SFR Illegally Converted To Duplex

[Michigan CG]

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)..............................

WHY are you going to complete a 1004 form for a property that IS NOT a single-family residence? You can, but you will have to use a HYPOTHETICAL CONDITION that it is and you will have to make the report SUBJECT TO converting it back to a single-family home. Of course if you do that you will have to estimate the cost of cost of removing the walls, taking out the kitchen, making the laundry and two bed area part of the GLA, etc, etc.

And then we have the questions of Highest and Best Use AS CURRENTLY IMPROVED.




Not only do you have the cost of removing multiple walls and a second kitchen but you most likely have two very small kitchens that are not up to par with your comparables (let us have that discussion later, the choice of comparables). You also have the cost of making the home typical of other homes which would mean that the home has to function like other homes and has to have the appeal of other homes. I am sure that those walls in place are going to create gaps in flooring........I would also consider that. You have two front doors and a rear door, will the exterior of your HYPOTHETICAL home have two entrance doors on the front and do market participants really want two doors on the front of their single-family home or would there be a discount for the exterior look of the home?

 

[Michigan CG]

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

PLEASE don't take this person's advice. She has an opinion about everything, many being unsupported.

If you were appraising a property and there was a converted house to a liquor store would she state "Since liquor store use is not legal, this is still a single-family home"?

Her above statement is ludicrous to be nice. It is currently A DUPLEX and what are you going to do about the Highest and Best Use section of the 1004? I don't want to even think about what she would do in this situation.

 

[Michigan CG]

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.

NO, you are not OK with putting it on the 1004. It isn't a house, it is a duplex with a random laundry area with beds.

And then to top it off you have a lender who wants an AS-IS value? REALLY?

Exactly how are you going to give an As-Is value on a duplex that is not legal with huge amounts of repairs needed that is currently NOT IMPROVED to its HIGHEST AND BEST USE?

You need to have a talk with the "lender" and if it is a clueless AMC you need to walk away.

My fee for even thinking about this one would be $1,500 on the low end.

 

[J Grant]

That's a good point, re GLA not contiguous re an opening in the partition....it is out of our hands as an appraiser what Fannie or UW this will accept. Our end is we don't want to be misleading.

Which leaves us with if it is done "as is", describe what is there, that it would be a low cost cure to install a door or opening in the partition, that for report purposes the GLA sf is considered X total sf since that is what was originally built under roof and Air conditioned/heated area...turn it in and see what happens. If lender or Fannie conditions it on homeowner opening up the area in partition, then it would be up to homeowner at that point to comply and you could do a final inspection.

See if anyone else has a better idea that is all I can think of right now.

 

[J Grant]

PLEASE don't take this person's advice. She has an opinion about everything, many being unsupported.

If you were appraising a property and there was a converted house to a liquor store would she state "Since liquor store use is not legal, this is still a single-family home"?

Her above statement is ludicrous to be nice. It is currently A DUPLEX and what are you going to do about the Highest and Best Use section of the 1004? I don't want to even think about what she would do in this situation.

View attachment 30647

That's ironic coming from you who just used contract sales as "closed " sales in new construction and a chief appraiser has rightfully so an issue with it...

I've got 20 years res appraisal experience with a wide range of properties ranging from REO, new constructon , to luxury and multi million dollar complex and no problems in all these years and I do review work as well. If this appraiser wants to take my advice, they can judge it on its merits.

 

[J Grant]

NO, you are not OK with putting it on the 1004. It isn't a house, it is a duplex with a random laundry area with beds.

And then to top it off you have a lender who wants an AS-IS value? REALLY?

Exactly how are you going to give an As-Is value on a duplex that is not legal with huge amounts of repairs needed that is currently NOT IMPROVED to its HIGHEST AND BEST USE?

You need to have a talk with the "lender" and if it is a clueless AMC you need to walk away.

My fee for even thinking about this one would be $1,500 on the low end.

Putting a partition down the middle of a HOUSE does not make it into a duplex! It's a single family house with a partition down the middle and a second kitchen stuck in. It is not a legal duplex, because duplex use is not legal in the zoning. It's anon permitted, (as in no permits pulled) illegal per zoning use of a single family dwelling.

 

[J Grant]

Highest and Best use has to be legal use, and since zoning does not allow duplexes, a duplex is not a legal use.

 

[Michigan CG]

That's ironic coming from you who just used contract sales as "closed " sales in new construction and a chief appraiser has rightfully so an issue with it...

Did you see the little post I made that I have THE DEEDS showing the sales?

Putting a partition down the middle of a HOUSE does not make it into a duplex! It's a single family house with a partition down the middle and a second kitchen stuck in. It is not a legal duplex, because duplex use is not legal in the zoning. It's anon permitted, (as in no permits pulled) illegal per zoning use of a single family dwelling.

Thank you, the above is saved into perpetuity. You are absolutely clueless.

 

[Michigan CG]

Highest and Best use has to be legal use, and since zoning does not allow duplexes, a duplex is not a legal use.

And since it is a duplex which is not legal your answer is what? It was to put it on a 1004. Misleading is in USPAP, people need to understand that just because a lender wants it on a certain form does not mean they get it on that form. USPAP states that the report must be credible.

 

[Elliott]

Its been my experience the "black letter" of the law seldom means anything to government officials, unless there is something in it for them. Duplex, smuplex. As far as the lender is concerned, I would have been very upfront from the inspection forward what it was about. I wouldn't be "completing" unless the lender had acknowledged the issues with the property going forward and I had statements from them that they "understood" what I'd described about the subject and they told me to complete it as it is.

Here's the downside of "completing" and it enters the ether of the AMC. Some appraiser is going to get it as a "review." And if they want to pin your hide against the USPAP wall, they will have more than many reasons to do it. I'm just saying to be very, very careful before you hit 'send.'