Appraising Legal-non conforming duplex

[Stephanie L. Dudnick]

I have completed the property inspection for a refinance transaction on a legal non-conforming duplex. The zoning is R-3, though per the city it is considered legal non-conforming due to it's sub-standard lot size (3,300 +/-) and due to it not having a garage. Both units total approx. 1768 sq/ft. The city states it can not be rebuilt as a duplex if more then 50% is destroyed due to fire,etc. Do I appraise it as a single family residence and give value only to the larger unit (the other unit is a studio - no bedroom). or do I appraise as a duplex and disclose, disclose. I am really stumped on this one please help. :icon_eyecrazy: :icon_eyecrazy:

 

[Otis Key]

Does a SFR exist? http://commerce.appraisalfoundation.org/html/USPAP2005/competency.htm

 

[Stephanie L. Dudnick]

Hi Otis,

Let me clarify...There are two seperate house's on one lot not technically a duplex.

 

[Ruben Ramon]

Its still a duplex. Its a detached duplex. You have to do a highest and best use test. It is still legal, but nobody will loan on it without a rebuild letter from the city. That is a letter stating that if destrtoyed, it can be rebuilt as a duplex. Personally, I encounter this a lot, especially with residential turning into commercial. In my market, this doesn't change the HBU, but I have never had any lender do a loan on a non conforming property. If it really is a 2 unit, appraise it as a 2 unit.

You just have to be clear about the zoning being grandfathered. You are gonna get pressure to change the zoning though. I am gonna assume you know how to answer that. They may also want you to state that it can be rebuilt yourself. I would advise against that.

 

[Smokey Bear]

It's a detached duplex, legal non-conforming. I've never had a problem with these, just mark it correctly, note the rebuild requirement and who you spoke to at the zoning dept. or cite the zoning code that allows rebuild and under what circumstances. There are plenty of lenders that will lend on it, and I've never had any one come back and ask me to change it.

 

[Otis Key]

Ruben is correct in that it is what it is! You can't change it into the Taj Mahal on paper and appraise it. I think the pictures will give it away. Report what you know, even to the point of quoting someone from zoning on such and such date. However, we really don't care if they will loan or not. That's the purpose of the appraisal - to provide a report that presents our research, work, analysis and opinion of value so that the lender can make a decision about making a potential loan. Those details about the no rebuild are part of that report.

It is still legal, but nobody will loan on it without a rebuild letter from the city. That is a letter stating that if destrtoyed, it can be rebuilt as a duplex.

 

[Stephanie L. Dudnick]

Thank you for all your input! I have been told that lender's won't lend since it can not be rebuilt. I am happy to hear some will. Thanks again.

 

[Stephanie L. Dudnick]

Thanks Otis, I appreciate your statment.

 

[Smokey Bear]

P.S. - I've never had to get a rebuild letter. I just state what it is, cite the code, put it in the addedum etc. You can almost always find the municipal code online.

 

[Lee Lansford]

Lenders lend $$ every day on "legal nonconforming" properties.

Here is your challenge:
Find market data (sold) of properties with similar (ok, "reasonably" similar) improvements and zoning status.
Those sales will be the indicators of the market's reaction to the Subject's zoning status.
You may have to extend your search to include substitute, or competing, locations; also, a "good" sales comparison may be a property that sold 2 years ago.

Yes, this is a lot of work...but no one ever said (well, those who don't understand might say it!) that appraising was easy work.

Good luck.