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highest and best use question

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reneeaz

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Jun 27, 2007
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Certified Residential Appraiser
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Arizona
I have what was once a single family dwelling. The owner boarded up the hallway entrance to half of the house and converted what was once two bedrooms and a bathroom into a kitchen, bath and bedroom with its own exterior door. On the other half they added two bedrooms and a bathroom. Both sides are on the same meter and share the same heating/cooling unit. Zoning is R-5 - Multi Family zoning. I was classifying this a single family with accessory unit but given present zoning classification I believe the highest and best use of the property is multi family. The neighborhood consists mostly of single family homes however there are some duplexes, triplexes and fourplexes throughout the neighborhood. Is my thinking right?
 

Mike Kennedy

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Sep 28, 2003
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Certified Residential Appraiser
State
New York
Was it legally converted? Can the existing converted use transfer on sale "as-is"? What does the market data for orig SF use indicate? ....for 2FR ?
 

reneeaz

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Certified Residential Appraiser
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Arizona
There were no permits pulled for converting, however permits were pulled for added two bedroom and bathroom to the other end of the house. I don't see any problem of existing converted use transferring on sale "as is". Market data supports both single family and multi family. From what i have analyzed so far it looks like market value would be about the same for single family or multi family if the subject was legally converted to two units with seperate meters, water heater and heating and cooling.
 

leelansford

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Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
There were no permits pulled for converting, however permits were pulled for added two bedroom and bathroom to the other end of the house. I don't see any problem of existing converted use transferring on sale "as is". Market data supports both single family and multi family. From what i have analyzed so far it looks like market value would be about the same for single family or multi family if the subject was legally converted to two units with seperate meters, water heater and heating and cooling.

So...are you stating that the LEGALLY PERMITTED USE is NOT as a 2-unit?
 

reneeaz

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Freshman Member
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Jun 27, 2007
Professional Status
Certified Residential Appraiser
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Arizona
No, the subject is NOT currently legally permitted as 2 units.
 

PropertyEconomics

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Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
No, the subject is NOT currently legally permitted as 2 units.

The question of PERMISSIBLE and permitted are differing issues. I know others will disagree with me on this but Legally Permissible and paper permitted are two different things. Is the use as two units permissible? If there are no paper permits for the conversion, can a permit allowing two units be obtained?
 

reneeaz

Thread Starter
Freshman Member
Joined
Jun 27, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
The question of PERMISSIBLE and permitted are differing issues. I know others will disagree with me on this but Legally Permissible and paper permitted are two different things. Is the use as two units permissible? If there are no paper permits for the conversion, can a permit allowing two units be obtained?

Yes, two units are permissible and yes permits allowing two units can be obtained if the owner wanted to put in a seperate electrical service, water heater and heating/cooling system on the second unit. Right now the two sides share the same air/heat, water heater and electrical service. That's where I'm having the problem, it's legally permissble, phycially possible, financially feasible and pretty even on max productivity between single family and 2 units.
 

ZZGAMAZZ

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Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
REENEAZ: This is a very interesting scenario. If HBU is determined to be its current non-permitted duplex status, would you need to assign a C2C to reflect the expense to covert via the prescribed protocol? How would you determine how much it will/would cost; and is the lost "opportunity cost" be factored into the C2C? Would this require an EA or a HC? If the latter, would the report be conditioned "subject to" the permits being obtained? Will the lender accept the report with a HC? What if the jurisdiction subsequently determines that duplex status cannot be granted?
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
Yes, two units are permissible and yes permits allowing two units can be obtained if the owner wanted to put in a seperate electrical service, water heater and heating/cooling system on the second unit. Right now the two sides share the same air/heat, water heater and electrical service. That's where I'm having the problem, it's legally permissble, phycially possible, financially feasible and pretty even on max productivity between single family and 2 units.


Renee .. I think you have your answer.
In prior posts you have said that a two unit and a single family unit essentially have the same value based upon your analysis. On that basis, the maximally productive use of the site would be for single family because two family will require a considerable capital expenditure in order for the use to become reality thus reducing the maximally productivity (ie return to the land) because of the additional capital needed. You could also probably make a good arguement that its not financially feasible to do the conversion (ie cost to cure) because there is no additional return to the capital needed to create the legal two unit.
With one you have a cost to cure and with the other you dont, or perhaps you have to remove a wall ... however, in comparison the costs are quite different and yet the value remains the same.
I think the tests for maximally productive and financially feasible answer your questions here.
 

reneeaz

Thread Starter
Freshman Member
Joined
Jun 27, 2007
Professional Status
Certified Residential Appraiser
State
Arizona
Renee .. I think you have your answer.
In prior posts you have said that a two unit and a single family unit essentially have the same value based upon your analysis. On that basis, the maximally productive use of the site would be for single family because two family will require a considerable capital expenditure in order for the use to become reality thus reducing the maximally productivity (ie return to the land) because of the additional capital needed. You could also probably make a good arguement that its not financially feasible to do the conversion (ie cost to cure) because there is no additional return to the capital needed to create the legal two unit.
With one you have a cost to cure and with the other you dont, or perhaps you have to remove a wall ... however, in comparison the costs are quite different and yet the value remains the same.
I think the tests for maximally productive and financially feasible answer your questions here.

Thank you for your help, I really appreciate it!!!
 
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