8 units on <9,000 sf

[CANative]

An AMC for a national lender that chases loans sent me an order for 4 appraisals. 4 borrower, 4 SFR's, based on plans and specs subject to completion of the subdivision and improvements. The loan rep FedEx'd a package with building drawings and costs. Nothing else.

I was going to set up an appointment to view the property with one of the borrowers who was designated as the contact person. However I know the street fairly well and while driving comps for another property I stopped by. I had not received the plans and specs at this point.

I found a graded lot with some utility trunks. My impression was that there is no way 4 houses could be built on this lot, that SFR's on this street was kind of ridiculous (transition center, HUD high density appartment complexes, multi-units, really old victorian age houses left over, gym next door, etc.)

I do some research and and zoning is R3 with a PD (planned development) overlay. Minimum lot size for SFR is 6,000 sf. If multifamily the minimum lot size per unit is 1,500 sf. I also find out that the lot was reconfigured into a .58 acre lot and there is a $1,500,000 recent sale to a redevelopment agency from the current owner of record with a million dollars coming from HUD. However, the recorder/assessor states that the owner of record is still the guy who's owned it for years and is listed as one of the borrowers.

I later find out that they had intended to build 8 units on a portion of the lot but the property owners on that street complained and got the project nixed. (one of the property owners is an official with the city... and she rents out the house she owns).

After interviewing the contact person (one of the borrowers) I find out the plan is to subdivide a portion of the larger lot into 4 lots and build 4 residences (1,300 sf) with 833 sf "auxiliary" units of 2 bedrooms. There will be 1" between each unit separating them. Some of the planning staff were unaware of this and when I spoke to them they were skeptical that the this could be done but the "borrower" told me I talked to the wrong person and should talk to Ms. Blahblahblah. Their plan is for "precision plan" (whatever the F that is) and that they have approval for 4 SFR's with auxilliary units on 2,200 sf lots. All units (main SFR and smaller auxiliary units will be metered separately).

Without giving myself away, I interviewed the contact person in such a way as to extract more information than he probably wanted his LO to know about. It's all about rental income, especially as one of them has a contact at the local hospital nursing staff. It seems visiting nurses need a place to stay for 3 months at a time and these would be perfect. Etc, etc., etc.

It seems to me they have come up with this plan as a "get around" after being denied an 8 unit project. They still have 8 units, it's just that they have 4 lots with 2 units each and are calling them SFR's with "auxilliary units" (i.e. accessory dwelling units, granny units, etc.) High price SFRs on this street is a ridiculous notion, especially in this dead market. And there have only been about 3 multi-family sales in the entire city (of 15,000) in the last year.

The AMC initially offered me $1,300 for the appraisal (plans and specs appraisal of 4 SFR's all about the same). But now I don't think appraising as SFR's with granny units is appropriate and they should be appraised as 2 unit income properties (at least) and I also have a HBU problem based on current zoning versus some sort of variance which may be tentative at this point. Obviously this point of view will screw up the proposed loan terms so I need to get back to the AMC/Lender for some consultations.

What should I do? Just pass on the assignment?

 

[Lost Cause]

What should I do? Just pass on the assignment?

I wouldn't worry about it too much, Greg. Once you get back to the AMC, your involvement with this property will, in all likelihood, be finished.

 

[CURT VAN HOOSER]

Greg,

Personally, I would have to pass due to complexity. But you...you are the Ray Miller of California, and as such, are required by the forum to seek out complex properties, to explore the county recordings and back door dealings, to boldly go where no appraiser has gone before. That aside, tell the AMC you need $3,000 for the assignment due to the complexity and the added research and analysis required. Inform them that it could take 10 to 15 days to complete. They will find someone else and you did not have to turn it down. OR... you could accept the challenge. My guess is, if you turn it down, the next appraiser will not even find out what you have to date and will float a bogus appraisal report. Then in a year or so, you will be back on the forum complaining about the shoddy work done by the previous appraiser of a 2-unit you are working on.

 

[Mike Boyd]

Zoning is PD. That means, anything goes subject to approval of the plan. Just do it, collect your fee and move on. Your reports, of course, will be subject to approval by the planning department and completion of each house and auxillary unit.

Each report, most likely, will be a clone of the first one. So, a $1300 fee is reasonable although maybe a little light.

 

[CANative]

In my (preliminary) opinion these units cross the line from SFR with ADU to two unit income properties.

1. If I maintain that position when I go back to the AMC/Lender then their proposed loan program/terms may not work. I don't like being in this position because it could probably be argued either way.

2. If they decide to procede, I don't think exclusion of the income approach would result in a credible opinion. The fee I quoted did not include the income approach (didn't know there were two units each). The income approach is going to be monstrously complicated due to lack of sales and death of the income investor market here. Also, the last time I did a rent survey on an SFR (at the clients request because of non-owner occupied, 2nd residence type scenario) I got "stipped" by the AMC to state that the rental forms (1007/217) were only provided at the request of the lender and that the house was owner occupied. I put "owner occupied" at time of inspection because the sellers were living there.

3. Although they are proposing four separate loans by four separate borrowers and this may reduce their overall risk, am I responsible for an aborption rate discussion for four 2-unit properties?

 

[John Hassler]

In my (preliminary) opinion these units cross the line from SFR with ADU to two unit income properties. Can both units be rented out or must one be OO? If both can be rented that H&BU will dictate whether SFR w/ADU or duplex.

1. If I maintain that position when I go back to the AMC/Lender then their proposed loan program/terms may not work. I don't like being in this position because it could probably be argued either way. You need to make a decision you can defend. Nothing wrong with negotiating a fee for the work done and calling it a day.

2. If they decide to procede, I don't think exclusion of the income approach would result in a credible opinion. The fee I quoted did not include the income approach (didn't know there were two units each). The income approach is going to be monstrously complicated due to lack of sales and death of the income investor market here. Also, the last time I did a rent survey on an SFR (at the clients request because of non-owner occupied, 2nd residence type scenario) I got "stipped" by the AMC to state that the rental forms (1007/217) were only provided at the request of the lender and that the house was owner occupied. I put "owner occupied" at time of inspection because the sellers were living there. If one unit must be OO then I can't see how doing an Income Approach would apply. If duplex then it would appear you have your work cut out for you. Charge accordingly.

3. Although they are proposing four separate loans by four separate borrowers and this may reduce their overall risk, am I responsible for an aborption rate discussion for four 2-unit properties?Well, maybe not an an absorption study per se but you market condition section should discuss the anticipation of similar properties coming on line at the same time

Greg, I realize you know all this already. Just thought you might want to hear it from somebody else.

 

[CANative]

Both units can be rented and that is their plan (according to the borrower/builder/developer/owner I talked to).

 

[John Hassler]

Both units can be rented and that is their plan (according to the borrower/builder/developer/owner I talked to).

In my work file I would work this out both as a duplex and SFR w/ADO to determine H&BU. If they are both equal H&BU then it could be done either way.

 

[CANative]

In my work file I would work this out both as a duplex and SFR w/ADO to determine H&BU. If they are both equal H&BU then it could be done either way.

What's that work out to? 8 appraisals or 12? I've lost count. And it's in Ukiah. It's hard enough just doing a plain old SFR appraisal right now.

 

[John Hassler]

What's that work out to? 8 appraisals or 12? I've lost count. And it's in Ukiah. It's hard enough just doing a plain old SFR appraisal right now.

Waah, waah, waah.


:new_smile-l: