Illegal Unit In Apartment Building

[Michigan CG]

Kindly post a corresponding Recognized Definition of Highest and Best Illegal Use? Thanks.

I have appraised no less than 10 properties this year where something was illegal. Today it was a house on a 5,000 SF lot when zoning requires 6,000. I guess they should tear it down.

 

[Mike Kennedy]

I have appraised no less than 10 properties this year where something was illegal. Today it was a house on a 5,000 SF lot when zoning requires 6,000. I guess they should tear it down.

appraised "as-is", based on EA or H.C. ?

 

[Michigan CG]

appraised "as-is", based on EA or H.C. ?

Appraised as-is with no EA or HC. It has been that way for 50 years.

 

[timd354]

Appraised as-is with no EA or HC. It has been that way for 50 years.

They should tear up your appraiser's certification...lol

 

[CANative]

I have appraised no less than 10 properties this year where something was illegal. Today it was a house on a 5,000 SF lot when zoning requires 6,000. I guess they should tear it down.

I have a property tax appeal client out in the Central Valley (San Joaquin Valley). 40 acres, AG zoned where everything around for miles and miles is row crops, corn and dairies. One house per lot is all that is allowed. They have three houses. All more than 5,000 sf each, right next to each other and all extremely high quality. Totally illegal and the assessor doesn't know how they got there (figuratively.) The original assessment was based on land value plus the full estimated cost of each structure.

I've been getting it reduced each year for 5 years by arguing the non-conforming use and the limited utility of each house to a single owner. Full value on house 1, half value (cost) on house 2, one third value (cost) on house three.

 

[J Grant]

Acting as an advocate in tax appeal is one matter. But if you had to do a HBU analysis /a MV purpose appraisal, how would you handle 3 houses on one lot when all that is legally allowed is one house on one lot? Do we or do we not have to appraise to HBU? Isn't one of the tests of HBU legal usage?

 

[CANative]

Acting as an advocate in tax appeal is one matter. But if you had to do a HBU analysis /a MV purpose appraisal, how would you handle 3 houses on one lot when all that is legally allowed is one house on one lot? Do we or do we not have to appraise to HBU? Isn't one of the tests of HBU legal usage?

You think there is a difference between the methodologies used in tax appeal and the types of assignment we do in our fee practices?

There isn't. Same thing basically. It's all about market value, highest and best use, etc. The point of the post was to demonstrate that there might be market value for illegal uses. Just because something has some elements of illegal use doesn't mean that the bulldozer boys should be called out.

 

[Gobears81]

It'd be nice to see this type of response on the other commercial/ industrial threads. Half of the threads shown on page 1 have 10 or less posts and all but two have less than 25 posts.

 

[CANative]

The "technical" issues in this thread are not overly complex and allow for us residential appraisers to participate at some level.

 

[J Grant]

CaNative- "The point of the post was to demonstrate that there might be market value for illegal uses. Just because something has some elements of illegal use doesn't mean that the bulldozer boys should be called out."

I agree with that. However, in a MV purpose assignment the HBU as a stand alone question exists and then must be reconciled with the valuation aspect when there is a conflict between the two.

Specifically, a 12 unit building, the 13th unit is illegal per zoning only allows 12. That does not mean someone has to bulldoze the whole building, or demolish the 13th unit. But the HBU would have to be legal use as 12 units, correct? (if you disagree, how does one get around that)

Okay, so HBU is legal use 12 units. But let's say you ask around, look at comps etc and see the market will pay more for the 13th unit because it does exist, enforcement is lax, and a buyer is hoping they can rent it out and collect income and not get caught (or at least not get caught for a very long time). So how to reconcile the HBU as 12 units and market reaction of value for 13th unit? As I said originally, imo I would not count the income from the 13th unit in cap rate/income stream as it is from a unit that is illegal per HBU. But I would reconcile the value on SCA higher end if market is paying more for a 13th unit for reasons mentioned. And of course disclose and explain. If lender wants to make report subject to removing the 13th unit that would be lender decision. I could see the case for an appraiser making report subject to removing the 13th unit as well, not sure if I would do it .