I hope someone out there can help me out with this. I was asked to do an appraisal on a two family in Flushing Queens. I didn't realize until I got back to the office that the zoning was M1-1 (Light Manufacturing). I let the client know and they came back to me and now want me to complete the appraisal. I am assuming highest and best use would be light manufacturing. If so how would I address highest and best use and also can I complete the assignment for the client. I appreciate any feedback.
There are two H&BU questions you need to address. But before that, as LOT suggests, you need to research the zoning.
First, confirm that the actual zoning is M1-1. Don't use a zoning map or internet-verification; call/visit the jurisdiction and confirm it.
Next, find out if residential use is a permitted, conditional, or grandfathered use.
In some of my markets, there are grandfathered residential-use properties in light-industrial zoned areas. As long as you are confirming the zoning, you might as well confirm if the residential improvement can be rebuilt as-is if destroyed. Also, find out if the residential improvement can be significantly modified (expanded, upgraded, etc., etc.). This is important to know if you are going to value it as a residential-use property.
OK, assuming that the improvements/use (residential) is permissible....
You definitely have two H&BUs to do (I don't care what the form or others say).
The first question you have to determine is what is the H&BU as-vacant. Since (presumably), as vacant, an industrial use would be permitted and not a residential use, you have to determine if the site, vacant, is worth more than the site, improved. If so, then the value of the property is the value of the site, vacant and ready for development as an industrial property (possibly less the demo costs of the existing improvement). This would simplify your problem (but not the lender's). But, you may need a commercial appraiser to co-sign onto that opinion.
Let's assume that the as-improved value (industrial land with a residential improvement that is allowed) is worth more than the site, vacant and ready for development for an industrial use.
So, H&BU as-improved is "as is" as long as the improvements contribute value to the site.
If you do the cost approach, make sure you value the site at its H&BU as-vacant (industrial); chances are you'll have some functional obsolescence that is unique to the subject due to the different H&BUs (as-vacant vs. as-improved).
Finally, you should ensure that your comparables have the same zoning and the same circumstances regarding their status (grandfathered, same ability to rebuild, expand, etc., etc.).
Once you get all of that, the rest is simple. :laugh:
Good luck!
