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SFR in commercial area

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Jan 15, 2002
Professional Status
Certified Residential Appraiser
Currently working on a REO. Subject is a small 900 Sq Ft single family residence, with a 4500 Sq Ft lot. Property is located in the middle of the block. Only parking available is the 1 car driveway, parking is not allowed on the street in front of the property. Property is zoned as Heavy Commercial. Homes on both sides of the subject are similar SFR. But, the area is mostly small commercial, houses converted for business use.

In my opinion, due to the location and lack of potential parking, the home by itself is best use as SFR.

I do not appraise commercial property. But, since the commercial potential is present, is there anything else that I need to do/mention to CMA?


Frederick R. Ruffell

Senior Member
Jan 21, 2002
Professional Status
Certified General Appraiser
I am currently doing a similar assignment except my property is a 2 unit property. The lot is sided to one side by residential and by commercial on the other. the whole area is zoned commericial-general. Here is what I did. Called city planning and got the skinny on zoning and the subject (i.e. conditional use permit, rebuildable? etc.) The lot is somewhat smaller than the comercial lots but in line with the residential lots. I then pulled commercial sales (via the MLS) for the neighborhood. At this point it became clear that by the time you demolish the existing structures and build a suitable commercial building ( office/store front), assemble the small lot next door for parking to stay within the building/zoning requirements, add a curb cut, etc... one would be losing money. So highest and best use is current use even though it MAY be an interim use.

I would be happy to hear some other appraisers take on this methodology as I am not yet a commercial appraiser.

Terrel L. Shields

Elite Member
Gold Supporting Member
May 2, 2002
Professional Status
Certified General Appraiser
Don't you just hate those kind? Was asked to appraise a lady's mothers house and 14 acres on a state highway. Dawned on me at last minute. Isn't the proposed Bypass of 540 going to be near here? Oh, yes she replied, " the exit ramp will be right here and the highway will go beside the house" GEEZ, SFR became Commercial Speculative land.


Sophomore Member
Feb 4, 2002
Highest and best use becomes more of an issue than just filling in the form report. You may want to check if any of the similar properties that are being used for commercial have sold in the last few years, how long they were on the market, etc. Failing to analyze highest and best use for a potential commercial property is a good way to get into trouble.
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