All Forum Posts by: Brad S.

If you are asking about "legal" sf (square footage), that happens only when the area is constructed or inspected and signed-off by the local jurisdictions. So, if there is a local planning and building department, typically, permits would have to pulled and building inspector/s would inspect the construction, during and/or after, to ensure it meets their standards. If an area was constructed or finished (including a finished basement), without permits, then it is unpermitted sf, and not considered legal sf.

Of course, this assumes that your area is governed by a local building department which requires permits. My understanding is that some areas do not.

Now, per newly adopted measuring standards for appraisals, a finished basement may be permitted as living area, but, it is considered below grade finished living area, and is reported separately from above grade sf. 

Just to be clear, that doesn't mean the below grade (finished basement) has a different market value than above grade. That depends on the specific market. It also doesn't mean that "illegal" or unpermitted areas have any less value, but an appraiser would/should not include those areas in the overall living area calculations.

@Caleb Lee

 Here is my response to your other post on another thread - in case you don't see that one.

************************

I am a local appraiser, amongst other things, and have some insight into this issue. This is a big topic amongst appraisers these days, and is still kind of an unknown black box. How it is handled depends on the appraiser that gets the assignment, not the Lender. The Lender cannot have any influence on choosing the appraiser, so it is a crapshoot.

For similar assignments, I have been able to find some recent sale comps with ADU's. Or, I also look for R1 zoned properties with guest houses, since they can typically be readily converted into an ADU, or currently have a similar utility (use). I try and steer away from duplex or triplex comps, that might have zoning other than R1. There may be some differences with those properties with different zoning, so I prefer to find comps with similar zoning, if possible.

Now, it is not always possible to find other ADU properties or other R1 zoned duplexes. So, i'd say in that case it may be reasonable to comp an SFR + ADU with a duplex, but then we should take into account any potential appeal differences between those properties. Usually, the higher density properties are in different neighborhoods, and may have a different appeal.

Also, SB9 allows 2 dwellings on an sfr zoned property and an ADU (3rd unit). But, my understanding is that some municipalities will not allow all 3 units to be rented if the property is not owner-occupied. Therefore, a triplex on a multi-zoned lot may have different legal rights (all 3 units can be rented regardless of owner occupancy). So, that might cause a different market appeal. This is why I try and stay with similar zoning for my comps.

But, honestly, my guess is that most appraisers will just pick those properties that seem like good comps, irrespective of their zoning. That may be good or bad. Some areas I work in have higher values for sfr's than duplexes, and therefore, the sfr + ADU would be more valuable than a duplex.

So, bottom line is it may be a roll of the dice. To address your last comment - the bill does not allow or disallow us (appraisers) to do anything, for that matter, neither do Lenders or anyone else. it is always up to our discretion to do what we see fit and appropriate, in order to do the assignment.

That said, I did find a couple of comps which give me a general idea of value of adu properties, in your area. Feel free to DM me, if you want to discuss it further.

Hey Caleb,

I am a local appraiser, amongst other things, and have some insight into this issue. This is a big topic amongst appraisers these days, and is still kind of an unknown black box. How it is handled depends on the appraiser that gets the assignment, not the Lender. The Lender cannot have any influence on choosing the appraiser, so it is a crapshoot. 

For similar assignments, I have been able to find some recent sale comps with ADU's. Or, I also look for R1 zoned properties with guest houses, since they can typically be readily converted into an ADU, or currently have a similar utility (use). I try and steer away from duplex or triplex comps, that might have zoning other than R1. There may be some differences with those properties with different zoning, so I prefer to find comps with similar zoning, if possible.

Now, it is not always possible to find other ADU properties or other R1 zoned duplexes. So, i'd say in that case it may be reasonable to comp an SFR + ADU with a duplex, but then we should take into account any potential appeal differences between those properties. Usually, the higher density properties are in different neighborhoods, and may have a different appeal.

Also, SB9 allows 2 dwellings on an sfr zoned property and an ADU (3rd unit). But, my understanding is that some municipalities will not allow all 3 units to be rented if the property is not owner-occupied. Therefore, a triplex on a multi-zoned lot may have different legal rights (all 3 units can be rented regardless of owner occupancy). So, that might cause a different market appeal. This is why I try and stay with similar zoning for my comps.

