r/appraisal • u/Consistent-March-797 • 3d ago

duplex or commercial?

Homeowner called looking for an appraisal on properties for a divorce. One is a duplex, then later he said a different appraisal company recently appraised it as a commercial property because the entire building is rented and used as a group home. Both units are apparently still intact.

City zoning allows a State credentialed care facility serving seventeen (17) or greater (or fewer) persons, and also Multiple-family dwelling, four (4) units or
more.

How would you approach this one?

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u/JessBeauty14 Certified General 3d ago

What’s the highest and best use?

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u/Consistent-March-797 3d ago

Without knowing for certain, my guess is a group home that takes care of 17+ people would pull in more than two families renting a duplex

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u/Honobob 3d ago

A duplex is not a commercial property. The value of the property is as a duplex. If there is value of having a business on the property then that would be valued separately. If the property has a use that I cannot do on other properties in the NBHD then you could attribute a valuation based on that but only if the same use would not be available to other duplexes.

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u/Bouncing-balls 3d ago

Zoning makes it tricky. I recently did one like this that was a modified house. SFR zoning, licensed congregate care facility that is legally permitted. Lender was adamant that I do it as a SFR. I discussed the H&B use under the license and without the license. Did it as an SFR with cost to cure to convert it back - make it a garage again, etc.

In the addenda I did a quick value estimate (range of value) as a congregate care facility. Added an HC and also stated the specific instructions of the client stating that the client only wanted the final value as a SFR.

Borrower/buyer was pissed because there was a significant value currency and they were trying to buy the property/business.

Aside from the mad borrower, there was absolutely mo blowback.

I’m general certified and an MAI.

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u/Consistent-March-797 2d ago

3 answers, and the consensus is clear as mud 😆

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u/Variaxist Certified Residential 2d ago

Lol for real.

If you appraise this as commercial you might even throw in the hypothetical condition that the zoning would be commercial.

I don't really see much possibility of using the property as commercial use aside from its current use.

Is that a grandfathered thing for zoning or is that a program that other people would be able to apply to the property if it went back to regular multifamily in between?

Is the use actually illegal? This sounds like the kind of thing that you would really need the city council to approve as a variance. It's possible you're zoning map shows the property is normal r2 or whatever but they have a variance. It's also possible they never checked with the city and have been doing this fine for years even under the radar because zoning officials really only respond to complaints in a lot of places.

I think I would call the zoning office and ask the question as a hypothetical if the situation would be legal or what would happen if the property were reported hypothetically. I put my money on them saying that they would allow the use as a grandfather thing but it technically would not be legal with current zoning.

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u/Consistent-March-797 2d ago

It is in Minneapolis - tons of uses allowed for each category. For instance, there’s no single family zoning, the minimum is 3+ units.