Wants me to switch to 2-4 family form

[Neil Melby]

Vacancy rate is climbing, at about 6-7% locally due to much recent construction of multi unit properties in the area.

Good idea to seek Fannie advice-any suggested contact numbers? I took a class from one of their chief appraisers several years ago, but no longer have his number.

 

[Jim Onderisin]

I don't want to assume anything about your assignment or your client. I'd be discussing this assignment with my client's chief appraiser (or highest level appraiser). It sounds like, if the property had only one basement unit, you'd be able to appraise it as a single-family residence with an auxiliary unit. Unfortunately, you have two auxiliary units. The obvious solution is to find comparables with similar basement or attic units. Comparison with typical three-unit buildings would not be appropriate.

 

[Mike Kennedy]

Either the H&BU is SFR or it's not. Misrepresenting H&BU simply because the customer demands it - absent requisite market data which fully demonstrates H&BU as a Multi is a violation of USPAP Ethics, Competency, Conduct, SOW Rules and SR1&2.

If your opinion was fully supported in the report - customer request to revise is permissible. Refer him/her to the report. Customer DEMAND to revise is Coercion.

 

[Neil Melby]

Spoke with a seasoned appraiser in this market. She quizzed me about any rental history on the area above grade, this area is occupied by the homeowner, and has been for some time. No rental history is available for this area, making it more difficult to appraise as a 3 family property without a contributory rent for this (the majority) area of the home.

 

[PropertyEconomics]

Can you not simply appraise the subject as a single family residence and adjust for the difference between an unfinished basement and the value of the two units you have which are rented? Compare the contributory value of an unfinished basement with the value of the income stream and adjust, making sure you dont double dip on the land.
Discuss this with the underwriter and see what they say.

 

[Neil Melby]

Sounds very logical to me, will present that to the client.

Thanks much!

 

[Lee Lansford]

Either the H&BU is SFR or it's not. Misrepresenting H&BU simply because the customer demands it - absent requisite market data which fully demonstrates H&BU as a Multi is a violation of USPAP Ethics, Competency, Conduct, SOW Rules and SR1&2.

If your opinion was fully supported in the report - customer request to revise is permissible. Refer him/her to the report. Customer DEMAND to revise is Coercion.

Following Mike's words, what more needs to be said?

 

[PropertyEconomics]

Either the H&BU is SFR or it's not. Misrepresenting H&BU simply because the customer demands it - absent requisite market data which fully demonstrates H&BU as a Multi is a violation of USPAP Ethics, Competency, Conduct, SOW Rules and SR1&2.

If your opinion was fully supported in the report - customer request to revise is permissible. Refer him/her to the report. Customer DEMAND to revise is Coercion.

The problem is, it appears the appraiser only opined the rental unts had no value and thus did not include them in the analysis. This would be contrary to that which existed as of the date of the assignment. The appraiser did not mention any hypothetical conditions nor did they mention addressing the income in any way. I dont think the "value" was fully supported in the report and thus the need for further discussion. No highest and best use was fully analyzied as to comparision of the value of the rental units vs the contributory value of a basement.
I believe the request was reasonable, however, it may not be the best way to appraise the subject and its the appraisers job to reasonably reflect the value of the subject based upon what exists and the data available to him. If it is decided that the true highest and best use is for SFR then it should be supported with the analysis within the report, however, the probability of continued rental of the basement units cannot be ignored.

 

[Neil Melby]

The lower level finishing was given value in the appraisal, markedly less so than the above grade finishing as indicated by the market in this area and by the condition of the finished basement space, based upon a comparison to other properties with basement finishing, the market gives little value to finished basements in 102 year old properties like the subject, as this basement, similar to other basements of this age, are somewhat damp, with typical settling cracks. The appraisal did inform the lender that the basement apartments were leased on a 30 day oral lease. The lender has full knowledge of what is contained in the property from the appraisal, they are just stating that they now, after ordering and receiving an appraisal on a 1004 form, want the property appraised using a 2-4 family form. My analysis, as it has always been, is that this property will sell best as a single family home. If the client wants to ensure that the highest and best use is followed, maybe they should require that the tiny kitchens in the basement be removed.

 

[Mountain Man]

Stay with your Highest & Best Use analysis... that is how it must be appraised. They won't like it, because the UW will not accept it, but it is what it is.