Duplex vs SFR

[glenn walker]

I already stated in this thread we appraise it with physical condition as is so we are on the same page as that.

I've done reverse mortgage appraisals and I've done REO appraisals and with either if it is MV we develop HBU - unless VA instructs the appraiser not to develop HBU I don't see where that applies. You reference a higher and better future use -but for MV it is present highest and best use.

OP - My subject is a 1900 build, originally built as a single-family home. It was converted to an up/down style duplex in the '60s but hasn't been rented in 20 years. The city records it as a duplex. Zoning allows SFR and two-family. It has been owner-occupied with the owner using both units since then (there is an interior staircase leading to the upper level). There is only one elec. meter and one set of mechanicals (not

Here is how to handle the poor condition and HBU vs current configuration.

"Both MF and SF zoning is present, and legal. The subject was originally a SFR, and was converted to a duplex in teh 60's, but could be retrofitted back to a SFR. The subject is in poor condition and needs repairs. Because of the condition , the typically motivated buyer is a property flipper /investor. SFR is determined to be the HBU ( state why). Because a buyer would have to spend a substantial amount on repairs, the nominal cost to retrofit configuration to SFR does not affect the market value opinion. "

You have it all figured out bravo but you could have saved the poor OP a lot of headaches by just posting this to begin with but you went off a cliff about this and that and that and this and by the time you got done my head and the OPs was spinning. If you are correct its highest and best use is its existing use which OP says owners have been using as a SFR for as many as 65 years.

So the H & B Use analysis was a 10 minute job and like 90% of all VA reverse mortgage defaults its current existing use is its current highest and best use. NOW what you forgot to ask is how big of a lot or land is this located on ? That is a big deal when you have mixed zoning or land use -Is there excess or-surplus land and finally can we discuss " Price versus Value" : ) LMAO

 

[CGinMN]

You can approach the "as is" value of a property that is flip-bait from two directions. One way is to find other properties which are in directly comparable condition - what you see is what you get. The challenge there is finding enough of such properties and then trying to adjust for their respective variations of "beater". You often won't be able to do either due to the general lack of such sales data. However, if you can find enough such data this will usually be the more directly indicative approach.

The other way to do it is to work backwards from the "as completed" condition by finding properties in finished condition and discounting via cost+profits. That's a more indirect approach and it requires a better handle on repair/rehab costs.

If you have some data for each but not enough to make a definitive case with either one then you might have occasion to do both.

When appraising the beaters I always make an attempt to run the numbers both ways, if not in the report, at least on the back of the napkin.

 

[George Hatch]

Me too. That definitely beats proceeding on the basis of a blind assumption.

I think one aspect of the comparison that doesn't get enough love is the consideration of the risks and the X-factor. If I have an existing use that is slightly less valuable than the land value then I have to consider the point that there is no risk involved in simply leaving the existing use in place. No lost income, no unsupported holding costs, no "unknown" complications popping up at the last second, no sweat about the market conditions for the alternate use changing before you can bring it to market, no fretting about obtaining the financing or having to pay higher financing or deal with higher rates/lower LTVs that go with development projects, etc.