ADU Comparable

[sputnam]

Words have meaning, J. To wit:

Here is the OP: "They asked if I could note the ADU in the report but not include it in the valuation because construction is not yet complete."

Here is your response: "The AMC is instructing you how to do the appraisal wrt value"

A small change, I grant, but those two words could not be more diametrically opposed. You intentionally denigrated the AMC by changing those words. Doesn't really matter to me - I have no idea who the AMC is. It's just extremely annoying that every single post gets twisted into an AMC hate rant. Seems to me an attempt to actually assist the OP would have been more productive. That's just me, though.

That's right. It is an assignment condition. It's completely legit with regards to USPAP.

 

[J Grant]

What does USPAP say about this kind of behavior? To get our answers, we look to *USPAP Advisory Opinion 19 (AO-19). In this advisory opinion, we read the following:

• Assignment conditions that compromise an appraiser’s impartiality and objectivity in an assignment are unacceptable.
• While a client may feel that offering preference in current or future assignments on the basis of “making the numbers work” in a specific assignment is appropriate, attaching such a condition to an assignment compromises an appraiser’s impartiality and destroys the appraiser’s credibility.
• The Uniform Standards of Professional Appraisal Practice is explicit about such matters. Agreeing to perform an appraisal assignment under such a condition violates the Conduct section of the ETHICS RULE in USPAP, which states, in part:
  • An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. An appraiser must not agree to perform an assignment that includes the reporting of predetermined opinions and conclusions.
• Furthermore, accepting compensation for completing an appraisal assignment under such a condition violates the Management section of the ETHICS RULE in USPAP, which states:
  • An appraiser must not agree to perform an assignment, or have a compensation arrangement for an assignment, that is contingent on any of the following:
    • the reporting of a predetermined result (e.g., opinion of value);
    • a direction in assignment results that favors the cause of the client;
    • the amount of a value opinion;
    • the attainment of a stipulated result (e.g., that the loan closes or taxes are reduced); or
    • the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the assignment’s purpose.

 

[J Grant]

What does USPAP say about this kind of behavior? To get our answers, we look to *USPAP Advisory Opinion 19 (AO-19). In this advisory opinion, we read the following:

• Assignment conditions that compromise an appraiser’s impartiality and objectivity in an assignment are unacceptable.
• While a client may feel that offering preference in current or future assignments on the basis of “making the numbers work” in a specific assignment is appropriate, attaching such a condition to an assignment compromises an appraiser’s impartiality and destroys the appraiser’s credibility.
• The Uniform Standards of Professional Appraisal Practice is explicit about such matters. Agreeing to perform an appraisal assignment under such a condition violates the Conduct section of the ETHICS RULE in USPAP, which states, in part:
  • An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. An appraiser must not agree to perform an assignment that includes the reporting of predetermined opinions and conclusions.
• Furthermore, accepting compensation for completing an appraisal assignment under such a condition violates the Management section of the ETHICS RULE in USPAP, which states:
  • An appraiser must not agree to perform an assignment, or have a compensation arrangement for an assignment, that is contingent on any of the following:
    • the reporting of a predetermined result (e.g., opinion of value);
    • a direction in assignment results that favors the cause of the client;
    • the amount of a value opinion;
    • the attainment of a stipulated result (e.g., that the loan closes or taxes are reduced); or
    • the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the assignment’s purpose.

The above is USPAP's AO on assignment conditions. A stretch to call my post a hate-filled anti-AMC rant because I used the word instruction vs ask, either way, an appraiser who accepts an agreement of an assignment condition is stuck with the results and some assignment conditions are grounds for not accepting the order. The "legit" part is up to the appraiser to determine.

IMO, the point is this client, by asking, is hoping for a yes answer and an assignment condition that ignores/excludes a significant property attribute without an HC is misleading. An assignment for lending purposes on the URAR is either as is, or subject to, and this client was asking for a third option for a segment to be excluded which would require an HC but appraisers are not allowed to add an HC not already on the form.

My post was made to protect appraisers by making them aware of what they are being asked to do.

 

[alebrewer]

 

[Xavier Hargrove]

The problem with this advice is it means the appraiser is turning in a misleading report on the rationale the client asked for it. The client is not signing the appraisal, we are. That is why the option exists for an appraiser to refuse an assignment condition and thus decline the order (or make the client remove the condition). Saying the part built ADU exists but we excluded it at client's request does not erase the problem.

