Too many units - need a second opinon

[J Grant]

Respectfully disagree. It IS what it is zoned for--legally permissible is one of the tenets not only of HABU, but also value. We do not control how an occupant uses space. Many jurisdictions limit living in a basement or cellar. Raise your hand appraisers if you have NEVER once seen someone illegally using a basement space as living area. Did you call it living area? Did you call out the non-conforming use as the occupancy police?

I've seen people living in a shed before. I didn't call that an ADU.

IF zoning says 3 units, appraise it as such, that is what the market will be willing to pay for it.

??Appraisers can now decide to reconfigure properties?

If the appraiser is to appraise it as three units, then there HAS TO BE THREE PHYSICAL UNITS. Which would mean making it subject to being converted from four units to three units.

I do not understand, though, how the city got involved in the first place. I've had the client put this on hold until the City of Chicago came back with a determination

The bold above from the OP - the appraiser told the client to put the order on hold until the city of Chigacao came back with a determination. What is the zoning? What does a "determination" mean?

I do not understand this from the OP:The rear building is on a crawl set up with two apartments

What does a "crawl set up" mean? Does it mean that the rear building is reached trhough a basement?

 

[Overimprovement]

??Appraisers can now decide to reconfigure properties?

If the appraiser is to appraise it as three units, then there HAS TO BE THREE PHYSICAL UNITS. Which would mean making it subject to being converted from four units to three units.

I do not understand, though, how the city got involved in the first place. I've had the client put this on hold until the City of Chicago came back with a determination

The bold above from the OP - the appraiser told the client to put the order on hold until the city of Chigacao came back with a determination. What is the zoning? What does a "determination" mean?

I do not understand this from the OP:The rear building is on a crawl set up with two apartments

What does a "crawl set up" mean? Does it mean that the rear building is reached trhough a basement?

People can convert a building to whatever they want. I've seen a 2BR house have a makeshift kitchen (toaster oven, laundry sink fed by a water hose, and a small fridge--just bigger than a mini) and temporary walls that made it a 8 BR home. Should my comps be 2 BR, or 8 BR? One kitchen, or two?

Sounds very much to me like someone simply converted a building to two units, with no permits, no zoning change, no nothing. That does NOT make it now a 4-unit property.

 

[J Grant]

People can convert a building to whatever they want. I've seen a 2BR house have a makeshift kitchen (toaster oven, laundry sink fed by a water hose, and a small fridge--just bigger than a mini) and temporary walls that made it a 8 BR home. Should my comps be 2 BR, or 8 BR? One kitchen, or two?

Sounds very much to me like someone simply converted a building to two units, with no permits, no zoning change, no nothing. That does NOT make it now a 4-unit property.

Yes, indeed, PEOPLE can convert a building (physically).

But that is different from an appraiser "converting" a building on an appraisal report, to make it seem to be something other than what exists physically. (without the proper EA or HC or making it subject to changing it physically)

With your above question, I would appraise it on a case-by-case basis, but temporary walls or a makeshift "kitchen" as you describe is not a kitchen- the minimum requirement, at least for lending, is a stove or range cooking source. A water hose, a small fridge, and a toaster oven do not meet a normal buyer standard, either for a kitchen.

If I park a car in my bedroom, it does not turn the bedroom into a garage. If I put a bed in my garage, I can sleep there, but it does not turn the garage into a b edroom;'

People can use or illegally use portions of a dwelling or building however they want. Sleep in the kitchen sink if they want to. But when they get an appraisal done, then the appraiser might have to disclose an illegal use or unsafe conversion of a space, or not legal per zoning use or physical change to a buidling etc.

 

[Dublin ohio]

??Appraisers can now decide to reconfigure properties?

If the appraiser is to appraise it as three units, then there HAS TO BE THREE PHYSICAL UNITS. Which would mean making it subject to being converted from four units to three units.

I do not understand, though, how the city got involved in the first place. I've had the client put this on hold until the City of Chicago came back with a determination

The bold above from the OP - the appraiser told the client to put the order on hold until the city of Chigacao came back with a determination. What is the zoning? What does a "determination" mean?

