GLA of 1.5 story home

[George Wynn]

Fellow Forumites,

I need help w/ a delicate appraisal. I have a client who ordered an appraisal of a 1.5 story home, being purchased by an investor, as it is near colleges. Two bed, one bath main w/ 680 sf GLA. Upper level has very steep stairs & is finished near equal to main floor. The MLS lists approx 200 sf GLA from the upper level (not a big surprise). Now the problem: The ceiling height is 6' at the peak, along w/ having a very steep roof line. The local rental inspector says it won't fly, to try & count this as a bedroom.
City records show 680 sf GLA, counting main floor only. The single family market would accept this as a bedroom & there are several comps similar to this home, w/ the same issue on the upper level. The value could probably me supported in the market, but, would absolutely need a third bedroom for the income.. and the upper level is the only option. My thought is to list this as a 680 sf 1.5 story w/ finished attic & compare to main floor GLA of similar comps, w/ the same issue. In looking at the past resale history of several past sales of this home there is not one Realtor who accurately listed the GLA (You're Kidding Me!!!!). Just looking for some quick feedback on how I might handle this situation, or possibly some helpful verbage to consider in my report. I fully intend on completing the appraisal, as I've already earned my fee in research. I think the real revelation will come out in the SF Rent Schedule, when the rent capacity is being calculated on two bedrooms. I can just imagine Skippy doing this report & all parties involved looking at me like I'm the bad guy. I guess commissions do strange things to peoples values. Can't you just imagine the loan closing & the homeowners shock when the rental inspector arrives two weeks after closing & only provides two bedroom occupancy for this home. Ouch!!! ANyway... any helpful comments are requested

gw:new_all_coholic::new_all_coholic:

 

[Charles Knutson]

The single family market would accept this as a bedroom & there are several comps similar to this home, w/ the same issue on the upper level. The value could probably be supported in the market, but, would absolutely need a third bedroom for the income.. and the upper level is the only option. My thought is to list this as a 680 sf 1.5 story w/ finished attic & compare to main floor GLA of similar comps, w/ the same issue.

That's the answer -- the market will treat the finished attic as a bedroom, even if you cannot. Use comps with similar finished attics, and try and deal with it (the third bedroom's incurable functional obsolescence) in the narrative.

 

[Marcia Langley]

George,

First, making sure your comps have the exact same issues is exactly the main thing, good for you.

It sounds like your market has a very exact and timely rental inspection code. Is it true that the rental inspector has to inspect after each transfer of the property? I mean is it guaranteed he will show up?

So, if I understand you properly, it is, by local ordinence, a two bedroom unit. Your report would have to say that.

However, if your comps had the same issue, it's their total rent that would be considered, not just part of the rent.

For example, if market rents were $300 per bedroom, a three bedroom unit would rent for $900 and a 2 bedroom unit would rent for $600 but your comps show that a finished attic would add $300 to the total rent. The finished attic adds income to the total rent at the same rate that a third bedroom would. In effect, the existence of the finished attic causes the market rent to be $450 per legal bedroom. If all of your comps are two bedroom with a finished attic and they are all renting for $900, that's the conclusion you would reach.

It is very important to describe all of this in precise detail and make sure your conclusions are truthful and credible.

 

[CANative]

(the third bedroom's incurable functional obsolescence)

If, for example, a legal third bedroom contributed $300 per month to the market rent and GRM's were say 150 wouldn't that be $45,000 in value? And if it cost $20,000 to modfiy the structure to increase the ceiling height in order to make it "legal" would the functional obsolesence still be considered incurable?

Just asking.

 

[George Wynn]

Maybe I wasn't perfectly clear. My comps are not necessarily rental properties, as there are a relatively limited number of SF rentals. The similar homes will support market value, but, not will not necessarily support the value as a rental property. And yes... we have a very aggressive rental inspection process. The inspector told me verbally they would never allow this as a bedroom... and they come back & check frequently if there is any doubt or concern of overoccupancy or any non-compliance issue.

 

[Don Clark]

Does your state require compliance with the ANSI Standard? If so, the requirement is for a minimum of 7 feet from floor to ceiling for 50% or more of the area to be counted as living area. That aside, I would go with what the local rental inspectors are telling you.

 

[RSW]

Does your state require compliance with the ANSI Standard? If so, the requirement is for a minimum of 7 feet from floor to ceiling for 50% or more of the area to be counted as living area. That aside, I would go with what the local rental inspectors are telling you.

Don,

You beat me to this point.

 

[Mike Kennedy]

Maybe I wasn't perfectly clear. My comps are not necessarily rental properties, as there are a relatively limited number of SF rentals. The similar homes will support market value, but, not will not necessarily support the value as a rental property. And yes... we have a very aggressive rental inspection process. The inspector told me verbally they would never allow this as a bedroom... and they come back & check frequently if there is any doubt or concern of overoccupancy or any non-compliance issue.

What use WOULD be permitted......and included in GLA.:icon_idea::new_smile-l:

 

[Marcia Langley]

Maybe I wasn't perfectly clear. My comps are not necessarily rental properties, as there are a relatively limited number of SF rentals. The similar homes will support market value, but, not will not necessarily support the value as a rental property. And yes... we have a very aggressive rental inspection process. The inspector told me verbally they would never allow this as a bedroom... and they come back & check frequently if there is any doubt or concern of overoccupancy or any non-compliance issue.

You'll have to call it a two bedroom house.

Market rent is derived from the market. Even if your sales comps are not rented, you'll have to find comparable houses that are rented in order to analyze rents.