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Commercial or Residential or both?

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Jeff Horton

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
First for me. I have a property in our small town that is a Residence with a business in the basement/lower level. Daylight basement opens to the street, owner ran a trophy shop with the upstairs as his residence. The house could just as likely become a residence or a full fledged business or remain as is if it is sold.

Mixed use neighborhood off the main street. It is zoned for business but about half or more of the homes are still residences. Medical clinic at the end of the block. Large Church behind. No big demand or trend of these going commercial any time soon. Good place for a business that doesn't have a lot of foot traffic or need exposure.

I have found two comparable sales (remember small town) that are residences zoned commercial at the time of the sale. Better locations being on the main street but otherwise considering the situation good sales.

I am thinking about using similar residential sales that are not zoned commercial as comps because of the possible use of this as a home. Would that be a mistake? Not that I have a lot of choice in the matter.

Other option is use inferior homes zoned commercial I, but they would receive no weight basically.

OH Yea, it's an Estate Appraisal. So no lender guidelines to deal with.
 

Ken B

Elite Member
Joined
Feb 18, 2004
Professional Status
Certified General Appraiser
State
Florida
Who's buying the other properties? You said two sold; commercial or residential buyers?
 

Jeff Horton

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Got to drive by and make sure, but I believe these two are businesses now. But you have to keep in mind that are on the main streets in town making them more desirable as as business location. My subject is located off the main street in area that would see no where near the traffic. So honestly, I think you looking at different buyers.

Since I have posted this and been looking at my sales data and just sitting here thinking. I think that it is much more likely the buyer for this would want it as residence rather than business. Someone like me that wants a work shop would love the space on ground level. It's perfect for the way it is used. But not that many businesses that would fit in it's niche. It is sort of unique.
 

Ken B

Elite Member
Joined
Feb 18, 2004
Professional Status
Certified General Appraiser
State
Florida
If you have a property with a residential HABU, the similar properties which were purchased for commercial uses may not be "comparable."

Consistency of use is the applicable concept.
 

Jeff Horton

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Your hitting on the problem. What is the HBU of this property? I THINK it is as used. Residence upstairs and a small business downstairs in the (daylight) basement area. I am not aware of any others residences set up like this in town. Much less any sales of one like it. As I say, it's sort of unique but not in a bad way.

That is why I was thinking of splitting the comps between the two and trying to find as similar in location and zoning as I can. I really don't see much other choice.
 

Ken B

Elite Member
Joined
Feb 18, 2004
Professional Status
Certified General Appraiser
State
Florida
Any rental data for use in an income approach? Can you extract a GRM from other properties and apply it to a market rent for your property?
 

Jeff Horton

Thread Starter
Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Not really. There is rental property but few public sales. Hard to tract down any rental data. Plus we are a none disclosure state too.

One good thing is the subject is only 5 years old and looks brand new. So the cost approach gives me a number I can trust. It's in line with the Tax Assessment and actually compares pretty well with the two commercial sales.

I have a good idea of the value. Just need to make sure my methods are right and see what the comps indicate.
 
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