Two townhouses combined to one?

[Lee Lansford]

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...or, is the HBU developed in context with client needs in mind?

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An interesting assignment and question for sure.

The OP has a difficult assignment before him.

As to your question, the answer is "no"...other than the appraiser's interest in developing and communicating a credible appraisal upon which the client and other intended uses may rely.

 

[Lee Lansford]

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Would the appraiser state that the HBU is not "as is", but is "other" (revert to two units) but that the subject is being valued "as is", at client request?

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Appraising for MV, yes?

Yes.

Thus, H&B use (both vacant and as improved) is not to be ignored.

Not all client requests are appropriate.

 

[J Grant]

True, LL, not all requests are...good analysis.

 

[hastalavista]

I wouldn't use "interim use" for our situation.
As you note, the use is the same (residential); it is the improvement that is not maximally productive due to its configuration. The site (presumably) supports two townhouse units, but the current improvement is a single unit. If we assume that the analysis shows that conversion should take place, there is no "interim" (why wait? Change should occur now).

Value in Use or "Use Value" (Dictionary of Real Estate, 4th ed.): the value a specific property has to a specific person or specific firm as opposed to the value to persons or the market in general.

From The Appraisal of Real Estate (12th ed.): Use value is the value a specific property has for a specific use.... Real property may have a use value and a market value...

Use value has a different definition than market value.
We assume (in this scenario) that the townhouse improvement as-is (2-units combined into one) does contribute value to the underlying site. Therefore, there is use value (it is worth something, more than the vacant site). As-improved, its worth whatever a 3,600sf townhouse would fetch. I can appraise it that way, but I cannot call the value "market value" because if my H&BU analysis is correct, the subject would sell for more as-is to an investor who will remodel vs. to an owner-user who will occupy.
The investor is the likely buyer; because the investor will out-bid the owner-user.
The value the owner-user would pay is less than what an investor will pay; the value of the larger GLA for an owner-user utility is less than the value of that GLA reconverted to the original, 2-unit configuration (after all costs and EI are accounted for).

Don't confuse "as is" with H&BU.

As-is, the subject is a large, single-unit townhouse.
If the H&BU is to remodel, then the as-is value (market) reflects the as-is configuration and accounts for all the costs to convert. As-is, this will sell for more than the townhouse to an owner-user.
There is nothing hypothetical or extraordinary about the valuation. The valuation reflects the "market value".

Appraising the property as-improved (when the as-improved configuration is not H&BU) and not considering the H&BU and what impact that has is an "as is" valuation as well. But the value is not "market value".
There is nothing hypothetical or extraordinary about the valuation. The valuation reflects the "use value".

As the text states, "Real property may have a use value and a market value".

 

[J Grant]

well explained answer...the OP should be good to go!

 

[Joyce Potts]

Go look up superadequacy in any standard appraisal text book and read about it. Yes, that's what demos are made of. Outside of lot sales, try allocating the typical townhome's Land Value (assuming it's SF attached and not condo) based on county property appraiser ratios. It's not much, but something. At least try and search for even a condo scenario where someone combined two adjacent units into one and even if there are no sales, again, run an allocation of the country property appraiser just and/or asssessed value ratio in comparison to the other townhomes. Again, it's only better than the ROMA (right out of your *****) method. Assuming this townhome is a typical in the marketplace, hammer the overimprovement/superadeqacy home. You might also want to speak to local Realtors and see if they have any 'constructive' information.

I see this similar to an excess vs. surplus land scenario. Obviously if you don't have other combined townhomes, the HBU is more than likely subdivide the improvements back to the way they were in which case you'll also need the cost cure.

Other than that, drop back and punt but don't drop and break the wine bottle.

 

[Joyce Potts]

Eric, I just realized you're in Florida. There were two combined condo unit into one that I know of that sold in the last two+- years in Winter Park--if I remember correctly in Whispering Waters on Interlachen.

 

[J Grant]

Joyce, woul d it have to be a combined townhomes? Wouldn't a large townhome be a viable comp/and show market demand/price for a large townhome unit? It might be almost impossible to find a combine townhome comp. If there is a market for large townhomes, I don't think the new buyer would be that interested that it was a combined unit, if they were looking for liveable space (assuming the combined HOA maint fees for the units were not excessive). I agree combined condo unit would indicate some kind of trend to combine units , but still pretty rare ..

If there is no market for large townhomes, then the HBU per the analysis in other posts is retrfit back to 2 sep units,. Either there is a market and demand for large townhomes in the area or there is not, but basing it on another combined townhome sale may be an impossible task, esp if no such comp exists.

I have never done an appraisal on combined townhomes. I did once do a combined condo, but that is a bit more typical and there were comps. I have done large over improvement/super adequate homes and condos and I found the assignments interesting.

 

[Eric C]

This is definately a complex assignement based on all your feedback. I appreciate it.

I haven't had a chance to go see the property but I'm going today as I'm about the interior. After the inspection I'll let the client know if I can continue or not.

What I do know so far is that each building in the community is composed of 4 attached townhouses. The subject is the corner unit and adjacent unit. The exterior has the same appeal as it was still two separate townhouses but there is only one folio number for both.

(not real prices or contract price but...) typical tonwhouses are in the range of $190K and the contract price for subject is say about $290.


I have seen combined condos in the past in high end places like Miami-Beach but these were actual renovations as apposed to the subject that was built like this by the developer back in 1988. Not sure if there is a difference.

 

[J Grant]

You've got to inspect interior to see...if they took out two kitchens to make one kitchen, is it a well appointed, larger kitchen, or the same small basic kitchen from orig townhouse.

How much would it cost to retrofit back to two units...dmolition, install a new second kitchen, a sound proof wall between the units, egress, then apply for permits, a new co of o, get it replatted to two sep folio numbers etc ? ( and is it even possible legally? ). Depending on interior configuration, it might not be cheap to retrofit to two sep units., or it may not that much

Also, you seem to be basing the entire market on the subject subdivision, 4 attached townhomes does not make a market....you have to research surrounding area to see competing properties for size, appeal etc. that might compete with subject.