Residential Property In A Commercial Zone.

[xm39hnu]

As long as the residential use is a legal one, you can do the appraisal (if you want it.) However, H&BU as vacant will likely turn out to be to improve the property. THEN you have to consider all that commercial stuff to determine the ideal improvement and bounce it off the typical improvement. PITA, but it helps to determine the amount of functional obsolescence associated with using commercial property for residential purposes.

H&BU as improved would likely turn out to be "present use," unless cost of purchase, demolition, and construction would yield a higher return. May be, maybe not. See if X-Boss lady can help you with it, if you want to use it as a study assignment. It is on assignments like this that CG's earn their pay.

 

[Liz South]

My $.02 for what its worth

Had a similar situation not long ago. Residential property in an area zoned commercial. At first didn't want to do it, client insisted, so then I tackled it and found that even though it is zoned commercial, its highest and best use was residential as commercial required more street frontage, and other items. Checked the zoning code and met with a zoning official to determine the exact usage since code would not allow the property to be rebuilt if more than 60% destroyed.

Just either price your job high enough to allow for time to meet with zoning officials or figure that some jobs you take you lose some money on and chalk them up as learning experiences.

Just because something is zoned commercial does not make it a commercial property.

Just my $.02

Liz S.

 

[Tim Juska]

I have seen properties of this type before. I just ask myself several different questions:

1. We are to initially consider the site as though vacant to determine highest and best use. Is the value of the site worth more because of the commercial zoning than you would value it as a residential use? I would look to MLS or county data for land sales. As long as the improvements add some value over and above that of a vacant site, then you should be at your highest and best use until the improvements are removed.

2. Are residential uses permitted in the commercial zoned, are they grandfathered and what are the zoning restrictions?

3. Can you show a market for residential properties in commercial zones for this area? Hopefully you will find some. If you can show that other residential properties in similar commercial zones have sold and are continued residential uses, then there may be a market for them.

4. If your residential comps in commercial zones have been demolished or converted to commercial, then I would probably tell them to find a commercial appraiser.

If I were to appraise the property, I would include the zoning, the restrictions and the potential for a change in use depending on the zoning requirements and restrictions. The residential use may be the interim use for the property until such time that the use is completely outlawed, demolished or deteriorated at which time the new use as commercial would kick in. Then let the underwriter decide.