commercial or not???

[jjsappraisals]

I have been running into day care, both child and elderly, homes in my running around as an appraiser. there is no medical care being given, just room and board, with state lic. on wall, hand rails in halls and baths, sometimes ramps to assist walkers and such, and owner occupied. the debate with my lenders is that they are not commercial, due to being in a neighborhood, an SFR dwelling, conforms to use, and can be easily turned back into a "home" by removing railings and such. many of these homes are "overbuilt" due to additions with extra bedrooms, large rec rooms, and/or 2nd kitchens. Can these homes be appraised as single family residences or are they commercial because of the state lic. and income bieng generated? ****
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Lenders want us to not mention the day care at all. I see where this is going, but I feel as if I can make all kinds of statements about highest and best use, and zoning, and market acceptance, however, by admitting a day care is taking place with a zoning variance, are we not stating there is a commercial business there? follow my logic? I hope this clarifies.

 

[Mountain Man]

It depends on the zoning ordinances, and the highest & best use. I have seen several similar care homes that have variances and are readily marketable for the same use. As for converting them back to SFD, what is the cost to cure? May be too high for the loan deal to work.

Mell.

 

[Pamela Crowley (Florida)]

Mell is right. I did 4 of these last year all at once. All were in SFR zoning within SFR subdivisions. All had the necessary modifications for special care homes. Just did them on URAR with an estimated cost to cure to put them back into more typical SFR conditions. Treated the inside sprinkler system as an over-improvement but not a negative. Most of these will have commercial grade vinyl tile flooring, wide doors and ramps for wheel chairs, specialized bathrooms... Just figure out about how much it would take to add carpeting and maybe redo the bathrooms a bit. The rest didn't seem like any big deal to me. I can't see where wider doors are adjustable in either direction. I like to finish the complete inspection then walk through again as if I'm interested in buying it. That's when I make decisions regarding what would be necessary to bring it back to 'typical' SFR condition for that particular neighborhood. That was one of the few times I actually let others 'help' me with my inspection without an additional charge. The mentally challenged (is that politically correct?) residents were so fascinated with what I was doing and it took about an additional 1/2 hour in each house talking to them and letting them help me. (normally, I tell the homeowner that wants to help that I change an extra $50 for that. :lol: ) I'd have to look it up to make sure but, I did charge and additional $150 each I think.

 

[Mountain Man]

Ahhh, I think I understand now. Yes, you would be stating that there is a business operating there. So the lender wants a SFD report with no mention of current use or occupancy? I would not do it with out disclosing the current info., but also state the highest & best use as SFD (if that is what it is). Sounds like they want a "home loan", but won't get it if you mention anything in the report about the "house guest". The typical mortgage company will not finance anything that has a business operating on site. The two kitchens would also be a UW's clue. I wonder if they are applying for homestead exeption? I say, don't help them put the blinders on the lender. The lender is your client, not the LO.

How 'bout other opinons?

 

[George Hatch]

Mell and Pamela are right in my book. The license for the daycare or group home most likely goes with the operator rather than the property. As for the wider doors, ramps and bath extras, these items might appeal to a buyer with physical disabilities, and may thus not even require modification or removal. The 2nd kitchen is probably a loser. Cost to 'cure' probably isn't very much. Other possible buyers might include another group home operator, an extended family, or a religious cult waiting for a comet.


I would not try to avoid the occupancy issue. If the property is being used as a business or for non-owner occupancy then that should be disclosed. The lender can make their decision accordingly. This is another case where the value isn't the only thing that can kill the deal. Even if your value is right, a lender can come unglued if the appraisal report doesn't disclose and reconcile these other issues.

George Hatch

 

[Mountain Man]

George, "religious cult waiting for a comet". :lol: :lol:
Got me! ROFL.

Mell.

 

[Judy Whitehead (Florida)]

I have done a few of these as well. Mostly older people. The zoning laws locally allow you to keep up to 5 people in your home without a zoning change. I always treated it as any other residence unless there were changes to the property that were atypical, such as extra potties, hand rails, etc. The ones I have done were not changed very much at all.

My mother-in-law (age 91 in a few weeks) is presently in a home that I appraised. I didn't even know this lady kept extra ''guests'' until I got to the family room and 3 or 4 people were sitting there watching TV. There was absolutely no smell, no changes to the home (except the owner had remodeled part of the garage into an office) and as far as I was concerned, it was a single family residence. You had better believe when the time came to look for a place for our family member we went there first!

 

[jjsappraisals]

thanks a lot to all of you for the information you supplied. I am new to the group and I am allready pleased with the response.

 

[Larry Lyke]

jjs --

There are a couple of due diligence itmes regarding doing SF properties that have in-home on-site operating businesses:

--Some states protect these types of businesses by statute because it's in the interest of the whole community;

--And, of course, you can see it coming, there will be more of these types of businesses in residential neighborhoods by virtue of lack of affordable housing and housing shortages in and around big urban areas;

--The zoning is most important to address. The state regulations or statutues will be incoroprated into the local zoning laws;

--If the state says it's OK, the munipality's only real right to regulation is to issue the license and perhaps do the inspections.

--The Appraiser has absolutely nothing to lose by disclosing the facts as they are known. The Lender is asking you to be dishonest if they don't want it disclosed. The Lender is PASSING THE RISK to the Appraiser, when in fact it's their risk to see to it that they're dealing with an upstanding Appraiser!

--Honesty is not a commodity. Try putting that in an appraisal. Nor is it fungible.