Two-unit or Three-units?

[amluscombe]

City has the property as a two-unit multi-family. Zoning is medium density, which includes a mixture. Subject is a duplex. Owner lives in the larger unit, doesn't rent out second one. But, she does "rent" out the basement finished area as an apartment to her daughter. There are three separate meters and there is an egress window in living room area of basement.
Lender thinks that basement finish should be third unit. I have put out emails to others and thought I'd check here, too. I know that local/state building codes can vary. Also, what does FNMA have to say about below-grade units. I would think that they would not accept a below-grade unit. Market data has been very slow in this area, not a lot available. Just looking for more (& maybe quicker) ideas & advice on finding out if this is legal and FNMA acceptable.

 

[Restrain]

Sounds like a duplex with an illegal basement unit. I've seen these in the major cities (primarily brownstones and the like). Whether it is legal depends on allowable zoning. That being said, Disclose, Discuss, then try to find homes with similar illegal basement units to determine if there is a premium paid for the third unit. A San Francisco appraiser is probably a very good source for the "how-to" on this one.

 

[Michigan CG]

City has the property as a two-unit multi-family.

One of the bigger Iowa "cities"?

Zoning is medium density, which includes a mixture. Subject is a duplex. Owner lives in the larger unit, doesn't rent out second one.

What or who is in the second unit and why does she not rent it out?

But, she does "rent" out the basement finished area as an apartment to her daughter. There are three separate meters and there is an egress window in living room area of basement.

Egress window, but is there a separate entrance? Renting to daughter at Market rent?

Lender thinks that basement finish should be third unit.

Of course he does, wants more value from the rent.

Is it a traditional duplex?

 

[Lee Lansford]

City has the property as a two-unit multi-family...

If by your own words you are telling us that the legally permitted use is as a 2-unit, what question remains unanswered?

 

[amluscombe]

Thanks for the responses....I'll explain a little more. Okay, mentor has (surprisingly) never ran into this either. CG that has worked in this market(S.C.)for over twenty years. His advice was to check with inspections to see if it could be made legal and what would it take to make it legal. Then, do a cost-to-cure for it. IF is even possible.
Tim, yes....I am on the opposite side of Iowa that you were. Thank goodness, the DRY side. Only one county in my area a disaster. All three "units" have separate exterior access. Single-family converted years ago to two-unit. There is one door connecting 2 above-grade units and homeowner has it open and is using all spaces. In other neighborhoods, HBU would indicate this should be a single-family residence. But, not in this neighborhood. Homeowner is retired older lady who says her 50something daughter pays her $260 per month for the basement unit. Any comments are appreciated. Postal service hast three different addresses on subject. Property records only have the one address, and marked as two-unit.
Comments appreciated