Is it commercial?

[juck224]

Hello,

I'm posting again asking for help over the weekend, this is a topic I will go over with my supervisor on Monday but was also hoping to get some advice in the meantime since I was planning to work on this report today. I completed an inspection for an old farmhouse with 3 large outbuildings, which is not uncommon in this area. Zoning is legal nonconforming as SF, as far as I can tell there is only some commercial use allowed in the zoning district as a conditional use which as long as they are auxillary to the principal use: "Service buildings and facilities normally auxiliary to a permitted principal use." However upon inspection, the owner is currently using one of the outbuildings running a full time business (powder coating) out of one of the outbuildings, and is renting another to a business for storage space. I am wondering what I need to do further to verify HBU, whether I can complete this as residential, etc. Any help would be appreciated and if there is any more information I can provide that is helpful I'd be happy to. This may be a simpler answer than I think but I have not run into this situation before, and was hoping for some insight. Thank you.

 

[J Grant]

Hello,

I'm posting again asking for help over the weekend, this is a topic I will go over with my supervisor on Monday but was also hoping to get some advice in the meantime since I was planning to work on this report today. I completed an inspection for an old farmhouse with 3 large outbuildings, which is not uncommon in this area. Zoning is legal nonconforming as SF, as far as I can tell there is only some commercial use allowed in the zoning district as a conditional use which as long as they are auxillary to the principal use: "Service buildings and facilities normally auxiliary to a permitted principal use." However upon inspection, the owner is currently using one of the outbuildings running a full time business (powder coating) out of one of the outbuildings, and is renting another to a business for storage space. I am wondering what I need to do further to verify HBU, whether I can complete this as residential, etc. Any help would be appreciated and if there is any more information I can provide that is helpful I'd be happy to. This may be a simpler answer than I think but I have not run into this situation before, and was hoping for some insight. Thank you.

My opnion -
Just because someone is using outbuildings for income-producing producing does not make the property itself "commercial". However, the income-producing activities must be disclosed (including photos ) and let the lender decide wrt loan eligibility.

If the outbuildings can be used for other uses, such as keeping vehicles or hay storage, the property, what is the HBU as vacant?

Are there several outbuildings atypical? With a typical property having one outbuilding and or or barn? How much acreage is there? Oftentimes, a number of things combined lead one to conclude A or B, assuming the zoning allows it. If zoning is SF as you say, then it is not a legal HBU for commercial since one of the HBU tests is legally permissible. Which can not stop an individual owner from ignoring it and renting a building out for income - that is called value in use.

 

[juck224]

My opnion -
Just because someone is using outbuildings for income-producing producing does not make the property itself "commercial". However, the income-producing activities must be disclosed (including photos ) and let the lender decide wrt loan eligibility.

If the outbuildings can be used for other uses, such as keeping vehicles or hay storage, the property, what is the HBU as vacant?

Are there several outbuildings atypical? With a typical property having one outbuilding and or or barn? How much acreage is there? Oftentimes, a number of things combined lead one to conclude A or B, assuming the zoning allows it. If zoning is SF as you say, then it is not a legal HBU for commercial since one of the HBU tests is legally permissible. Which can not stop an individual owner from ignoring it and renting a building out for income - that is called value in use.

Yep, I will make sure to disclose and comment, and provide plentiful photos. However, zoning does not appear to allow this current use, and I am almost positive that HBU as vacant is SFR. I will let lender decide, however, another important note is that this was only purchased about a year ago through a res loan which provides at least some support to my conclusion, though that doesn't mean the last appraiser didn't make a mistake so I still want to cover all my bases. Thank you for the help. Also to answer a few questions of yours, yes several is uncommon but there are similar sales in the area with several. 2.75 acres, which is average for the market area and this specific property type.

 

[J Grant]

Yep, I will make sure to disclose and comment, and provide plentiful photos. However, zoning does not appear to allow this current use, and I am almost positive that HBU as vacant is SFR. I will let lender decide, however, another important note is that this was only purchased about a year ago through a res loan which provides at least some support to my conclusion, though that doesn't mean the last appraiser didn't make a mistake so I still want to cover all my bases. Thank you for the help. Also to answer a few questions of yours, yes several is uncommon but there are similar sales in the area with several. 2.75 acres, which is average for the market area and this specific property type.

Sounds like you are on the right track-
Remember it is HBU as vacant - zoning might not allow current use and then it is a lender issue with their customer. But it does not turn a res property into a commercial one. It could be a res property with several buildings and he owner is flouting zoning by using the buildings for income

 

[George Hatch]

The appraiser develops the opinion of HBU. The lender develops the opinion of whether/not the property fits the loan program they're using.

OP doesn't want to lose sight of the point that the reason we do HBU is in order to identify which type of buyer will pay the most for this property in its "as is" condition and based on which property attributes. We do that in order to seek out the properties which would compete most directly for those buyers.

 

[J Grant]

The appraiser develops the opinion of HBU. The lender develops the opinion of whether/not the property fits the loan program they're using.

OP doesn't want to lose sight of the point that the reason we do HBU is in order to identify which type of buyer will pay the most for this property in its "as is" condition and based on which property attributes. We do that in order to seek out the properties which would compete most directly for those buyers.

Agree- but HBU for MV also has to be a legally permissible use and if the subject is zoned residential, then commercial use is not legal so how can it be the HBU even if a buyer would pay more for it?

That is where ( imo) the value of use plays in - a property owner of res property can take their chances and rent out a shop building for income, and then the lender might ( or might not ) deny the loan because of their borrower is using part of the property for business income. Of course, the loan approval is not the appraiser's problem.

Its another version of Airbnb - the Airbnb rental monetizes the property for value in use but it does not turn a residential house into a hotel.