I do not understand this from the OP:The rear building is on a crawl set up with two apartments

What does a "crawl set up" mean? Does it mean that the rear building is reached trhough a basement?

Actually if you read the op it has five units. The front 2 story building has 2 apts, one each floor and one in the basement. The rear 2 story building is on a CRAWL space with 2 units, one on each floor

 

[RCA]

Well, in many cases, the city can and does force demolitions or modifications that are illegal, as soon as they become aware of them, such as during the sale. Calling for an inspection can trigger the action.

In Pacifica, if you have constructed a wall to separate the 2nd bay of a garage into living area, and code requires a 2 car garage, if the city discovers this fact through any. of a number of different channels, it will force the wall to be demolished. So, for all practical purpose the Market Value of the house cannot include the wall - because its existence is tenuous, at the whim of City Planning/Building.

Note: "Force" may be a bit too extreme. The way this works is kind of round about:

Enforcement occurs only if and when the City becomes aware of a violation and chooses to act. During a sale, that awareness typically arises through one of four pathways.

ChatGPT:

"A. Complaint-Driven Enforcement (Most Common)​

This is the dominant mechanism.

• A neighbor files a complaint
• A buyer (or buyer’s agent) contacts Planning or Building
• A disgruntled party reports “illegal living space”

Once a complaint is logged, the City is legally obligated to investigate. At that point:

• The garage conversion is evaluated against zoning and building codes
• If zoning requires two covered parking spaces, and they no longer exist, a violation is established

Only then does enforcement begin.

B. Permit or Inspection Trigger During Escrow​

Cities do not inspect homes just because they’re sold.
But enforcement can be triggered if the seller applies for something that requires City review, such as:

• A retroactive permit
• An ADU permit
• A building permit for other work
• A sewer lateral inspection (in some jurisdictions)
• A resale inspection if required (Pacifica generally does not mandate a full one, but partial triggers exist)

At that moment, City staff may discover:

• The garage is no longer a garage
• Required parking was removed
• The space was converted without permits

Now enforcement authority exists.

C. Lender / Appraiser / Insurer Pressure (Indirect but Powerful)​

This is not City enforcement, but it triggers City involvement.

• Appraiser flags “unpermitted living area.”
• Lender requires clarification or permits
• Buyer demands legalization or restoration
• Seller contacts the City to “clear it up.”

Once the City is contacted, the enforcement authority is activated.

In practice, this is the most common pathway.

---

D. Disclosure-Driven Exposure​

California disclosure law is strict.

If a seller discloses:

“Garage converted to living area”

The buyer or agent may ask:

• “Was it permitted?”
• “Does zoning require two parking spaces?”

If the answer is “no” or “unknown,” City involvement often follows — again, indirectly.

3. What Happens​

If zoning requires a two-car garage, and the garage has been converted without approval, the City generally has three legal remedies available:

Option 1: Restore the Required Parking​

This is where wall removal comes in.

The City does not care about walls per se — it cares about:

• Functional, code-compliant covered parking

If the only way to restore compliance is to:

• Remove walls
• Remove plumbing
• Remove insulation
• Restore garage doors

Then that becomes the required remedy.

Option 2: Legalize the Conversion​

This is only possible if:

• Zoning allows a parking exception or reduction
• ADU law applies
• The site qualifies for parking replacement waivers

If parking cannot legally be waived, legalization is not possible.

---

Option 3: Record a Violation / Notice​

If neither restoration nor legalization occurs:

• The City may issue a Notice of Violation
• Fines may accrue
• A lien can be recorded (rare but real)

At that point, most escrows fail.

4. Why the Two-Car Garage Requirement Is So Powerful​

When zoning explicitly requires two covered off-street parking spaces, the City has a very strong position:

• The requirement “runs with the land”
• It does not disappear because a house is old
• It does not disappear because prior owners violated it
• A sale does not grandfather non-compliance

This is why garage conversions are particularly risky when:

• The lot is small
• There is no room for replacement parking
• The conversion predates modern ADU statutes

5. The Critical Distinction: Enforcement vs. Market Reality​

Here is the practical truth, stated plainly:

Most forced “removals” happen not because the City is watching sales —
but because the market cannot close a transaction with an unresolved violation.

