HBU for a Non-Conforming Duplex

[ZZGAMAZZ]

Subject is a the basis of a mortgage re-fi and the report is based upon a 1025 form. Subject is a "legal non-conforming duplex" (per city Planning) on a parcel zoned SFR with re-build status to its current configuration if damaged less than 50%; if more than 50% it must be re-built to a SFR.

I'm thinking that the status "as improved" cannot be the current improvements based upon the "legally permissible" test, although I don't know whether the "legally permissible" HBU test makes a distinction between "legal" and "legal non-conforming."

However, if "legal non-conforming" is not excluded by the 1st test, the current improvement would be HBU by virtue of the remaning tests, as least IMHO.

I don't think my analytical abilties can extend this far and appreciate advice.

 

[Randolph Kinney]

Side-stepping the legal issue for the moment, have you looked at values relative to the typical SFR compared with your duplex?

 

[ZZGAMAZZ]

I did so somewhat coincidentally when the NDC comp search default yielded all SFR's rather than duplex units although the subject is called out as a duplex on NDC.

Duplex units typically in inferior condition relative to SFR's. Condition notwithstanding the duplexes are approx 15% - 20% higher, e.g., $210k -- $175K.

 

[Mike Kennedy]

Is the "duplex" use based on Assessment or Building/Zoning Records. (often illegal duplexes in SFR neighborhoods are TAXED on their known use whether legal or illegal)


Does the non-conforming Use transfer on sale or expire requiring SFR use and/or re-application for a variance to continue Use as a Duplex?


Does the market indicate typical use as 2FR? highest return as SFR or 2FR?


Suggest researching further (if subject is located in an area WITH zoning and building ordinances).

 

[ZZGAMAZZ]

Duplex use based upon City Planning designation obtained from the jurisdictional authority, e.g., Planning Department.

I am unaware of the concept that non-conforming use might or might-not transfer and I will ask.

Market response would appear favorable to duplex use because the value is higher; however, the market includes approx 6 sold comps within 3 months, and approx 35 active listings. From that perspective, the market for duplexes barely exists.

 

[Mike Kennedy]

suggest expanding the time line retro 6 months and 1-3 years analyzing closed, contracted, and actives. determine DOM and L/S $% for each property type as well prior to coming to any conclusions.

 

[George Hatch]

Answer the following questions with a T/F and answer the followup question if appropriate:


____ There currently are legal uses that would economically justify the removal of the existing improvements. If so, which uses?

____ There currently are legal uses that would economically justify the conversion of the existing use into a different use. If so, which uses?

____ There currently are no legal uses that would economically justify the removal of the existing improvements.

Three options, pick one. In broad strokes whichever one you pick is your Highest/Best Use as improved.



The term "Legally permissible" is not limited to those uses that could be developed under the current development standards. It also refers to uses that have a legal right to remain in place.

"Non-conforming" is also often expressed as "legal non-conforming", and as such can qualify as the HBU if there are no other legal uses that would economically justify removal of that use.

Most likely, WYSIWYG on this one.

 

[CANative]

Z... The same answer I suggested in the FHA thread applies here. I won't say anymore because George is making you work for it.

 

[ZZGAMAZZ]

GB: It is a coincidence that I asked two similar questions becuase they are two different assignments...and I couldn't find my prior thread. Actually it's great that the answers to two similar questions in two different threads yield the same response. Thank you.

 

[Howard Klahr]

In regard to the comps, are they legal non-conforming also? Not that they have to be, but often in older areas where changes in use and regulations occur the comps exhibit similar limitations and therefore demonstrate market acceptance.