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Old 03-13-2006, 05:16 PM
josh smith josh smith is offline
Join Date: Dec 2005

Posts: 21
Default Addition

i just got a new order for an appraisal on a property being sold. it has an unpermitted addition of about 300 sqft. with the additional sqft the value is there but without the addition it falls about $50,000 short of the purchase price.

do i include the addition in as sq ft or not? i know i shouldnt but it's bound to get me yelled at if i say the value is not there
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Old 03-13-2006, 05:37 PM
Couch Potato's Avatar
Couch Potato Couch Potato is offline
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Location: Chapel Hill
State: North Carolina
Professional Status: Certified Residential Appraiser
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Much depends on how your market views the addition. How does your local government view such issues? Do they generally ask for it to be removed or gladly change the tax card and charge a fee for the privilege of paying higher taxes? Make sure you know what is correct for your particular market before acting.

As for getting yelled at, if that is a problem for you that would cause you to alter your opinion of value of a property you need to become deaf, grow thicker skin or find another profession. You will get yelled at in this profession and generally need to be able to handle it like a duck's back handles water.
Old 03-13-2006, 06:27 PM
josh smith josh smith is offline
Join Date: Dec 2005

Posts: 21

i dont mind getting yelled at but i dont want to defend my reasoning on why the value isnt there. if i include the unpermitted addition in the gla i will get conditioned and they will ask for permit #'s but i already know there are none. so they will tell me to take out the addition and that will result in different comps and a lower value. we shouldnt have to worry about permits and just appraise what we see
Old 03-13-2006, 06:52 PM
Mike Garrett, RAA's Avatar
Mike Garrett, RAA Mike Garrett, RAA is offline
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Location: Colorado Springs, CO
State: Colorado
Professional Status: Certified Residential Appraiser
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$50,000 for a 300SF addition? Thats $167 a square foot! Not in my market.

I am doing one right now where they added a 450 square foot stick built addition to a HUD manufactured home of 2100SF. The addition is of a higher quality than the main structure and it was done without a permit.

Contributory value of the addition...maybe $10,000. Should I include it in the GLA? I think so BECAUSE the market will recognize it's contribution not the fact it was done without a permit.
A Former AQB Certified USPAP Instructor
Old 03-13-2006, 07:24 PM
David Wimpelberg's Avatar
David Wimpelberg David Wimpelberg is offline
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Location: Hamptons, NY
State: New York
Professional Status: Certified General Appraiser
Posts: 15,797

It depends on the market area. This situation would be a problem here. The title company would note it and then the brakes would be put on the loan until the certificate of occupancy/compliance was issued for the structure. If the structure was not built to code or in a nonconforming location, it may have to be altered or razed.
Old 03-13-2006, 08:06 PM
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Ryan Nyberg Ryan Nyberg is offline
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Location: Washington
State: Washington
Professional Status: Gvmt Agency, FNMA, HUD, VA etc.
Posts: 4,162

Depends on your area. How old is the addition? How old is the house? You could make the report subject to inspections and approval of the addition.
Old 03-14-2006, 07:41 PM
Denis DeSaix Denis DeSaix is offline
Join Date: May 2005
Location: Northern California
State: California
Professional Status: Certified General Appraiser
Posts: 15,044


My advice is to contact your client and ask them to check with the lender to see if they require permits in order to value non-permitted areas.

My general advice:
In appraising an addition, it is the market that determines if there is value for a non-permitted area. For example, in San Francisco, non-permitted additions/conversions are common and typically have full market value. In other areas, the market does not give full (or any) value to non-permitted areas. So, whether an area has market value is market derived.
Having said the above, the lender has the right to require all areas that are given value in an appraisal report be fully compliant and permitted with the local regulatory agencies and zoning.

HUD and Fannie do not require permits for value, but individual lenders may and do; it would be considered a contractual agreement of the assignment (not a Supplemental Standard, since its not a Government Agency or GSE). Again, my advice is to get with your client and have them run it by UW or lender rep.

Good Luck!
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