Single family with Grocery Store

[PropertyEconomics]

RNM,

Don't be discouraged by the hostility on the forum. I would also warn about taking posters advice when not backed up by citation. The quote below is from The Appraisal Foundation and may or may not be of help to you.

USPAP Q&A Vol. 10 No. 3 March 2008
Does Appraising a Physical Segment Require Use of a Hypothetical Condition?
Question:
I received a request to perform an appraisal on an improved property; however, the client only wants me to provide an opinion of land value, giving no value to the improvements. Does such an assignment require the use of a hypothetical condition, since the improvements exist but are not being included in the value?
Response:
No, such an assignment does not require the use of a hypothetical condition.
Standards Rule 1-2(e)(v) permits the appraisal of a physical segment of a property. In this example, the segment being appraised would be the land. Put simply, the land is the subject of the assignment and the improvements are not. To avoid communicating a misleading appraisal report, the report would have to acknowledge the existence of the improvements on the land, but they do not have to be included in the valuation.
USPAP defines a hypothetical condition as:
that which is contrary to what exists but is supposed for the purpose of analysis.
In this example, a hypothetical condition would not be required because the land does, in fact, exist. This is no different than the situation that commonly exists in appraisals
employing the cost approach. In arriving at an opinion of value by the cost approach, an appraiser often develops an opinion of the site value as if vacant, separate from an estimated value of the improvements.
This can be contrasted by an assignment that includes providing a current value of proposed improvements. Appraising the improvements as if currently completed is contrary to what exists, so a hypothetical condition would be required in that case.

Not to rehash old things, but to rehash old things, the land "as vacant" does not exist and if you are using vacant land sales as your indication of value (or unimproved land) then you are in fact appraising something different then that which exists if the property owner owns both the land and the improvements. The appraisal would be hypothetical according to USPAP ... read the document and you will find it to be true.

 

[Wyoming]

Not to rehash old things, but to rehash old things, the land "as vacant" does not exist and if you are using vacant land sales as your indication of value (or unimproved land) then you are in fact appraising something different then that which exists if the property owner owns both the land and the improvements. The appraisal would be hypothetical according to USPAP ... read the document and you will find it to be true.

Thanks for your input. When talking about this issue, another appraiser and I came up with the same logic as you. I am curious why TAF does not see it the same way.

 

[Fred]

Given the feedback, they might be rethinking that one.

 

[AnonApprsr]

I sure am tired to my feathers reading posts....

Maybe you shouldn't reply at all. The man was asking for help, not to be belittled and patronized.


To the OP: I would probably appraise it as a single family residence with an "outbuilding." This is assuming that the store itself can be used, as is, as an outbuilding for storage or the like. Find some comps that have a barn/outbuilding and derive an adjustment to make in the grid.

 

[Lee Lansford]

I received a request today for a single family refi. After I pulled the assessment on it, I found out it is a residence with acreage and a small detached grocery store on the front of the property. Below is the assessment showing where they are all on the same parcel. Can I appraise the residence and land only, if I disclose the presence of the grocery store and that I am not giving it any contributory value?? I have contacted the lender to get their stance on it (I know most lenders will not lend on mixed use). But my question is can I do this? There may be a simple answer, but this is typical of how my workload has been lately and I can't come up with one. Thanks in advance for your responses.

TaxItemNo: ***** (12 - RURAL LOTS)
Assessed Value: 740
Implied Value: $7,400 (Assessment ratio = 10%)
Units: 6

TaxItemNo: ***** (22 - STORE)
Street Address: *******
Assessed Value: 5830
Implied Value: $38,866 (Assessment ratio = 15%)
Units: 1
Construction Year: 1950
Square Feet: 2448

TaxItemNo: ***** (21 - RESIDENCE)
Assessed Value: 16080
Implied Value: $160,800 (Assessment ratio = 10%)
Units: 1
Construction Year: 1981
Square Feet: 2403

Tax Item Totals:
Assessed Land: 740 ($7,400) 6 Units
Assessed Improvements: 21910 ($199,666) 2 Buildings
Assessed Total: 22650
Homestead Exemption: 7500
Taxable Parish Value: 15150

My best "guess" is that your efforts to appraise this property (given the intended use) by "ignoring" (my desriptive word, not yours) the presence of the grocery store is similar to trying to put a square peg in a round hole.

 

[Lee Lansford]

Lee, Look to the recent post by Brian Weaver concerning mixed use properties and Cert Residential properties. I won't try to quote it here because I don't remember it that well.

I discussed it a little concerning small farms with some income, and the post also covered small business income properties.

The relative size in this thread likely does not fit, but you should read thread.

It is in the Illinois section

Wayne Tomlinson

Wayne, which post are you referencing?

Unless I have missed a recent change--and I doubt that I have--Cert Res are limited to SFR and 2-4 unit residential properties. Anything above and beyond requires a Cert Gen signing as Supervisor Appraiser.

Lee

 

[AnonApprsr]

Ask yourself.

You definitely shouldn't ignore it. I've dealt with similar situations where a SF property had an attached room that was used as an antique store. However the store wasn't year round, and honestly did not look like it was making a lot of money.

With my suggestion above, it can only work if you believe that is how the market would treat the property. Just ask yourself:

"How would the market deal with this? How would a buyer looking for a single family home of this type, in this area, treat this store?"

The answers to those questions, is the answer to your OP.

 

[Lee Lansford]

...


To the OP: I would probably appraise it as a single family residence with an "outbuilding." This is assuming that the store itself can be used, as is, as an outbuilding for storage or the like. Find some comps that have a barn/outbuilding and derive an adjustment to make in the grid.

Would it not be a bit deceptive...not to say lacking in credibility...to take this approach?

Is not the Subject an obvious mixed-use property and to compare it to an improved property that contains a SFR and, say, a large storage shed, a bit of a chicanery (i.e., puttin' a square peg in a round hole)?

 

[Lee Lansford]

Wayne, which post are you referencing?

Unless I have missed a recent change--and I doubt that I have--Cert Res are limited to SFR and 2-4 unit residential properties. Anything above and beyond requires a Cert Gen signing as Supervisor Appraiser.

Lee

Wayne, not to concern yourself...I found it.

Lee

 

[AnonApprsr]

Would it not be a bit deceptive...not to say lacking in credibility...to take this approach?

Is not the Subject an obvious mixed-use property and to compare it to an improved property that contains a SFR and, say, a large storage shed, a bit of a chicanery (i.e., puttin' a square peg in a round hole)?

Read my subsequent post where I clarify. Examine how the market/buyers would treat it if they wanted to buy a single family home. If a buyer wants a single family home, how would they treat the Subject's store? In the market in which I am in right now, a buyer who wanted a SF home (and this home is the type they're looking for) they wouldn't see it as a hindrance and would probably be willing to pay a little extra for the outbuilding.

If the market would treat it differently in the OP's area, than the appraiser should consider the market's reaction.