I have come across this situation a couple of times - the MLS lists a 4 Unit multi, with rents for 4 Units. Somewhere in the communications, usually a realtor email or verbally, we're informed of a 5th unit. It may conform to code, but the town does not list the property as a 5 Unit.
My question is - how do you handle this in your offer price? Completely discount the 5th unit? Partially discount? If you think its more likely than not the town would approve the 5th unit?
I am currently analyzing a deal where the seller has factored in the 5th unit in his asking price. I don't think its reasonable to pay that if I'm taking the risk of getting legit.
Advice and opinions welcome.
@Hope S. - You will need to talk with a local agent.
In my area we have a lot of "illegal units" so the MLS is supposed to only list the number of legal units. Our local building code allows for 1 additional dwelling unit above and beyond the number listed on the zoning certificate, so long as it is considered "habitable" by local building codes.
So when I do comps for a client, I will comp it against other legal 4 units with a 5th unit.
You are going to need a local expert because under 4 legal units is residential financing and 5 and above is commercial. So your deal could not go through, or you could have trouble selling it, if you do not work with a local expert
No credit for illegal or unregistered units. If some one is listing additional units and pricing accordingly based on rental income then let the buyer beware.
There is zero value in units that are not zoned and the buyer could incur additional costs, loss of income, fines, removal or upgrades to permit.
Complete discount for non permitted units or walk away from the deal.
Thank you both. I think this is why one particular property has been languishing on the market for over a year. I will keep a level head and make an offer at the true value (4 Units).
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