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Two Units - One Report

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Fritz Smith

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Oct 11, 2006
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Certified Residential Appraiser
State
South Carolina
I have an assignment to appraise a duplex that is in a project converted to condos. Each unit now has a separate tax map and is taxed individually. The units can be purchased separately. The owner purchased both units of one building at the same time and they both appear on the same deed. He and his banker insist that I can do both units on the same report since they were purchased that way. I contend they must be appraised individually and have offered to do one at the usual fee and the second one for a nominal fee to cover my time. Am I right?

Interestingly, there are sales of individual units and both units in the same building. The sales prices of both units purchased together are less per unit than purchased separately which makes sense. I have explained to them a per unit appraisal would have a higher value for each unit but they could not add the two together for a value for the entire building which is what they want. How can I convey this in a report for one unit?
 

TJSum

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Nov 12, 2007
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Certified Residential Appraiser
State
Maryland
Interesting question. In the past I have seen two condo units either side by side, or one on top of the other, combined to make one larger unit. They either make a doorway or stairs between units for full interior access. They have been on the same deed, but they still had two separate legal descriptions, paid two condo fees, etc. It is wise to keep them as two legal separate units, in case the owner ever wishes to convert them back into two separate units. The parking also can be deeded separately, but treated as "one property" on the report.

My main question is if there is interior access between the two units. If so, IMO no problem putting it on one report, just make sure to put both legals, both condo fees, both taxes, etc. Disclose it all, explain in full detail, take interior pictures especially the access between the units, etc. The client needs to know it could be converted back at any time so they can protect themselves against this with the proper legal paperwork.

You are lucky to have similar comps, usually the nightmare is finding comps for this situation. In some markets, where "large" units are a luxury, I have seen the two combined units sell for higher prices than the two smaller units would sell for separately.

P.S. Make sure the condo project allows the conversion, you said there were similar comps, so most likely this project is okay with it.
 

Mike Boyd

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Jan 18, 2002
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Retired Appraiser
State
California
It would be interesting to see how they are insured by the title company: as a single property with one title report or as 2 separate properties. My bet is that they would be insured separately.
 

Fritz Smith

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Oct 11, 2006
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South Carolina
I apologize for not being clear. These units were purchased as rental investments and leased sepatately. They have not been combined into one dwelling.
 

Walter Kirk

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Joined
Jun 24, 2003
Professional Status
Licensed Appraiser
State
New Jersey
If the parcels have different parcel numbers they must be treated independantly even if they were conveyed on a blanket deed. Your comment about single units selling for more than bulk sales indicates that your H&BU analysis must consider this.
 

Kevin A. Spellman

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Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
The investor would require two mortgages to be recorded if the loan is sold on the secondary market. I would do one appraisal for one unit, not two on one report. The problem doing the subject as a two family, you may not possess 100% ownership into the land. The deed may state 50% for each unit. Their request could easily create a non-compliant USPA appraisal report. You would have to make the report subject to abandoning the master deed as a condominium and then re-record the subject as two units into one deed without the description of comment elements.
 

TJSum

Elite Member
Joined
Nov 12, 2007
Professional Status
Certified Residential Appraiser
State
Maryland
I apologize for not being clear. These units were purchased as rental investments and leased sepatately. They have not been combined into one dwelling.

Then I agree with the others, two separate reports.
 

Fritz Smith

Thread Starter
Senior Member
Gold Supporting Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
South Carolina
Thanks everyone. I thought so as well. Now I can tell them 5 out of 5 appraisers think they are wrong.
 
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