Help Needed

[AObrejan]

Hello everyone!

I'm currently appraising a property and need some help getting it done the right way.
Here is some information about the property:
Per Inspection: Detached SFR with Guest House(s).
The guest house(s) if approximately the size of the main dwelling, 2 levels, separate entrances for each level, no kitchen on either level.
Per the County Planning and Building Dept. the property can only have one Guest House with a living area not to exceed 20% of the building envelope.
Client sent the request as a Multi-family and changed request after my inspection (appraisal is for a purchase and the property was marketed as 2 SFRs on one lot).
I've done research and could not find one similar home sold within 5 years and 5 miles out. Most homes with similar lot and GLA sell for high 200k and the purchase price of subject in low 400k.
Other details: The County Planning and Building Dept. cannot provide a building permit or confirmation that the Guest House exists. Owner provided some documents that show a livable area similar to what I measured, however, the County says that, per their records, that area has been converted to garage and they don't have any other records.
How would you approach this valuation?
Please ask questions if clarification is needed. I've spend the last 4 days making calls to several people to get a solid answer and still don't have everything clear.
Thank you very much!

 

[hastalavista]

A. Its size would indicate that it isn't possible to get it permitted as a guest house, let alone two guest houses (how big is it, by the way)?
B. The county does not have any information indicating that it has been permitted as a guest house (accessory dwelling unit, or ADU).
C. There isn't a kitchen; so it does not function as a accessory dwelling unit.

Sounds like you have a house with a large outbuilding, that is finished, but not configured as an ADU.

What am I missing?

(BTW, what county is this?)

 

[AObrejan]

A. Its size would indicate that it isn't possible to get it permitted as a guest house, let alone two guest houses (how big is it, by the way)?
B. The county does not have any information indicating that it has been permitted as a guest house (accessory dwelling unit, or ADU).
C. There isn't a kitchen; so it does not function as a accessory dwelling unit.

Sounds like you have a house with a large outbuilding, that is finished, but not configured as an ADU.

What am I missing?

(BTW, what county is this?)

Denis,

A)The main dwelling is approx. 2,100 sf, the guest house(s) about the same size. The building envelope is approx. 14,000sf, and it appears that a guest house can be built up to 2,800 sf (20%).
B) The owner send me documents that show a permit for Addition to Detached Garage (no sf on the page) and another showing approx. 2,100 sf named "livable to detached garage". I sent the documents to the county and they've told me that the :livable to detached garage" means that living space has been converted to garage. That being said, the property has a very large garage and the guest house is attached to it. I cannot tell how living space has been converted to garage, but yet, the living space is still there.

C) Per the county, the structure cannot have a kitchen. The county sent me an older Property Records Index Card which mentions a guest house.
According to the County, a guest house cannot be rented (by the way, I also have to do a rental survey)

San Bernardino, CA

 

[hastalavista]

C) Per the county, the structure cannot have a kitchen. The county sent me an older Property Records Index Card which mentions a guest house.
According to the County, a guest house cannot be rented (by the way, I also have to do a rental survey)

Wow, what a mess!
The quoted part seems contradictory (which I think is why this is puzzling):
The county indicates the structure cannot have a kitchen, yet the county sends you an older property records card that mentions a guest house????

At this stage of the game, if it were me, I'd stop and contact my client. Based on how I understand what you've been told, this structure isn't a guest house; functionally, it has no kitchen and per the county, a kitchen isn't allowed. What I'd tell my client is, based on that, it is a finished accessory building. Could be used for recreational purposes, etc., but not as a structure intended for occupancy and does not have the ability to be permitted as such (although you better confirm that with the new State ADU law; ADU's are very easy to create now since January 1, 2017. In fact, if it were me, I'd go back to the county and ask if this structure could be permitted under the new ADU law. If you are not familiar with that, you should be; it is the biggest change in residential zoning since rent control and many appraisers are still not aware of it).

So, assuming it isn't a ADU, cannot be permitted as an ADU, you likely have a big outbuilding attached to the garage which might make a great recreation room (man cave; hobby/arts & crafts, gym area... indeed all of the above) but in the price range you quoted ($200k) would have significant functional obsolescence.

Good luck!

 

[Tim The Enchanter]

Most homes with similar lot and GLA sell for high 200k and the purchase price of subject in low 400k.

The outbuilding or whatever it is called is surely not worth another 100k+ all by itself.
I always include extra explanation etc when I pronounce a deal DOA.
Try to prevent any blowback afterwards.
Print this thread for your file.
Good luck with the mess.

 

[AObrejan]

Wow, what a mess!
The quoted part seems contradictory (which I think is why this is puzzling):
The county indicates the structure cannot have a kitchen, yet the county sends you an older property records card that mentions a guest house????

