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Highest And Best Use

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WAG28

Freshman Member
Joined
Aug 2, 2017
Professional Status
General Public
State
North Carolina
Hey guys!

First let me start off by saying I'm not an appraiser and am a first timer. If any of you would be so kind as to share your experience and knowledge it will be greatly appreciated.

Here's the situation.

I am interested in a large older house in the historic district just on the edge of downtown. The property is zoned commercial (Downtown zoning) but allows for residential use with a special use permit. The house was a primary residence for 90 years and was sold at auction in 2009 to a real estate investor who intended to use it as offfice space, but since that time the property has never been rented and to my knowledge no accommodations or changes have ever been made to utilize as office or commercial space. In other words it still functions and looks like a SFH. The house is on a busy 4 lane street lined with large older homes and some of them have been converted to office space, but some are still primary residences (even the primary residences in the immediate vicinity are zoned commercial). Downtown has seen a major revitalization as well as the historic district and the area has become highly desired by professionals (doctors lawyers) and it is my opinion that most of the commercial conversion took place during a time when downtown was a place your kids weren't allowed to go (making these homes undesirable as SFH at that time). My lender says no problem writing a residential mortgage with the mixed use zoning, but the highest and best must be residential. I know you can't make a definitive statement without conducting a market analysis, but from your experience which way do you think it would go? Commercial or residential? For what it's worth, and I don't place any merit on tax value, but the lot is valued at 200k the SF improvement at 400k.
 

AMF13

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
2009 was not exactly a bull market.
You have a reviving downtown and similar buildings are going to office space for docs and lawyers etc.
It's zoned for that.

My SWAG from across country, w/o knowing your unnamed town, is professional offices or retail is H&B.
If not quite yet, maybe soon.

This psychic reading is worth exactly what you paid. Good luck. :peace:
 

WAG28

Freshman Member
Joined
Aug 2, 2017
Professional Status
General Public
State
North Carolina
2009 was not exactly a bull market.
You have a reviving downtown and similar buildings are going to office space for docs and lawyers etc.
It's zoned for that.

My SWAG from across country, w/o knowing your unnamed town, is professional offices or retail is H&B.
If not quite yet, maybe soon.

This psychic reading is worth exactly what you paid. Good luck. :peace:


Thanks so much for the response! I don't think I was clear, the doctors and lawyers are buying down town to live. It is my contention that the redevelopment that took place took place at a time when down town wasn't a great place to raise a family so people took the commercial route, but with revitalization it has become a magnet for families (like myself).
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I give credit to you (as a non-appraiser) for describing your situation as well as you did.
In the same breath, I will suggest to you that no one can give you a reliable opinion about the property's highest & best use (H&BU) without analyzing the specifics of the property given the description you have provided.

Lee in LA appropriately identified his contribution as a SWAG. The rest of us would have to do the same. This isn't something you can poll and, based on the results, have any confidence in whatever the winner was of the votes.

H&BU analysis is, by definition. subject-specific. It not only considers the neighborhood's dynamics, zoning, and the use patterns, but also the specifics of the improvement (which include what it is, as-is, and what its remaining economic life is) and site.

You have two good choices in my opinion:
A. Make an offer on the property for a price you think it is worth as a house. Let the appraiser go and do his/her job and make her determination.
B. Pay a local and competent (I stress the "competent" part) appraiser to do a H&BU analysis for you. Based on that outcome, you'll have more confidence in making the offer on the house. The only problem is, the appraisal/analysis you get cannot be used for a mortgage loan (although you might be able to offer the appraiser hired by the lender it as data to consider),

As good as your description was, and as much as many on this forum would like to give you something to hang your hat on, the truth is we cannot.


Good luck!
 
Last edited:

WAG28

Freshman Member
Joined
Aug 2, 2017
Professional Status
General Public
State
North Carolina
I give credit to you (as a non-appraiser) for describing your situation as well as you did.
In the same breath, I will suggest to you that no one can give you a reliable opinion about the property's highest & best use (H&BU) without analyzing the specifics of the property given the description you have provided.

Lee in LA appropriately identified his contribution as a SWAG. The rest of us would have to do the same. This isn't something you can poll and, based on the results, have any confidence in whatever the winner was of the votes.

H&BU analysis is, by definition. subject-specific. It not only considers the neighborhood's dynamics, zoning, and the use patterns, but also the specifics of the improvement (which include what it is, as-is, and what its remaining economic life is) and site.

You have two good choices in my opinion:
A. Make an offer on the property for a price you think it is worth as a house. Let the appraiser go and do his/her job and make her determination.
B. Pay a local and competent (I stress the "competent" part) appraiser to do a H&BU analysis for you. Based on that outcome, you'll have more confidence in making the offer on the house. The only problem is, the appraisal/analysis you get cannot be used for a mortgage loan (although you might be able to offer the appraiser hired by the lender it as data to consider),

As good as your description was, and as much as many on this forum would like to give you something to hang your hat on, the truth is we cannot.


Good luck!


Thanks so much for the kind words and advice. I think option B would be necessary to perform and is a smart suggestion. The other part of me wonders if a residential appraiser dispatched by a local credit union who only lends on residential property would put up a fight on commercial highest and best, and if he did, would he be certified to make that call as a residential appraiser, but that is either here nor there. Thank you again for taking the time to help.
 
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