Okay, a client asked the appraiser to exclude the part finished ADU. Clients can ask for anything, Seems they often find an inexperienced appraiser to hand these types of assignments off to, perhaps knowing an experienced one would not go along with it. The market value opinion purpose asks for to value a subject property as a whole., not a segment of it. That is why we don't get to exclude pools, garages, or half a house because a client asks for it on a URAR. (unless it meets a pre-printed HC, which normally it does not )

I've checked the market and could not find any contributory value for a partially finished ADU. In theory I am sure there is some value but nothing that can be backed or proved by sales. Can't I omit based on this conclusion? That the construction is partially finished and the appraiser has not observed a definitive contributory value for partially finished ADUs. Therefore the appraiser valued the subject property and excluded the ADU from the valuation but does not denounce that there is an ADU on the subject property.

 

[TerryRohrer]

You can't value the ADU subject to completion because that is not what the Client wants. Since the Client doesn't want as complete, that leaves 'as-is'... but they don't want that either. So, you get to appraise a physical segment. You omit the ADU from the valuation analysis. An EA or HC is not required. You don't have to pretend like it isn't there. You are simply not including that portion of the property in the bundle of rights you are appraising. You do need to briefly describe that ADU and state that at Client request, the ADU is not included in the valuation. Keep a good work file.

So do you amend the address, legal description, assessor parcel number, annual taxes, etc., to reflect that the ADU is excluded (assuming a jurisdiction where the land and attachments are real property)?

 

[TerryRohrer]

I've checked the market and could not find any contributory value for a partially finished ADU. In theory I am sure there is some value but nothing that can be backed or proved by sales. Can't I omit based on this conclusion? That the construction is partially finished and the appraiser has not observed a definitive contributory value for partially finished ADUs. Therefore the appraiser valued the subject property and excluded the ADU from the valuation but does not denounce that there is an ADU on the subject property.

Does that mean you have found sales with partially finished ADUs and those ADUs didn't contribute, or that you didn't find any sales with unfinished ADUs? In the latter case, your guessing, but not supporting your guess.

 

[Fernando]

I've checked the market and could not find any contributory value for a partially finished ADU. In theory I am sure there is some value but nothing that can be backed or proved by sales. Can't I omit based on this conclusion? That the construction is partially finished and the appraiser has not observed a definitive contributory value for partially finished ADUs. Therefore the appraiser valued the subject property and excluded the ADU from the valuation but does not denounce that there is an ADU on the subject property.

It's rare that you find an ADU exactly like your subject.
I would get what's available. A comp with a half as* ADU. A permitted ADU. An "ADU' with no kitchen but has potential to put a kitchen.
Come on, think outside the box and get what you can get.

 

[J Grant]

I've checked the market and could not find any contributory value for a partially finished ADU. In theory I am sure there is some value but nothing that can be backed or proved by sales. Can't I omit based on this conclusion? That the construction is partially finished and the appraiser has not observed a definitive contributory value for partially finished ADUs. Therefore the appraiser valued the subject property and excluded the ADU from the valuation but does not denounce that there is an ADU on the subject property.

Even if you believe there is no contributory value for a partially finished ADU, it does not give you grounds to "omit" it The ADU is still there, right??? (rhetorical question)

Here is what you might say" There is a 400 sq foot/whatever sf partly finished ADU on the property ( see photos ). Fully finished ADU's indicate a contributory value of $40,000, however, no partly finished ADU's were present in any recent sales in the market area. The appraiser believes due to this and conversations with agents (or some other support) there is likely no contributory value that can be proven for the partly finished ADU, therefore no adjustment is made for it on the grid."

THE END

PS I would assume if it is 50-or 70% finished there is some contributory value but since it is unlikely to find a sale with a part finished ADU, the value can be depreciated partial cost, based on an ADU needing a complete gut job, or using a semi-finished outbuilding such as a workshop etc. But that is up to you and your market data-

 

[Fernando]

There is some value. You can call it a semifinished storage area which has some value.
In most cases, ADUs have value because most people like additional rent income even the rich (Yes, some rich people like to have additional income).
Few like me want an ADU in my house because I value my privacy and don't need the additional rent.