Duplex + ADU should be considered as Triplex?

[CGinMN]

A lot of the reason that market participants want to call it an ADU and a lot of the reason that appraiser go along with that is..... they don't want to either pay the higher fee for a multifamily appraisal or they don't want to learn how to do a multi-family appraisal. No matter how much spin you put on it... an SFR with an ADU is a two dwelling property. A duplex with an ADU is a three unit property.

SF + ADU rates are better than a duplex. From the users perspective, there is a difference between a 2 unit and a single family with ADU, although that distinction, like many, is subjective.

 

[J Grant]

SF + ADU rates are better than a duplex. From the users perspective, there is a difference between a 2 unit and a single family with ADU, although that distinction, like many, is subjective.

Regardless of what market paripants percieve or which loans offers the better rate, the appraiser has to define the property according to its legal HBU which ties into zoning as well as property charatirscs.

I've appraised some borderline/could-be-either property and eventually found the better answer for those assignments. Othres, it is clear it is a duplex or a house with an ADU - and sometimes people want to fudge things to get a better rate or qualify for a loan but that is not my problem.

Though the OP example was a duplex plus ADU or triplex, either way, that appraisal for res lending was done on the 1025 form as a 2-4 unit small income property. Whether the additional building is called an ADU or a third unit on the appraisal would depend on the property characteristics and what zoning allows as the deciding factor.

 

[George Hatch]

The parallel to "who is doing what?" is "what is this property doing?"

If it wasn't for how (some) lenders underwrite then 3 units with 3 potential rents would logically be valued as 3 units regardless of the nomenclature being used. "Legally permissible" as a concept does not revolve around the nomenclature. Inasmuch as "lender will accept" is not an element of HBU analysis, WYSIWYG.

The form does not drive the development. Do what you have to do with the report but don't lose sight of what the property owners are doing with these properties or how the math works that they're using.

 

[J Grant]

The parallel to "who is doing what?" is "what is this property doing?"

If it wasn't for how (some) lenders underwrite then 3 units with 3 potential rents would logically be valued as 3 units regardless of the nomenclature being used. "Legally permissible" as a concept does not revolve around the nomenclature. Inasmuch as "lender will accept" is not an element of HBU analysis, WYSIWYG.

The form does not drive the development. Do what you have to do with the report but don't lose sight of what the property owners are doing with these properties or how the math works that they're using.

What the property owners are doing and how the math work compises the valuation aspect.

What the property physically consists of and what the zoning allows comprises the subject's physical property characteristics.
How to reconcile the two is part of the appraisal development.

I agree the form does not drive the development. However, it seems that some are using a URAR form incorrectly - either for the wrong property type or choosing to ignore one or more of the printed certs .

 

[George Hatch]

Technically, what the zoning allows contributes to the subject's legally permissible characteristics.

Does it matter whether the mechanism which legally allows a use is characterized as a by-right or a variance or a use permit or a pre-existing which now comprises a grandfathered use? Permissible is permissible regardless of the labels or the legal mechanisms being used. As an aside, that's also one reason why that element is referred to as legally permissible instead of legally permitted. "with permits" is arguably a subset of "permissible".

When we refer to properties having different financing alternatives, that's an internal lender protocol which will vary by lender. Not to mention the other alternatives for financing a sale such as a seller carry or all-cash purchase.

 

[ZZGAMAZZ]

I am not in Cali, but will offer my perspective -
Property is supposed to be valued at is HBU, and a component of HBU is what is legally permissible

So if your subject is in zoning that ONLY permits/allows a maximum build of a duplex plus ADU, then that limits what your subject can legally be - a duplex plus ADU - it can not legally be a triplex of the zoning does not permit a triplex .

The value aspect can only come after you define what your subject is - which you are in the process of doing.

You fortunately have a duplex plus an ADU for a comp. you can bracket it with additional duplex comps and triplex comps.

Good morning. I might be wrong, but my gut feeling is that the post isn't about valuation but about verbiage. I experienced a property with IDENTICAL physical improvements. Of course Nothing identical existed even in a neighborhood with 40% multi-unit improvements. The report was submitted and I devoted an extra week addressing lender/client conditions for me to describe the property as a Triplex rather than as a duplex with a legal ADU. I interviewed EVERY SINGLE SOURCE of info: city, county, textbooks, Forum, everything. {So then the big boss of the Planning Department throws a curveball by telling that a Triplex has to be in one building, adding an interesting nuance that described the frequent difference of opinions between appraiser and rest-of-the-world.} Nevertheless I eventually caved by terming the improvements as Triplex [with a hefty description of the controversy] because I couldn't find even one tangible source of info, written or verbal, that actually defined a Triplex in a functional context that addressed the Condition. I figured that if the definition was as vague as it seems, I could do no wrong by complying with the client condition.

