SFR Illegally Converted To Duplex

[John J. Phillips]

Completing a conventional 1004 assignment of a 1921 1-story 1,500 SF property originally constructed as a SFR. The owner has converted the home to a duplex by constructing a dividing wall down the center of the residence from front to back (left/right duplex), and installing a second font door, both sides also have rear/side exterior doors. They also partitioned the rear of the home to a third separate space (not accessible from the interior of either unit) that has a washer/dryer and two additional beds (so some GLA issues with that). The zoning does not allow duplexes (SFR only). I informed the client thinking the assignment would be cancelled, but they seem to be trying to make it work. My understanding is the owner would be willing to install an interior door connecting the two units (like a hotel suite). The property is owner occupied and I believe both "units" are occupied by related family. Property is C4/Q4. So just trying to wrap my head around this during the busy holiday season to make sure I am thinking this through. It is not really a question of value or quality/condition, as much as legality, property eligibility, proper appraisal form, functional obsolescence and making sure not to misrepresent anything. Any thoughts as to how you would approach this would be greatly appreciated.

 

[J Grant]

I assume client needs an "as is" value?

 

[J Grant]

Completing a conventional 1004 assignment of a 1921 1-story 1,500 SF property originally constructed as a SFR. The owner has converted the home to a duplex by constructing a dividing wall down the center of the residence from front to back (left/right duplex), and installing a second font door, both sides also have rear/side exterior doors. They also partitioned the rear of the home to a third separate space (not accessible from the interior of either unit) that has a washer/dryer and two additional beds (so some GLA issues with that). The zoning does not allow duplexes (SFR only). I informed the client thinking the assignment would be cancelled, but they seem to be trying to make it work. My understanding is the owner would be willing to install an interior door connecting the two units (like a hotel suite). The property is owner occupied and I believe both "units" are occupied by related family. Property is C4/Q4. So just trying to wrap my head around this during the busy holiday season to make sure I am thinking this through. It is not really a question of value or quality/condition, as much as legality, property eligibility, proper appraisal form, functional obsolescence and making sure not to misrepresent anything. Any thoughts as to how you would approach this would be greatly appreciated.

Since duplex use is not legal, this is still a single family home.

Two ways to do it: Subject to conversion back to a single family (remover partition, second kitchen if there is one etc)

Or do appraisal " as is", factoring in negative appeal of a chopped up house and could include a cost to restore back to original use as a single family interior floorplan, which would inlcude a cost to cure (clients usually want to see a cost to cure estimate even for an "as is" appraisal...the adjustment for funct obs of the chopped up floor plan with a partition down the middle might be more than cost to cure.

The property condition of C 4 or C 5 is its own determination.

Sounds like the biggest challenge would be comps needing work or having odd configuratiron if done "as is" Good luck....these assignments are a PITA

 

[Tim The Enchanter]

Tell them the fee needs to increase due to complexity.

 

[glenn walker]

The word real estate attorneys in my area would use the word is this a possible conversion with out permits ! ** The use of the word illegal means someone broke the law ** Are we talking Texas ? LOL : )

 

[J Grant]

It is not really a question of value or quality/condition, as much as legality, property eligibility, proper appraisal form, functional obsolescence and making sure not to misrepresent anything. Any thoughts as to how you would approach this would be greatly appreciated.

Assuming it is a bank conventional loan or FHA/fannie etc, sounds like UAD 1004 form (did client specify UAD?) 1004 is single family form, because despite the partition down the middle, it is still a single family home...as you note due to chopping it up which is not what most SFR homeowners want or expect, it would have some funct obs affecting value...I touched on that in my post above,how much, that would be the hard part of the assignment. It's lack of permits regarding the conversion, and current use as a duplex is illegal use as a per zoning, but the original footprint of the home/structure is still "legal" as a SFR home on its lot.

 

[John J. Phillips]

I assume client needs an "as is" value?

Since duplex use is not legal, this is still a single family home.

Two ways to do it: Subject to conversion back to a single family (remover partition, second kitchen if there is one etc)

Or do appraisal " as is", factoring in negative appeal of a chopped up house and could include a cost to restore back to original use as a single family interior floorplan, which would inlcude a cost to cure (clients usually want to see a cost to cure estimate even for an "as is" appraisal...the adjustment for funct obs of the chopped up floor plan with a partition down the middle might be more than cost to cure.

The property condition of C 4 or C 5 is its own determination.

Sounds like the biggest challenge would be comps needing work or having odd configuratiron if done "as is" Good luck....these assignments are a PITA

Thanks. Sounds like I'm o.k. then appraising as is on a 1004. They are looking for an as is value, which I don't have an issue with, but FNMA may. But I believe eligibility is the lenders call and I have reported the facts. The assignment is made a bit easier in that this neighborhood is being gentrified so renovating is economically feasible (especially given the functional obsolescence) and there are comps that were purchased for complete renovation (while they didn't have the same functional issues, re-configuring the floor plan during the process of a complete renovation shouldn't move the needle too much, the flippers typically open up the floor plans of these old houses anyway). And yes it has two kitchens and other functional issues. Thanks again.

 

[John J. Phillips]

The word real estate attorneys in my area would use the word is this a possible conversion with out permits ! ** The use of the word illegal means someone broke the law ** Are we talking Texas ? LOL : )

A coversion without permits would indicate that it is a legal use but no permits were obtained, this is not a legal use, hence illegal versus legally permissible.

 

[John J. Phillips]

It is not really a question of value or quality/condition, as much as legality, property eligibility, proper appraisal form, functional obsolescence and making sure not to misrepresent anything. Any thoughts as to how you would approach this would be greatly appreciated.

Assuming it is a bank conventional loan or FHA/fannie etc, sounds like UAD 1004 form (did client specify UAD?) 1004 is single family form, because despite the partition down the middle, it is still a single family home...as you note due to chopping it up which is not what most SFR homeowners want or expect, it would have some funct obs affecting value...I touched on that in my post above,how much, that would be the hard part of the assignment. It's lack of permits regarding the conversion, and current use as a duplex is illegal use as a per zoning, but the original footprint of the home/structure is still "legal" as a SFR home on its lot.

Thanks. The big issue I think really is can it be done as is, or does the owner actually have to install a door to connect the units and cure any other functional issues. I know condition issues need to be cured, but I don't see anything that requires functional issues to be cured. I guess one could call it a SFR with big time functional issues instead of an illegal duplex, but I believe GLA must be contiguous so I think an interior connection might be needed for that.

 

[John J. Phillips]

Thanks. The big issue I think really is can it be done as is, or does the owner actually have to install a door to connect the units and cure any other functional issues. I know condition issues need to be cured, but I don't see anything that requires functional issues to be cured. I guess one could call it a SFR with big time functional issues instead of an illegal duplex, but I believe GLA must be contiguous so I think an interior connection might be needed for that.

.....also the lender is of no help they don't seem to have a clue