Urgent-Guest House Question

[Tony Young]

Hey everybody. I have a quick question. Now through a couple of different mentors I have heard of different ways to accommodate this situation. We are appraising a home that has a in-law unit that was permitted back in 1983 per city permit department. Through research we have located 3 comparables that have similar inlaw units. 2 of them have the quest house included in the GLA, one does not. I have also grided 4 other comparable from the immediate competing marketplace that do not have the guest house. Here goes the question do I



Include the guest house is the GLA advancing the total room count, bed/bath, etc. and bracket it by GLA, Bed/bath, Condition Location, and homes with and without guest house
Do I not include the additional GLA from the guest house and derive a lump sum adjustment for properties without guest house through market reaction or income approach.


And if #2 is the right way to do it, do I extract the guest house GLA from the comps that have the guest house that were reported as the two being combined?



Or these approaches could all be wrong, but I am a bright eyed sponge for knowledge looking for guidance from the YODAS!!!



I have seen both ways done and don’t know where the advance peer reviewer would think was a more acceptable approach.
:new_smile-l:

 

[CASEYJONES]

How i have approached them in the past is by treating them seperately. I would assume that you could get the GLA from the local tax assesor for each comparable; thus, i would break them out seperately. Often times agents will try to include the detached area in the overall GLA, but this is not correct. I would use as many comparables with the guest houses as i could; however, if there are not many available and you have similar sales a lump sum adjustment for the dwellings without the guest quarters could be derived. i have often run into the circumstance where i have a larger guest quarters than the only other comparable; however, have not valued the subject's any more due to insufficient data to support an adjustment across the board.

 

[Lee Lansford]

From what you provide I assume that the "guest house" is in fact a separate structure from the main house.

It is not correct to include the GLA of the separate "guest house" in with the GLA of the main house.

 

[Tony Young]

yes it is a seperate unit. So extract the guest units from the other comps that have guest house's included. And do a lum sum adjustment from Income approach?

 

[Lobo Fan]

It depends upon whether it is seperately metered or not. If it is on the same meter then it is an accessory unit. If it has two meters it is a duplex. I have done it both ways. It depends upon the condition of the units. Quite often the in-law quarters are of lesser construction and finish. It the difference is obvious, I will break it out. If the difference is neglible, I will include it, assuming it all under one roof.

So to be included in the base GLA it has to be all on one meter and similar in quality to the main structure.

I am working on one right now, where I broke it out over the fit and finish issue.

It does make the adjustments interesting.

 

[Tony Young]

Thank You Chuck.
Yes it is of similar condition as the main house. Both structures are remodeled, And seperate from eachother.

 

[Lee Lansford]

Tony, you ask about the Income Approach...

Is the Income Approach applicable to the assignment? If you say "yes", WHY is it applicable?

Lee

 

[Tony Young]

I was told by an "adjustment class" teacher that when you can not find good indicators of market reaction, another way to deal with guest houses is to use the income approach of what similar sized rentals are going for and GRM is. Another person suggested using the cost approach. But I lean more towards income derived from similar units.. Please steer me in the correct direction.

 

[Lobo Fan]

If it is a seperate structure, I would lean towards breaking it out. I am not sure what others do, but I will adjust it at a percentage (60-70%) of the cost per square foot of the cost approach. Sometimes I will go as low as 35% if the quality is a lot less. You need to decide if it is an accessory unit or a duplex first. All the other decisions will cascade from that point.

 

[Doug Wegener]

Guest House

Hey everybody. I have a quick question. Now through a couple of different mentors I have heard of different ways to accommodate this situation. We are appraising a home that has a in-law unit that was permitted back in 1983 per city permit department. Through research we have located 3 comparables that have similar inlaw units. 2 of them have the quest house included in the GLA, one does not. I have also grided 4 other comparable from the immediate competing marketplace that do not have the guest house. Here goes the question do I



Include the guest house is the GLA advancing the total room count, bed/bath, etc. and bracket it by GLA, Bed/bath, Condition Location, and homes with and without guest house
Do I not include the additional GLA from the guest house and derive a lump sum adjustment for properties without guest house through market reaction or income approach.


And if #2 is the right way to do it, do I extract the guest house GLA from the comps that have the guest house that were reported as the two being combined?



Or these approaches could all be wrong, but I am a bright eyed sponge for knowledge looking for guidance from the YODAS!!!



I have seen both ways done and don’t know where the advance peer reviewer would think was a more acceptable approach.
:new_smile-l:

Does the guest house have a kitchen and is it legal?

Assuming it is a guest house and not a 2 -unit property, then I would break out the 2 with GLA included in the main living area.

If you have 3 good comps with guest houses why would you want to confuse the matter with including non-guest house comps?

If all the guest houses are similar size, age, and quality then you may have no adjustments to make for the guest house.

Keep it simple.

I never had an underwriter call me and ask for a non- guest house comp on a property with a guest house.
.