Illegal 4-plex

[larryhaskell]

I inspected a property the other day that was reported to be a duplex. It turns out that the improvements were built as a duplex and each had an attached 1 car garage. I also discovered that the garage area had been converted into two studio units so we now have a 4-plex. Per the local planning department, 4 units are not permitted with the current zoning and lot size. So if the improvements are destroyed, only the duplex can be rebuilt. The lender wants me to go ahead and complete the report but just explain everything I learned from the planning dept. My plan is to value the property as a duplex. Now, what is to be done with the garage conversion? Do I require that the garage be converted back to its intended use or just ignore the conversion and give it no value? I have my thoughts but would appreciate input from anyone with an opinion.

 

[Tater Salad]

Was this legal when converted? Is it grandfathered, or was it never legal to begin with? Can it be sold this way, or would it have to be converted back to a duplex to transfer ownership?

The reason I ask is that we have areas where zoning has changed, disallowing future 4-Family development, but allowing it to exist and transfer as long as not destroyed. These I value as 4-Families with big bold warnings about rebuild, as there are other sales of non-conforming 4-Families to compare.

But if not a legal conversion in the first place, that's another story.

 

[xm39hnu]

Explain what the lender told you to do, and who (by name) told you to do it, and when this instruction (date and time) was given. Then use the hypothetical conditions that the property use conforms to local zoning, and that the garage is just a garage. Prominently state that actual conditions are to the contrary, but that you've been instructed to do as you have done. I would also add a caveat to the user that the value as the property actually exists could be substantially different if these hypothetical conditions had not been imposed on the appraiser by the client. Highlight this text in your report.

 

[Mike Garrett RAA]

Can't determine if it was grandfathered by your comments but it would appear to be so. Highest and Best Use issue...."as improved". I would appraise it as a four unit explaining the zoning and the fact it cannot be rebuilt as a four unit if destroyed.

 

[larryhaskell]

The conversion was not legal because a 4-plex would never have been permitted on this site with the zoning. The person responsible for the conversion is now deceased and I'm dealing with the daughter that manages the property. The improvements are not grandfathered. I didn't give the specific address to the planning dept. because that is the policy of the lender. However, the person I spoke to indicated that had I given the address they would have required that the two studio units be converted back to a garage. Hope this additional info helps.

 

[Mike Garrett RAA]

In which case it is an "illegal use". I would reject the assignment on that basis and charge for my time accordingly.

 

[Farm Gal]

ASSuming that it could not be sold 'as-is' for liability reasons, or only with the disclaimer that the addition/change was illegal.... check the market nad local law carefully - do NOT assume anything.

I would think you would have to value it as single family, with a cost to cure (being $ conversion back to SFD).

 

[larryhaskell]

Lee Ann:

The improvements as they were built are a legal duplex with a two car garage. My thought is to appraise it as a duplex subject to the two studio units being converted back to a two car garage.

 

[Farm Gal]

yup.

sorry I didn't see (or remember) that

Use whatever was the last 'legal' permitted use...

except: like I said I would be very careful about any statements about the market: check to see what the market REALLY does in your area... you 'sort of' need to do this research regardless of clinet desire in order to competently perform the hypothetical condition part of the assignment (return to legal use).

On the other, other hand if you have a very clear scope of work agreement with the client (and I'd get it in writing) you can dodge that bullet and research by 'made as instucted' reportwriting! :idea:

 

[larryhaskell]

It would seem that I could also value the property as a duplex and discount it for the fact that the garage has been converted into an illegal use.