Mixed Use

[George Hatch]

I've done mixed use previously on multi-family forms; a certified USPAP instructor advised me I could do it if the predominant use was residential.

In theory, you can use a URAR form for a commercial use, or a land form for a commercial use, and vice versa. The form does not dictate compliance, it's the contents of the report package as a whole that does that.

The problem is using forms for appraisal types that they are not intended for is that these forms are specifically set up for limited types of uses, and you have to add or ignore sections to address the relevant areas of concern for different uses. For instance, on most of the residential forms it's hard to really get into highest and best use analysis, which is a big issue for non-residential use properties but usually not so big a deal for existing residential uses. Relevant neighborhood conditions are different between these uses, criteria for rating location influences is different, units of comparison tend to be different and so on. The short end of this is that it is usually a lot easier to touch all the bases when using the format best suited to the property type.

In the end, it isn't which form you use, but what you add to it to make the report that matters.

In relation to your appraisal, you have a mixture of uses that includes a specific percentage of office and a reciprocal percentage of residential uses. Finding a mixed use property with that exact combination for a comparable is going to be exceedingly difficult. When I do these (just did one last week), I often use a combination of whatever is available in mixed use data, and include some residential uses of comparable unit count and sizes, and non-residential uses of generally similar project and unit sizes. That gives you indicators for both the residential units (Price/Room works really well here) and the non-residential units (Price/SqFt indicators). You can do the same thing with allocating contributory percentages of the different OARs applicable to each component, if they are different, and according to their contribution to the net income.

The big thing to keep in mind on these things is that you have a property with non-homogenous uses, which is usually going to detract slightly from the value of the components. An example of this would be your property where there is an office use sharing the building with apartments. Is this office going to be able to get top office rents, even though it is the only one in the building? Are the apartments going to be able to rent for as much seeing how they share the premises with an office use? I'm sure you can see my meaning here. Depending on your data, you may end up having to discount one or both of the components slightly to account for the effect on value of this mixture of uses. Or not, because things may be different in your locale.

The appraiser controls the compliance of the report. The format is just the format.


George Hatch

 

[CKrinsky]

THANK YOU! Thank you, thank you, for a comprehensive, comprehensible and all-encompassing answer to my question about comps (no pun intended at all!) This is the information I've sought for months, thank you!