 

[J Grant]

Technically, what the zoning allows contributes to the subject's legally permissible characteristics.

Does it matter whether the mechanism which legally allows a use is characterized as a by-right or a variance or a use permit or a pre-existing which now comprises a grandfathered use? Permissible is permissible regardless of the labels or the legal mechanisms being used. As an aside, that's also one reason why that element is referred to as legally permissible instead of legally permitted. "with permits" is arguably a subset of "permissible".

When looking at the highest and best use (HBU) of a property, the potential use must meet four tests in order to qualify as an appropriate HBU. Specifically, the use needs to be physically possible, legally permissible, financially feasible, and maximally productive.Feb 19, 2023

This ties into the HBU of the property - it must be legally permissible. Thus, when an appraiser questions what a property consists of, a duplex with a third unit or a duplex with an ADU, what is legally permissible will help determine it.

It is interesting that nearly every appraisal question that seems very complex or odd can be answered by going back to the fundamentals.

What I see in many posts are distorting the fundamentals into a pretzel to get an agenda- or not understanding how to apply the fundamentals to the specific appraisal problem in an assignment. Some of the convoluted, twisting scenarios make me wince - creating an EA and finding a weird alternate use or making it subject to turning the property into something else etc.

 

[J Grant]

Good morning. I might be wrong, but my gut feeling is that the post isn't about valuation but about verbiage. I experienced a property with IDENTICAL physical improvements. Of course Nothing identical existed even in a neighborhood with 40% multi-unit improvements. The report was submitted and I devoted an extra week addressing lender/client conditions for me to describe the property as a Triplex rather than as a duplex with a legal ADU. I interviewed EVERY SINGLE SOURCE of info: city, county, textbooks, Forum, everything. {So then the big boss of the Planning Department throws a curveball by telling that a Triplex has to be in one building, adding an interesting nuance that described the frequent difference of opinions between appraiser and rest-of-the-world.} Nevertheless I eventually caved by terming the improvements as Triplex [with a hefty description of the controversy] because I couldn't find even one tangible source of info, written or verbal, that actually defined a Triplex in a functional context that addressed the Condition. I figured that if the definition was as vague as it seems, I could do no wrong by complying with the client condition.

What made you call it a duplext with an ADU in the first place rather than a triplex?

I have no idea if you are right or if the client was right - but it's not so much about verbiage as it is about HBU - if the only way a third unit exists legally in the zoning what is allowed is for that unit to be an ADU, then the subject is a duplex with an ADU. If zoning allows a triplex, then it is a 3-unit triplex. ( basically , without me seeing it of course )

 

[ZZGAMAZZ]

What made you call it a duplext with an ADU in the first place rather than a triplex?

I have no idea if you are right or if the client was right - but it's not so much about verbiage as it is about HBU - if the only way a third unit exists legally in the zoning what is allowed is for that unit to be an ADU, then the subject is a duplex with an ADU. If zoning allows a triplex, then it is a 3-unit triplex. ( basically , without me seeing it of course )

The 2-story older duplex was supplemented by a very recent legal (with documented building permits) conversion of a detached garage into an ADU, with the conversion to the ADU eliminating legal requirements for an enclosed garage. It was literally a duplex with an ADU that I reported accordingly, with the client condition for me to describe it as a Triplex, on 1004 page 1.

 

[J Grant]

The 2-story older duplex was supplemented by a very recent legal (with documented building permits) conversion of a detached garage into an ADU, with the conversion to the ADU eliminating legal requirements for an enclosed garage. It was literally a duplex with an ADU that I reported accordingly, with the client condition for me to describe it as a Triplex, on 1004 page 1.

Perhaps the client wanted that so badly because it is a Fannie loan, and Fannie ( to the best of my knowledge ) will not loan on a duplex with an ADU but they will loan on a triplex.

An example of a client harassing an appraiser to change something to get a loan through ( ?) Description in a void is not the issue, it is the zoning -
idk if your subject zoning permits a triplex or only a duplex with an ADU. At the end of the day it won't hopefully affect you but it sounds like (, maybe ) the client wanted to push a loan through and it would be denied with the property as a a duplex with an ADU.