HBU Question - Rural Agricultural RA Zoning

[Terrel L. Shields]

The client is asking for the 5000+ sf workshop to be appraised as empty. Is this a USPAP violation if I use the hypothetical condition that all the interior machinery will be removed from the workshop?

You can appraise a portion of a property without evoking the HC. Equipment is a "trade fixture" - personal property as is, or as a stretch, extraordinary assumption that the equipment is to be removed. You can certainly appraise the building as "empty". You don't include the furniture in the house in the valuation do you?

A Fixture is an article that was once personal property but has since been installed or attached to the land or building in a permanent manner. examples: fencing, feed bins, air compressor or other items used in a business. Trade fixtures (as known as Chattels) are articles that are owned and attached to the rented space or building by someone else (in your case the "business") and used in conducting business. These are personal property.

 

[Braun22]

Does zoning address home based business directly or do all home based businesses require a special or conditional use permit. It would seem to me that there would be a definition of home based business. Most rural areas I appraise in define home based businesses in one way or another.

I asked this question to the county and the response was that some business were allowed and others were not on a case by case basis.

 

[Braun22]

You can appraise a portion of a property without evoking the HC. Equipment is a "trade fixture" - personal property as is, or as a stretch, extraordinary assumption that the equipment is to be removed. You can certainly appraise the building as "empty". You don't include the furniture in the house in the valuation do you?

A Fixture is an article that was once personal property but has since been installed or attached to the land or building in a permanent manner. examples: fencing, feed bins, air compressor or other items used in a business. Trade fixtures (as known as Chattels) are articles that are owned and attached to the rented space or building by someone else (in your case the "business") and used in conducting business. These are personal property.

Thank you for the explanation. Much Appreciated.

 

[Terrel L. Shields]

The use of the workshop for the business, I believe, is legal non-conforming s

What does the Agri zoning say? In most cases I am familiar with this zoning allows for a home run business. But key to that is when was zoning imposed and when did the business start. If it was started prior to zoning, it is grandfathered. Sounds like this is a nothing burger anyway. You are appraising what is real estate and as proposed will be real estate but as a partial estate (if that's the length you want to go) the equipment is personal property. Exclude it and go on.

 

[Mark K]

Exclude it and go on.

This^^^

I believe that the OP is still muddying the waters by involving the business use with the real estate value.

There are some on this forum that reside in the camp that says that any income producing occupation occurring in a SFR instantly makes it a commercial property. One such thread went on, ad nauseam, about a hair dresser that cut hair in her garage and some thought (probably still think) that this somehow can adversely affect the market/appraised value of the property.

As succinctly stated above...."Exclude it and go on". However, if you can make a good argument for why the ongoing business concern can adversely affect the market value of the real estate and believe this is an important issue, to quote Ross Perot, "I'm all ears".

 

[George Hatch]

After numerous calls, I have found that the county requires a zoning change to rent out a building as commercial, and permits for a resident to use their own building as commercial; so am I correct to view it as you've said, non-conforming in regards to being legally permissible? I could not locate permits for the workshop, and one looks very close to the property line so will write in an EA.

A "permit" is a formal acknowledgement of the "permissibility" of the structure, but that's not the only way that structure can be considered "legally permissible" in the market.

For example, if a jurisdiction isn't actively preventing the existence and particular occupancy of a structure then it can be argued that they are effectively allowing it to continue.

In any case, what you're describing is a structure which cannot be rented out but CAN be used as commercial. Just like (unless otherwise prohibited) a room inside the home or a garage or shed can be used by a property owner for their business.

The purpose of HBU analysis is to identify which types of buyers would pay the most for the property and how they would use it. It is the actions of the buyers and sellers which will determine which of the property attributes mean the most to them. That is the context which leads to THEIR opinions of which properties can be considered the most comparable.

Let's say a property consisted of a 1200sf SFR and 10ac of land. The HBU analysis would be performed for the purpose of deciding whether the property would most commonly be bought and used for its land value or for its value as a residence. If the property would be most profitably marketed and sold as land then it should be appraised as such; the comps will consist of other such land parcels and the dominant unit of comparison will be price/ac or price/sf of the land area. If the property would most profitably be marketed as a residence then the comps will consist of other residences with the dominant unit of comparison being the sales price itself and not the price/sf of the land area or price/sf of the GLA .

 

[Braun22]

Thank you all again. Given the market area, and property location, the property presents as most similar to other residential use properties in the area. I've looked at comparables for land and other RA zoned commercial properties to see if there were any similar properties sold as commercial. They are not being sold as commercial, minus one which sold for less than the typical residential values. I will consider it similar to other properties which could qualify as being residential with commercial potential, write my HBU statement, and move on.

 

[George Hatch]

One shortcut you can use is to look at how these other properties were marketed and financed over time. And then how the have been used since their respective sale. If they were marketed as a residence with additional utility and then financed by a residential lender at a residential LTV then that's a pretty clear datapoint as to the buyer motivations.

 

[ZZGAMAZZ]

I asked this question to the county and the response was that some business were allowed and others were not on a case by case basis.

Perhaps the workshop employees were busy processing the harvest gleaned from the legally-permissible agricultural endeavors (remnding me of an AF thread 2 years ago that addressed the distinction between fructus naturales and fructus industriales, the latter of which are emblements.

 

[Ariba]

So you will take the word of the homeowner that he is moving the business? Does he have a lease on the new location? I got a bridge in Brooklin I.......

Contact the Lender on what you observed, they might not want to make the loan for any commercial use.