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How would you approach this?

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Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
The subject property is a "2 on 1" (i.e. 2 detached units on one lot/parcel) income property. The rear unit is a 2 bedroom 1 bath, no problem there. The front unit is currently 2 bedrooms and 2 baths. Public record show the property as 5 bedrooms total. I noticed that the second bedroom in the front unit was quite large and had 2 closets one at each end of the room. It appears that the interior partition was removed and one door was covered up. I would estimate the cost to put this back to the original configuration would be about $1000.00.

I want to call this a 3 bedroom unit.
Would you approach this as subject to a hypothetical situation (i.e. 3 bedrooms when there are actually 2)
OR
as a three bedroom with functional obsolesence attributable to the lack of an interior partition and door (cost to cure $1,000)?
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
Which floor plan would command the higher rent: as is, or your propsed change?
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Steve,
of course the three bedroom floor plan, that is why I state I want to do this as a 3 bedroom floor plan. But do I do it as a Hypo. Sit. or as-is (a three bedrom) with funct. Ob.???????
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
If your client is a lender, they may freak out with the "subject to" box checked, so ask them first. But with good 3BR data, proving that its' highest and best use is as a 3BR unit, I vote for a hypothetical situation subject to a $1,000 wall and door.
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
M Leggett, Interesting, Why? as I am leaning towards a 3 bedroom (it was built as a three bedroom and taxed as a three bedroom) with functional obsolesence of $1000 (i.e. cost to cure 1,000). I would think with a Hypo. the appraisal is subject to the hypothetical which would already include a door and wall.
 

Tim The Enchanter

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Why not call it a 2 bedroom as it is, and make adjustment versus a 3 bedroom at $1,000, explaining the floorplan alterations, and your cost estimate.

Some people would rather have 1 large bedroom than 2 small, I mean they took the wall out, right. Others would like the wall back and more rooms. Either way not a huge issue imho. :wink:
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Lee,
because the rent on a three bedroom is substantially higher which will give you a greater value in the income approach, this is a multi unit income property after all. Non Owner Occupied.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
I was thinking along the lines that it is a situation that doesn't actually exist, but is being considered for the purpose of the appriasal.

But I think you could really go either way. It was a 3 BR at one time, and could reasonably be re-convereted for not much $. It appears that 3BR is the highest and best use, to give the best return, just explain it well.
 

Tim The Enchanter

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
the rent on a three bedroom is substantially higher which will give you a greater value in the income approach

If that's the case despite the larger than average size for a 2 bedroom (I assume) then clearly the H&BU is 3 bedroom. I'm thinking it will mainly affect your income approach, as you'll make only a $1,000 adjustment in the market approach, and I guess a $1,000 functional in the cost approach. So that's maybe 1/2% or 1/4% or less of your value?

Either way you go at it, as long as you explain it probably doesn't matter much. Although they'll not likely want to see a subject to box checked, nor do I think that's needed.
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Thanks all, for helping me think this one through. I think we are all on the same page: 3 bedrooms, as is, functional obsolesence, cost to cure $1,000 (IMO). The hypothetical is not needed but could be used and would only confuse all but the most competant readers.
 
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