At this stage of the game, if it were me, I'd stop and contact my client. Based on how I understand what you've been told, this structure isn't a guest house; functionally, it has no kitchen and per the county, a kitchen isn't allowed. What I'd tell my client is, based on that, it is a finished accessory building. Could be used for recreational purposes, etc., but not as a structure intended for occupancy and does not have the ability to be permitted as such (although you better confirm that with the new State ADU law; ADU's are very easy to create now since January 1, 2017. In fact, if it were me, I'd go back to the county and ask if this structure could be permitted under the new ADU law. If you are not familiar with that, you should be; it is the biggest change in residential zoning since rent control and many appraisers are still not aware of it).

So, assuming it isn't a ADU, cannot be permitted as an ADU, you likely have a big outbuilding attached to the garage which might make a great recreation room (man cave; hobby/arts & crafts, gym area... indeed all of the above) but in the price range you quoted ($200k) would have significant functional obsolescence.

Good luck!

After speaking with them about 10 times, I do believe the County is also confused by their own records. Even if they did permit something, it still done't look like an accessory unit.
I did contact my client and was asked to "do my best"
Regarding the new law, the people I spoke to were not aware of it and could not provide an answer. Plus, since they don't acknowledge the guest house or any livable structure exists, it can only be a hypothetical answer to a hypothetical question.
I'll have to discuss it again with the client and see how they want me to proceed.
Thanks for the help!

 

[AObrejan]

The outbuilding or whatever it is called is surely not worth another 100k+ all by itself.
I always include extra explanation etc when I pronounce a deal DOA.
Try to prevent any blowback afterwards.
Print this thread for your file.
Good luck with the mess.

Thanks Lee,

I tried explaining to the client that, based on my research, I cannot come of with a contributory value for the structure.

I also enlisted the help of someone who reviews these type of difficult assignments (when everything goes south and complains are made) and was told that "whatever I do, make sure it's documented!".

 

[Eli]

Luck don’t exist. Luck is like a fairy tale.

Sarcasm is noted. Make sure you dig deep with your local code enforcement and report to your client. Extraordinary assumptions are likely. Hypotheticals maybe. Have a good handle on H&B use if the opinion of value is market value.

You could even have demolition considerations depending on your jurisdiction and H&B use analysis.

 

[hastalavista]

After speaking with them about 10 times, I do believe the County is also confused by their own records. Even if they did permit something, it still done't look like an accessory unit.
I did contact my client and was asked to "do my best"
Regarding the new law, the people I spoke to were not aware of it and could not provide an answer. Plus, since they don't acknowledge the guest house or any livable structure exists, it can only be a hypothetical answer to a hypothetical question.
I'll have to discuss it again with the client and see how they want me to proceed.
Thanks for the help!

Here is a link to the state's documentation describing the new ADU rules/regulations.
As an aside, I teach a 2-hour CE class (California) on this issue. Amazingly, many appraisers are not aware of this change. I say "amazingly" not as a criticism... it just shows how poorly significant information like this works it way through our appraiser-educational system.

http://www.hcd.ca.gov/policy-research/docs/17Jan30-ADU-TA-Memo.pdf

 

[J Grant]

Denis,

A)The main dwelling is approx. 2,100 sf, the guest house(s) about the same size. The building envelope is approx. 14,000sf, and it appears that a guest house can be built up to 2,800 sf (20%).
B) The owner send me documents that show a permit for Addition to Detached Garage (no sf on the page) and another showing approx. 2,100 sf named "livable to detached garage". I sent the documents to the county and they've told me that the :livable to detached garage" means that living space has been converted to garage. That being said, the property has a very large garage and the guest house is attached to it. I cannot tell how living space has been converted to garage, but yet, the living space is still there.

C) Per the county, the structure cannot have a kitchen. The county sent me an older Property Records Index Card which mentions a guest house.
According to the County, a guest house cannot be rented (by the way, I also have to do a rental survey)

San Bernardino, CA

Sounds like you've researched it enough and the county is "not confused with its own records.." . I agree with Denis' take, this is NOT a SFR with 2 guest houses ( what made you call a large garage with attached area 2 separate guest houses?.

It is what you see ( which is also what is permitted. ) A large garage with an "other " sf of space attached..which since local ordinance can not have a kitchen ( are you sure about that? ) is not a guest house...or even if it can have a kitchen, it does not have one now., correct? You are doing an as is appraisal, what exists now

So appraise it as exists now which from your description is a large separate building half of which is a garage. That might be comparable to SFR with large detached workshops, or garages, or guest houses...it at end the SC price is above your market value opinion then so be it...your comps and appraisal will tell the story of why.