Residential home being used as assisted living home.

[mjcrodgers]

Not sure if this is a problem or not. I am appraising the sale of two seperate homes which are next door to eachother. They are both currently being used as assisted living homes. (There is a onsite nurse there to take care of older people, who live there) Each home has a seperate contract for the purchase of the house and one for the purchase of the buisness intrest. Is it OK for me to just appraise the homes as residential SFRs, mention the current use and disclose that I did not consider this buisness aspect in the appraisal. Also does this represent a highest and best use issue? According to the buyer and current owner the city is OK with the business, since they see it as more or less a rental. I am waiting to hear back from the city. The look like basic SFR's with handicap features added. Thanks for your input.

 

[Mztk1]

A lot of times ALCs change the floorplan and other items to accomodate the occupants (wheelchairs, etc.) and to comply with zoning (fire laws, etc).

If structural changes were made to the house to accomodate and these items would add to value for the next ALC or substract from value is a SFR then it likely will not be considered "residential".

Take pictures of everything. Put a one page letter together explaining it to your lender and whether you believe without the business whether or not the properties compete in the residential market. Based on that, they will red or green light it.

If green lighted, summarize everything in the report that you described or summarized in the letter, fully disclose, and summarize the reasons why the subject still competes as a residential house (all residential houses in that market, by the way, are likely zoned to allow an ALC, and that's why significant changes to the structure is the key. If that is not correct, and the subject has special zoning, you may not be able to view it as residential any more).

 

[GA Benny]

Highest and best use! If the highest and best use is residential then appraise the property as residential. Document any modifications or deferred maintenance and you should be ok. I run my appraisal business out of my home, but that doesn't make it a commercial property.

 

[Jim Onderisin]

What is the zoning classification for each property? What uses does the zoning ordinance allow?

 

[Doug Trites]

In Michigan no zoning is required for AFC homes. No business value can be given because the license is for the indiviual not the home. No value should be used in income and appraisal should be done as single family with mention of current use. As long as the subject has not been hacked up into alot of small bedrooms usually no adjustment is required. The big issue is the license is for the owner not the subject property and no business value is present. At least that is the way it is in Michigan.

 

[lmichels]

Call your state ombudsman for elder issues and find out exactly how assisted living is regulated in your state. It's different in every state. Oregon is like Michigan, based on on what Doug said. But I know it's different in other states because I've had to explain it to reviewers and underwriters over and over again. In Oregon, where you can't legally transfer the business because the license is not transferable, and where Adult Foster Care homes are defined by state law as single family homes, I use single family homes for comps, preferably with the same number of Beds/Baths. Usually this means I end up with some AFCs as comps and others that aren't and it's easy to do a paired sales analysis and show that the "business use" as the underwriters call it has no affect on value. There are a few cases I've turned down where the psa says there is an affect on value - those I consider commercial properties likely to illegally include business transfers.

 

[The Warrior Monk]

The thing that sends up a red flare is the purchase of the business interest. I have never seen that on a property where the highest and best use is residential. An HBU analysis examining the two uses is likely warranted.

 

[James Andreas]

In LA area, check the on-line zoning code. I don't have it memorized, but something like 6 clients per SFR or 2 per bedroom. There is plenty on-line regarding permissability of assisted cares and half-way houses in SFRs/residential zoning.

As another said, if the improvements have been modified for the care facility, you may need a cost to cure. Handrails, ramps, levered doorknobs typically are not an issue. Oxygen lines through walls, beds bolted to floors, padded room (joke) etc. are non-conforming alterations. Often new doorsways are bootlegged to facilitate better flow - again, is this a detriment? Each A/C home I've appraised has been spotless, typically with upgarded kicthens, baths, and solid floors (vs carpet).

As far as the business interest, if I sold my home with a seperate contract for buying my business (good will? desk and computer?) it would have no impact. I've seen call centers, mail order businesses, and **** palaces in homes and it's still just an SFR - per zoning. The neighbor behind rents his home for film shoots seemingly 1/2 the year - still an SFR.

 

[James Andreas]

Also, if this pair is in Thousand Oaks, by chance, similar rules apply in Ventura County. Check State Code also, I have a vague memory that the assisted care / halfway house permissability is addressed - like 2 homes on a lot was approved a few years ago.