The City’s power is real — but it is usually:

• Activated late
• Triggered indirectly
• Enforced through leverage, not routine inspection

6. Bottom Line (Very Important)​

• The City of Pacifica does not automatically enforce garage zoning during a sale
• There is no pre-sale inspection requirement
• Enforcement occurs only if the City becomes aware
• Awareness is usually triggered by:
  • Complaints
  • Permits
  • Lenders
  • Buyers
• Once triggered, if zoning requires a 2-car garage and none exists:
  • Restoration (including wall removal) is a legally valid remedy

My Professional Opinion (as an analyst, not your attorney)​

If a property in Pacifica:

• Has a partially or fully converted garage
• Lacks replacement covered parking
• Has no permits or ADU approval
• Then the risk is not theoretical. It is a transaction-blocking risk, even if the City has not yet acted.
  
  The safest strategies are:
  1. Confirm zoning and parking requirements before listing
  2. Determine whether ADU or parking exemptions apply
  3. Decide whether to restore, legalize, or price for risk.

Then that becomes the required remedy."

The same logic applies to an illegal unit.

 

[Zoe]

I have worked on multi-family in Chicago. Local code enforcement and tax assessor are easy to work with. Getting to their office is not easy and especially sometimes this time of year. Yeah, you need to know how they classify it. The rest is simple. The rest is just common area.

 

[Zoe]

You definitely don't want to call it legal use if it is illegal use. You have to disclose that somewhere. There is no harm in you telling code what is there and say whatever. How is all this metered with utilities?

Code will probably say don't worry about it. But you still have to protect your client.

 

[sputnam]

I have an atypical assignment in Chicago. Two 2-story buildings on one lot. The front has a first floor apartment, 2nd floor apartment and the basement is finished with a common entry to also be used as an apartment. The rear building is on a crawl set up with two apartments. One on each floor. the rear building has a front enclosed entry that is unfinished and heated. it is where the furnace and hot water heaters are as well as the staircase to go to the 2nd floor. As this is Chicago, all sorts of things like this are out in the wild. I've had the client put this on hold until the City of Chicago came back with a determination. It has come back as three legal units. I was thinking of typing this up with curable functional obsolescence to address converting the rear building to just one unit and to de-convert the basement kitchen. But I'd appreciate feedback.

It really doesn't matter much what the City calls it. The property is what it is. You, the appraiser, determine that during your property inspection. What is your assignment? Current As Is market value? Then that is the job. The job isn't to manipulate the description of the improvements to fit. Are the current improvements conforming, grandfathered, or illegal? is a different question. What's the Highest and Best Use of the property? The City determines what they think and how they tax a property. They don't dictate how you appraise it. If I counted correctly, there are five units. That means this is a job for a certified general appraiser. If you aren't qualified or if you just don't want to do it... just withdraw from the assignment.

 

[Zoe]

I don't know. I don't know what zoning allows. I don't know if permits are pulled on this development. I don't know if sales comparison and/or income cap approach would be most applicable. I am not betting an extraordinary assumption and/or hypothetical condition would not be required.

If cost to cure could be used, then the appraiser could do that in any approach to value.

The appraiser made wise choice communicating with their client. Nothing wrong with punting either. The competency rule allows flexibility. If at any time in the assignment the appraiser discovers they are not competent, it is fine to punt.

Just don't send an invoice to the client if you punt for incompetency.

The client may want you to stop also after preliminary analysis. If client tells you to stop, you can send an invoice.

In other words if client says I don't want to do this. Please stop and send me an invoice for services rendered.

 

[George Hatch]

Zoning isn't the only issue at play here. What you're looking for is what type of buyer will pay the most for the As Is and how they will proceed with the usage.

As for considering the use of a hypothetical, there are limitations to that. You can't just fabricate an HC for the purposes of expediency in order to avoid doing the analysis of the "as is":