Zoning Violation

[Terrel L. Shields]

Mike, you ignore part of HBU where a likely change in zoning impacts HBU. Further, "as is" the lack of enforcement is a de facto zoning change we must consider.

 

[Meandering]

I have been asked to appraise a property originally identified as a single family residence. Upon inspection the improvement has been modified to accomodate two separate living quarters. Two electric meters are installed and separate entrances established. I contacted city building and zoning to which they advise the property is in violation. Upon notify the client, the client wishes me to proceed with the report. What is your advice?

Did you check with the zoning office for a certificate of occupancy for the 2nd unit?
Did you check if the second unit was grandfathered?
Did you check if the zoning office issued an exception certificate for the second unit?

Too many gun jumpers without sufficient information.

;.

 

[Mike Kennedy]

Mike, you ignore part of HBU where a likely change in zoning impacts HBU. Further, "as is" the lack of enforcement is a de facto zoning change we must consider.

OP only posted:
Post 1 "he improvement has been modified to accomodate two separate living quarters. Two electric meters are installed and separate entrances established. I contacted city building and zoning to which they advise the property is in violation."

OP did not provide additional info from B&Z as to whether or not the illegal conversion could be legalized either A as a 2FR (assuming the zone permits both single and two fam uses) or B mandatory reconversion back to SFR. Missing from the OP was any info from B&Z re curing the "violation".

Lastly, my post was verbatim from the Dictionary - I personally ignored nothing. Thanks.

 

[Tom D]

it's good for you to ask this question. if you are asking, than walk away from it. think of all the mistakes you can make, from reading the above brilliant posts. prepare your speech now for the state board, and do you think you can adequately explain that you did it correctly by de USPAP book, and your certifications. some appraisals are not worth the future risk, and there may be many hidden bear traps for you to get caught in. once your foot is in one, you can't talk your way out of it.

 

[Terrel L. Shields]

my post was verbatim from the Dictionary - I personally ignored nothing. Thanks

also verbatim from the AofRE

"Frequently the appraiser must consider whether there is a reasonable probability that the zoning could be changed...."

 

[hastalavista]

Think HBU. If it is not legally permissible, the HBU is a SFR no matter the configuration or number of meters. Practically speaking, no reputable lender would fund an illegal use. So if this is for a refinance/purchase with a standard lender, the request does not make sense. I would appraise as a SFR with necessary functional / cost to cure adjustments to make property functional as a SFR.

(my bold)

I don't disagree with you (on the bolded part) because if the requirement is to provide an opinion of market value "as is", that analysis will value the property at its H&BU and make whatever appropriate deductions are necessary for the illegal use. So, while a lender may not fund a loan based on the value of a property as-if the illegal use were legal, a lender might and can fund a loan of a property that has a current illegal use if that value is based on market value.

Further, another reason for a lender to request such an appraisal is to document why the loan is not being made. The appraisal will need to disclose that the current use is "illegal" and value it as-is. The lender then, in turn, has a reason to tell the borrower why, as-is, it won't make the loan or to suggest that if the borrower wants to return the property to a legal use, it will then consider the loan.

These kinds of situations are complex. In most cases, for a basic residential mortgage assignment, the "illegal use" will stop the process (and, my practice is to contact my client when I run into this situation to get instructions of how they want to handle it). Nonetheless, there are some legitimate reasons for a lender to request the appraisal to be completed, as-is, fully disclosing the illegal use and analyzing how that illegal use impacts the market value of the property.

I would appraise as a SFR with necessary functional / cost to cure adjustments to make property functional as a SFR

This would seem to me to be the correct process to value the property, market value, as-is. Implied in the analysis of the functional adjustment is whatever additional EI is necessary to add to the C2C to bring the property into compliance at its H&BU.

 

[Howard Klahr]

do you think you can adequately explain that you did it correctly by de USPAP book, and your certifications.

Yes ...

have been asked to appraise a property originally identified as a single family residence. Upon inspection the improvement has been modified to accomodate two separate living quarters. Two electric meters are installed and separate entrances established. I contacted city building and zoning to which they advise the property is in violation. Upon notify the client, the client wishes me to proceed with the report. What is your advice?

Rather than guessing I will inquire directly, what is the intended use of the report? As Denis has already suggested, there are reasons that an appraisal of the property "as is" is necessary. Not all appraisals are performed to obtain a loan and there are even circumstances where a loan could be made on this property.

To everyone suggesting all the reasons why a lender can't loan on this property, STOP playing underwriter. You don't know what it is that you don't know.

But to the OP, do you really understand the intended use of the report?

 

[OSU Beavers]

Electric meters are a B to move. Our old house originally had an unfinished basement. When the prior owner finished it, they just added a second electric meter next to the first one and a second panel downstairs. I asked the utility company years ago if they could combine the meters and they said it would cost over $1500. Just because it has two meters does not mean it is multi-family.

 

[The Warrior Monk]

Electric meters are a B to move. Our old house originally had an unfinished basement. When the prior owner finished it, they just added a second electric meter next to the first one and a second panel downstairs. I asked the utility company years ago if they could combine the meters and they said it would cost over $1500. Just because it has two meters does not mean it is multi-family.

Funny you mention this...the electric panel issue was one of the first things I thought of when reading the intial post. Given that there are two multiple panels, and apparently the current use is an illegal use, the electric work may have been done with permits. That may be a potential fire hazard. If there is plumbing work that was done it may have also been done without a permit.

Others have pretty much covered the issues. The first thing I do with such a property (for lending) is get on the phone with the client, discuss all the issues, and determine how to (or not to) proceed.

 

[CANative]

Sometimes there are dual meters but only one is measuring the usage for billing purposes. The other meter might just be sub-meter to measure the portion used by the second unit. The property owner or tenant would have to measure the difference between the primary meter and the secondary meter to determine the second unit's usage. That's not a great situation for an independent rental unit. More like an accessory dwelling unit.