owner is showing us everything here and if hes hiding something the value may change. The property is very oddly shaped which is hard to figure that every part of it has been inspected properly.

On top of that would there ever be an incentive why a borrower would want it to be a 4 unit rather than 5 in terms of getting a loan? (Its all renter occupied)

What do I do here?


Thanks all.

 

[gregb]

The loan program on a five unit varies from that of a four unit property.

 

[DanBuck]

The loan program on a five unit varies from that of a four unit property.

Im aware of this -but what specifically could it be here.

 

[TRESinc]

i would wait until you have inspected the 4th unit and see what it actually has.

1-4 units is considered residential, 5 or more is commercial. i almost bought a 4 suite little apartment building but it had a SFR on the same lot in the back and the interest rate was ridiculous for the commercial loan.

 

[gregb]

How many mail boxes? Have you reviewed the rental agreements/contracts and the owner's expense statement? If you are going to inspect the last unit, then you will know how many total units are in the improvements, non?

 

[Gobears81]

I know you mentioned that it is an oddly-shaped building, but I'd do your absolute best to have the three units which you have viewed mapped out. I'd convey all of this to the client as how can you determine market rent on that 4th or 5th unit if you don't know what's there? Same on the sales comparison approach - two small studio units would have a different value than a larger 1 or 2 BR unit

Assembled units in apartments isn't overly uncommon though, such as where they take two 1 BR/ 1 Bath units and make it into a 2 or 3 BR, 2 Bath unit. Usually the second kitchen is removed in those cases, though they often still have two front doors.

 

[DanBuck]

How many mail boxes? Have you reviewed the rental agreements/contracts and the owner's expense statement? If you are going to inspect the last unit, then you will know how many total units are in the improvements, non?

Good point.Actually now that I'm looking through the pics I'm noticing 5 electric meters(yet 4 gas meters)! At first inspection he mentioned the fifth is for the owner-which Im assuming refers to common area. Now there really isnt much common area.About mailboxes im not sure-I didnt see that. (Attached pic of part of prop below).

 

[Michigan CG]

I think you are getting jerked around. I would be charging extra for the extra inspection and you should already have the borrowers financial information for the property which would tell how many units. If it is five units the fee should go up, it costs more to hire a commercial job than a residential job.

 

[DanBuck]

I think you are getting jerked around. I would be charging extra for the extra inspection and you should already have the borrowers financial information for the property which would tell how many units. If it is five units the fee should go up, it costs more to hire a commercial job than a residential job.

definitely possible . or is it the rate on commercial hes trying to avoid. i just got off the phone with him-says its a 4. As you can see pic below there were 5 electric meters yet only 4 for gas which is confusing me even more. Even if i get another inspection Im afraid with the shape of this building, I might miss the 5th unit.. oh brother

 

[DanBuck]

I know you mentioned that it is an oddly-shaped building, but I'd do your absolute best to have the three units which you have viewed mapped out. I'd convey all of this to the client as how can you determine market rent on that 4th or 5th unit if you don't know what's there? Same on the sales comparison approach - two small studio units would have a different value than a larger 1 or 2 BR unit

Assembled units in apartments isn't overly uncommon though, such as where they take two 1 BR/ 1 Bath units and make it into a 2 or 3 BR, 2 Bath unit. Usually the second kitchen is removed in those cases, though they often still have two front doors.

Well issue here really is whats going on here-if the guys misrepresenting. Its possible he is,possible not. So lets say he assembled two kitchens and units into one but the town still as it at five, what status does this particular apartment now have- Is it one or not even one because it wasnt properly reported..