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  #1  
Old 06-30-2013, 02:08 AM
normando normando is offline
 
Join Date: May 2009
State: California
Professional Status: Certified Residential Appraiser
Posts: 2,213
Default re: Unpermitted Bathroom

How does Fannie Mae look at unpermitted bathrooms? The market loves to have more bathrooms and it appears functional. I know some lenders don't want me to give any value and they refuse to lend on any unpermitted work.
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  #2  
Old 06-30-2013, 03:27 AM
VolcanoLvr's Avatar
VolcanoLvr VolcanoLvr is offline
 
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Location: Inside the ring of fire
State: Washington
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Default

Your proof for the 'unpermitted' status of the bathroom is???
  #3  
Old 06-30-2013, 04:59 AM
andrew81 andrew81 is offline
 
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State: Illinois
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Default

not the same issue but some guidance

Quote:
Originally Posted by fnma selling guide - may 28th 2013

A one- or two-unit property that includes an
illegal additional unit or accessory apartment
(sometimes referred to as a mother-in-law,
mother-daughter, or granny unit).
Yes, provided that:
The illegal use conforms to the subject
neighborhood and to the market.
The property is appraised based upon its
current use.
The borrower qualifies for the mortgage
without considering any rental income from
the illegal unit.
The appraisal must report that the
improvements represent an illegal use.
The appraisal report must demonstrate
that the improvements are typical for the
market through an analysis of at least three
comparable properties that have the same
illegal use.
The lender ensures that the existence of the
illegal additional unit will not jeopardize
any future hazard insurance claim that might
need to be filed for the property.
  #4  
Old 06-30-2013, 09:01 AM
Randolph Kinney Randolph Kinney is offline
 
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Default

Quote:
Originally Posted by normando View Post
How does Fannie Mae look at unpermitted bathrooms? The market loves to have more bathrooms and it appears functional. I know some lenders don't want me to give any value and they refuse to lend on any unpermitted work.
You have Fannie Mae guidelines and you have lender overlays, their guidelines.

Your task is to show market acceptance and therefore contribution to market value. If you can show that permits are actively enforced, ... therefore a negative impact on the marketability of the property ...
  #5  
Old 06-30-2013, 09:44 AM
nicholz12 nicholz12 is offline
 
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State: Massachusetts
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Default

Quote:
Originally Posted by VolcanoLvr View Post
Your proof for the 'unpermitted' status of the bathroom is???

The building Department of any town or city issues permits.
  #6  
Old 06-30-2013, 09:59 AM
Denis DeSaix Denis DeSaix is offline
 
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Location: Northern California
State: California
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Default

Quote:
Originally Posted by andrew81 View Post
not the same issue but some guidance
You are correct; not the same issue.
But I don't know what guidance one can glean from it to use for the OP's situation?
The GSE excerpt refers to an illegal unit.
The OP's situation refers to a non-permitted bath.

This thread may quickly turn into another:
Does an alteration without permits create an "illegal use" even though the alteration is consistent with the zoning ordinance, but in the specific case, is not permitted?

Normando: I agree with Randolph's advice; the market will dictate if it has value or not.
A client may have a guideline not to value a non-permitted bathroom, but if the assignment is as-is market value, then I consider such a guideline to be contrary to the definition of an as-is market value.
Better, if the client doesn't want to loan on a property that has a non-permitted bath (which they are certainly entitled to do), its guideline should be to have the appraisal completed "subject to permits": that way, it is a lending requirement (and an acceptable assignment condition) for that specific lender, and not an appraiser's arbitrary decision.
Otherwise, as-is means as-is.

Good luck!
  #7  
Old 06-30-2013, 03:15 PM
Punalava Punalava is offline
 
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State: Hawaii
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Default

When I come across unpermitted items that are relatively insignificant to the property's overall size of improvements and market value I state, "The subject's unpermitted improvements have negligible value since most, if not all of their contributory value is offset by the market's reaction to the estimated costs and/or uncertainty of obtaining permits."

If the unpermitted improvements are significant in relation to the property's value, then I try to allocate similar comps which exhibit contributory value and marketability, or complete appraisal subject to permits and a final.
  #8  
Old 06-30-2013, 03:43 PM
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George Hatch George Hatch is offline
 
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Default

Cost to cure is prolly less than $1000. If it comes to that.
  #9  
Old 06-30-2013, 05:04 PM
Terrel L. Shields's Avatar
Terrel L. Shields Terrel L. Shields is offline
 
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Default

Quote:
"The subject's unpermitted improvements have negligible value since most, if not all of their contributory value is offset by the market's reaction to the estimated costs and/or uncertainty of obtaining permits."
I would hate to attempt to quantify that before a state board.
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  #10  
Old 06-30-2013, 08:14 PM
normando normando is offline
 
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Default

This is a sale and there were multiple offers. it appears the market gives the unpermitted bathroom some value. Regardless whether legal or not, market wants it even though overimprovement. Usually, I give it some market value but depending on client, client wants no value or some value given. Knowing which lenders absolutely do no loans on unpermitted work (not just illegal units), I screen my call and ask borrower whether they did any work without permits. If so, they may want to talk with their lender before I go appraise their property. I hate for them to waste their money.
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