Residential Bed & Breakfast

[The Warrior Monk]

Ditto Howard. A facility open to the public is not treated the same as a private residence. The use as a B&B may or may not contribute to the value of the property, which is part of the HBU of the property.

 

[Terrel L. Shields]

9 of 10 B & B's I know of were built to accelerate depreciation on the building and use as a tax shelter. The profit is miniscule without the tax benefit of writing off a portion of your electric, getting to deduct the building depreciation on taxes, etc.

A CR could do them but that would be dependent upon the value of the B & B and the state regulations regarding CRs doing commercial property.

 

[CANative]

If there is not a valid license then there is not a legal business/use of the property. It would then become an issue of highest and best use wouldn't it?

That's what I'm saying. If it's just a matter of getting a permit and not getting a permit then it remains a questions of highest and best use. The permit doesn't really change the physical property characteristics. It just ADDS some property rights.

 

[Mike Kennedy]

Thanks for the response. The disclosure of competency has been made. The home just features suite rooms, which we have plenty of homes in the area that are similar. Obviously, an income approach will also be taken into consideration.

Governing Municipality?

 

[Howard Klahr]

The permit doesn't really change the physical property characteristics. It just ADDS some property rights.

Most likely, in order to qualify as a bed and breakfast use, there would be many characteristics of the property that are commercial in nature i.e. plumbing, electrical and mechanical fixtures/equipment, ADA accessibility, additional parking, etc as compared to a typical residential improvement.

If there is an appropriate license it isa commercial use, without the license/permit or whatever, highest and best use. More than just a piece of paper.

 

[mark hurlock]

A bed and Breakfast is a commercial property. However, depending on your state statutes and regulations, residential appraisers in certain states may appraise commercial properties up to a certain transaction amount in some states there is no such limitation for non-federally related transactions. Other states limit residential appraisers just to residential properties federal transaction or not.

Having said that, there are many differences between an appraisal of a residence and that of a b&b. If you are allowed to proceed, do so l=knowing there is a quite a bit to learn about.

Would the percentage of the property that is actually used for guest have any influence?

Is a 10 room structure utilizing 3 rooms for guests and 7 rooms for the resident, commercial?

 

[Terrel L. Shields]

Is a 10 room structure utilizing 3 rooms for guests and 7 rooms for the resident, commercial?

It doesn't matter what the market says or we think. It is what our regulators think. And they tend to think of it as non-residential. And the reason why is given below.

From a Pennsylvania State Board Newsletter in 2011

Over the last several years, the Appraisal Board has seen too many cases that involved an appraiser misrepresenting a property's physical characteristics, current use, and/or highest and best use. In the majority of these cases, the misrepresentations were made in order to make the property appear as a single-family residence so that it could qualify as collateral for a residential mortgage loan.
Two of the cases involved operating Bed and Breakfast (B&B) facilities that were appraised as single-family residences.

 

[CANative]

Lets parse this a bit, ok?

Over the last several years, the Appraisal Board has seen too many cases that involved an appraiser misrepresenting a property's physical characteristics, current use, and/or highest and best use. In the majority of these cases, the misrepresentations were made in order to make the property appear as a single-family residence so that it could qualify as collateral for a residential mortgage loan.
Two of the cases involved operating Bed and Breakfast (B&B) facilities that were appraised as single-family residences.

First it says "too many cases that involved an appraiser misrepresenting..." But only two of the cases involved a B&B. What is the ratio?

Second, it's talking about intentionally misleading a client. What I'm advocating for on this thread doesn't involve intentionally misleading a client. I'm just saying that not ALL properties that involve a B&B business must be appraised as a B&B by a commercial appraiser.

Lastly, the OP didn't state that there was a B&B license on the property he's been asked to appraised. He just said that a B&B is a legal use.

 

[Terrel L. Shields]

OP

I have recently been asked to perform an appraisal on a Bed and Breakfast property.

He just said that a B&B is a legal use

Parse what you want but I read it to mean it is a B & B and I stand my ground from my first post. You best call the state board and find out what they think first. If they say it is fine and dandy to proceed as a CR, go for it. If they don't, then it is territory for a CG. period. end of story. I can assure you in my state the past investigators I knew tended to come down hard on folks if they were attempting to appraise commercial property on a CR license and until you know whether the state thinks a B & B is "Residential" or not is more important than the zoning issue.

 

[CANative]

It's not up to the state board to decide what kind of property it is. It's up to the market and up to the appraiser.

If it's just some couple who want to play part time hotel keeper for their too expensive beach front and only have a few guests during Memorial Day and the Fourth of July the HBU is probably a SFR regardless of what type of use permit they get.