But, honestly, my guess is that most appraisers will just pick those properties that seem like good comps, irrespective of their zoning. That may be good or bad. Some areas I work in have higher values for sfr's than duplexes, and therefore, the sfr + ADU would be more valuable than a duplex.

So, bottom line is it may be a roll of the dice. To address your last comment - the bill does not allow or disallow us (appraisers) to do anything, for that matter, neither do Lenders or anyone else. it is always up to our discretion to do what we see fit and appropriate, in order to do the assignment.

That said, I did find a couple of comps which give me a general idea of value of adu properties, in your area. Feel free to DM me, if you want to discuss it further.

 Hey Jeff! Been a while! Thanks for the shout out! Hope all is well with you!

...and thanks for the more detailed inquiry here.

@Matt Myre  Thanks for the clarification Matt. Although, I am happy to contribute some of my vast useless knowledge, my concern is with the BP ownership rights. Does that mean I would be unable to post my writings anywhere else, including my website, or otherwise capitalize on utilizing my writings in the future?  I assume BP rights are not that vast, but just would like more clarification. Thank You.

Is there pay involved?

First, I am a little concerned for you to be doing your first deal on a South LA 100+ year old property with foundation damage and who knows what else between the walls.

1) Does your agent have experience with rehabs/construction? My guess is that they have limited experience, since they are suggesting the retrofitting will fix a deteriorating foundation. You need to repair the foundation first. 

2) Have a reputable construction company inspect it and give you an estimate. You preferably want a company with a structural engineer on staff. Here are a couple I have used or got quotes from in the past, including 1 that did some similar foundation work on a duplex I rehabbed in S.LA years ago. Weinstein were the ones I used for our South LA duplex. They seemed the most reasonable at the time. But, check them out yourself.

Weinstein Construction Corp - https://weinsteinconstruction.com

Foundation Works  -  https://www.thefoundationworks.com

3) $30k for a renovations of a 1909 duplex in South LA sounds too low, especially in today's construction environment and if you need to redo plumbing and electrical. But, I don't know the property and what it needs, what your plans are, etc  Get multiple estimates.

4) What are your plans with this property?  Live in 1 unit and rent out the other?  renovate and sell? renovate and rent both units? etc?

and what are your #'s and why do you think this is a good deal? 
I'm guessing the property is the one I found listed for $639k and that you have it under contract below that and then the $12,500 credit? That property is relatively small ~1,300sf, and while the list price is relatively ok, it is definitely not low enough for a rehab/flip deal. A larger duplex almost directly behind this property sold for $655k in May.

So, what are your plans with it and what are your #'s. And I hope you have enough reserves for cost overruns, etc. The condition of the property I think you are talking about, looks pretty good, except for the things you cannot see - inside the walls, foundation, etc. But, I assume your inspection pointed some of those out.

@Sebastian Marroquin

Hey Sebastian, I’d be interested in meeting up. What’s the plan?

 @Michelle James

Ok, a few things here.
I am not sure what your above quote is referring to? Is it referring to the "owner" of the $57k sale or the owner of your Subject property (the one you are trying to purchase)?

In either case, 1 sale does not make a value. This $57k is an outlier and would simply be ignored or you can look further into it, if you like. As an Appraiser, I would first see if it was listed. I assume it wasn't, because it most likely was an off-market, non-arms length sale, which then, does not reflect market value. Or, it could of been sold for land value, due to substandard condition, etc. 

If I was curious about this sale, I would pull the mls listing, look at the comments and the private comments (available to mls members, not available on zillow, etc). I might call the listing agent and ask them the situation - "Why did it sell below similar sales?" Or, if it wasn't in the mls, I would look at the transfer information and see if it was transferred into a trust or was a partial interest sale etc. 

Or, and this is probably what you need to do
IGNORE IT!  IT IS NOT A COMP!

This one sale DOES NOT affect the price of your Subject, at all. 

Hey Nick,

Like Robert, I also grew up in the area and am actually completing a rehab/flip project in Woodland Hills right now. I'm happy to share my experience and knowledge. Send me a DM if you'd like.

Well, A lot of specific info is left out: type of loan (purchase, refi, cashout, no cashout), term (30yr fixed, etc), ltv, location-city, loan amount, etc.

But, a quick run through an online lender spit out 6.5%, $600k loan on a $800k purchase price, investment property, with a lender fee of $497, in Syracuse, NY, or lower rates with higher lender fees.

go to aimloan.com and run your loan scenario, they typically have fairly competitive rates.