Triplex, two buildings,

[Xavier Hargrove]

Hello all,

I recently got a private order to appraise a property for consulting purposes. The parcel is .49 acres and has a duplex on it, then a single-family house on it. The single-family house needs significant repairs to become rentable again. HBU supports the parcel being split down the middle with the duplex on one side and the single-family on the other. Although it is not its current use this action could result in a $20k-$30k increase in value. I developed the report on a general form and did so as a triplex acknowledging there may be HBU of splitting the lot. I am interested in knowing any thoughts on this. Am I doing this right? Is there more research I need to do? What is the best way to conduct this report?

 

[Terrel L. Shields]

HBU supports the parcel being split down the middle with the duplex on one side and the single-family on the other.

"as is"???? What it is, is a duplex and a rehab SFR. Value it that way and don't create imaginary scenarios that are contrary to what exists.

You have created a hypothetical scenario and if a private order, is that what they want? If they want the "as is" value, then do it "as is." HBU does not create "20k-30k" more value. Make sure your client wants a hypothetical because if they are wanting to put it on the market, they are going to over-price it.

 

[J Grant]

Hello all,

I recently got a private order to appraise a property for consulting purposes. The parcel is .49 acres and has a duplex on it, then a single-family house on it. The single-family house needs significant repairs to become rentable again. HBU supports the parcel being split down the middle with the duplex on one side and the single-family on the other. Although it is not its current use this action could result in a $20k-$30k increase in value. I developed the report on a general form and did so as a triplex acknowledging there may be HBU of splitting the lot. I am interested in knowing any thoughts on this. Am I doing this right? Is there more research I need to do? What is the best way to conduct this report?

To be clear, does zoning allow you to sell half the lot off? If the lot is worth more vacant than with th improvement, HBU is tear down the property and sell the lot; otherwise, it is not ( financially feasible ) If zoning allows splitting the lot, acknowledge it, as you note above, but appraise it " as is" ( if that is what your client wants ) or you can give them two values, one as is , and a second value for retaining the duplex and selling the lot with the dilapidated house on it for site value or as a rehab property.- if your clients wants to pay for the two value opinions.

 

[Tom D]

Either a 2-4 family or a split up. Did you discuss this situation with the client who may not have had any thought that it could be done. And boy oh boy, are you that sure it could be done.

 

[Terrel L. Shields]

What the 'ideal' improvement is does not dictate HBU. The forms are explicit in wants the 'as is' HBU, either the property is at its HBU 'as if vacant" or it is at its HBU "as is". HBU does not create hypotheticals. So, if the client wants to know what the property value is - mostly likely they want to know what its value is "as is"...not some scenario requiring them to spend money. Private work is not FNMA "subject to" work.

 

[Xavier Hargrove]

"as is"???? What it is, is a duplex and a rehab SFR. Value it that way and don't create imaginary scenarios that are contrary to what exists.

You have created a hypothetical scenario and if a private order, is that what they want? If they want the "as is" value, then do it "as is." HBU does not create "20k-30k" more value. Make sure your client wants a hypothetical because if they are wanting to put it on the market, they are going to over-price it.

Thanks for your response. Confirmed client wants as is

 

[Xavier Hargrove]

To be clear, does zoning allow you to sell half the lot off? If the lot is worth more vacant than with th improvement, HBU is tear down the property and sell the lot; otherwise, it is not ( financially feasible ) If zoning allows splitting the lot, acknowledge it, as you note above, but appraise it " as is" ( if that is what your client wants ) or you can give them two values, one as is , and a second value for retaining the duplex and selling the lot with the dilapidated house on it for site value or as a rehab property.- if your clients wants to pay for the two value opinions.

Makes sense client wants one value as is. Might've made it more complex than needed to be. Thanks for your input.

 

[J Grant]

Lending clients typically want one value because they are making one loan on a property. And the loan is based on an LTV% of the value.

We can value a component separately as part of the SOW or if relevant we can provide a second value opinion, but they only loan on the one MV opinion for the appraisal.

 

[alebrewer]

To J's point, one critical component of H&B is the legal component. What does zoning allow? Does zoning allow 3-family? Are there any lot minimums that would hinder subdivision?

 

[sputnam]

It's not really that difficult. If your HABU analysis concludes that the property should be split, you call your Client explain the situation and ask them if they want it appraised as a whole or as if split. If they want it as a whole, then you are providing value in use.... and it's a 3 family property. However, I would bet $5 to a doughnut, that your HABU analysis could go either way.