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Duplex Vs 2 House

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PushinValue

Junior Member
Joined
Nov 28, 2011
Professional Status
Certified Residential Appraiser
State
California
conventional purchase
2.5 acres (cannot be split)
3000’ main home
1000’ 1 bd 1 bath home
Zoning allows two homes
2 addresses
1 set of utilities
Can be and is rented
Land value 250-300
Most value is in the land plus main home (650-750k total value)
Second home contributes roughly 75k

The property is clearly not an investment property due to minuscule ROI. I can’t imagine even 1% possibility an investor buys this property due to being located in a high value semi rural part of town.

I thought this was a simple HBU analysis.... SFR w adu due to a significant portion of the value being in the main home and land. 5 comps, 3 SFR and 2 main homes with ADUs (main homes roughly 2500-3000’ with second homes of 800-1200’.


Lender comes back and says “investor wants this on 2-4 unit 1025. I state simply, this is a single family w ADU. Any “duplex” or investment property in this market are on lots under 1/2 acre. Review appraiser disagrees because “second home can be rented and a second residence is permissible”.

Do I need to elaborate further? What points am I missing ?

I tried to explain over half my comps are sfrs (because that is what is most similar to). My estimate is 90% owner occupied within the market for similar properties due to price point...

Help me see what I am missing (if I am missing something in my analysis).
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
You are not missing any points, you have an ahole reviewer and client telling you to change HBU to a duplex. From what you describe, it is a SFR with an ADU. Tell them you will not change it as that would be creating a misleading appraisal,
Zoning needs to be considered. When you say zoned for 2 houses, is it residential zoning aka a house and guest house, or mixed use zoning?

Re read fannie guidelines about ADU and SFR, sounds like this house and smaller guest house meets that plus configuration of property as well as your own HBU as SFR plus guest house
 
Last edited:

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
Appraise it both ways, SFR with ADU and duplex. The highest value wins. If that is SFR with ADU, report it on the 1004 including the HBU analysis and duplex value.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
If I'm convinced the H&BU is SFR + ADU, that's how I'm going to value it for a market value appraisal. Many times in rural areas (California) the zoning allows a second home or second residence (they don't necessarily call it an accessory dwelling unit). Sometimes, the size of that second dwelling is limited (1,000 or 1,200sf). While those homes can be and many times are rented out, the typical buyer of the property is not an investor (as you affirm); the buyer is purchasing for user-utility.
Valuing it as something else can be done (value in use); but it isn't market value.
 

Tom4value

Senior Member
Joined
Dec 4, 2016
Professional Status
Certified Residential Appraiser
State
Massachusetts
Haggling over an adjustment is one thing. Being pressured for a HBU opinion is serious business. No state auditor will fault you for sticking to your guns. The appraiser is solely responsible for determining HBU. Remind this Einstein that legally permissible is only one of the tests. This guy needs to close his "Appraising 101" book and let the appraiser appraise. If the LO structured the loan as a two family property, he has to change his paperwork, not you.
 

NachoPerito

Senior Member
Joined
Jul 25, 2012
Professional Status
Certified General Appraiser
State
Washington
You can get to market value on a 1025 form if you compare it to other two-unit properties in the area where a typical buyer is an owner/user with an ADU. You don't have to put any weight on the income approach if you don't think it is appropriate.
 

ValueArtist

Junior Member
Joined
Dec 12, 2010
Professional Status
Certified Residential Appraiser
State
California
Provide your fee quote for SOW expansion to double what you were engaged with?
 

timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
conventional purchase
2.5 acres (cannot be split)
3000’ main home
1000’ 1 bd 1 bath home
Zoning allows two homes
2 addresses
1 set of utilities
Can be and is rented
Land value 250-300
Most value is in the land plus main home (650-750k total value)
Second home contributes roughly 75k

The property is clearly not an investment property due to minuscule ROI. I can’t imagine even 1% possibility an investor buys this property due to being located in a high value semi rural part of town.

I thought this was a simple HBU analysis.... SFR w adu due to a significant portion of the value being in the main home and land. 5 comps, 3 SFR and 2 main homes with ADUs (main homes roughly 2500-3000’ with second homes of 800-1200’.


Lender comes back and says “investor wants this on 2-4 unit 1025. I state simply, this is a single family w ADU. Any “duplex” or investment property in this market are on lots under 1/2 acre. Review appraiser disagrees because “second home can be rented and a second residence is permissible”.

Do I need to elaborate further? What points am I missing ?

I tried to explain over half my comps are sfrs (because that is what is most similar to). My estimate is 90% owner occupied within the market for similar properties due to price point...

Help me see what I am missing (if I am missing something in my analysis).
Could you tell me what the difference is between 1 unit property with an accessory unit that can legally be rented (as is the case here) and a two unit property (which would allow owner occupancy in one or both of the units)? Did you explain that difference in your appraisal report?

Whether or not you call the property a 2 unit property or an one unit property with an accessory unit, there are clearly two living units here, each of which can be rented or each of which could be owner occupied under the applicable zoning. What is the definition that you are using to distinguish between a 2 unit and 1 unit with accessory unit and what is the source of your definition? I don't see how labeling the property a two unit property as opposed 1 with an accessory unit and reporting the results of your appraisals on Fannie Mae form 1025 changes the HBU of the property, which apparently from your write-up is a property with two separate living units that are both legally rentable and are both legal to operate as owner-occupied units no matter which way you label the property.

I am asking these questions because I have yet to see a definition of accessory unit versus 2 unit that would definitively classify the property that you described as either 1 unit with an accessory unit or a two unit property and I don't think the labeling of this property one way one another has anything whatsoever to do with HBU in this situation as either way the property could be used as an o/o property or a rental or combination o/o and rental
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
This is common in California especially high desert areas ( Apple Valley-Phelan-Victorville-Hesperia ) where if the property is located on one or more a acres the City or County allows a second dwelling unit which is often modular or a mobile home- Depending on the land use and zoning it can be either SFR with guest house or 2 on a lot rental - In your situation my guess is ( But-contact City-County on Zoning and land Use ) is you have a estate zoned parcel being a single family and a guest house and the City or County will not even allow income property - Of course we all know many do rent the back houses or modular but they also rent back lots to gardeners to park equipment etc but nobody confesses it and the City -County ignores it unless the properties start getting complaints or code violations. Once again Location Specific and H & B analyses-zoning and land use is the answer.
 
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