Permit Nay-sayers

[James Micozzi]

Sid... What would you like us to do if say a garage was converted to a family room 20 years and at least 3 owners ago, the work is beautiful and the use is legal but a permit was never applied for?

disclose this fact and move on. if the use is legal (acceptable under the local zoning regulations) but a permit was never applied for or obtained, this is a situation for the title company. Shame on them.

 

[Sid Pachter]

Contact/visit the local municipal building permit office, investiage of a permit was applied for and closed after all inspections were compelted. Most municipalities where permits are required have extensive data bases and should have data dating back 20+ years. Reserach, then you report your findings.... which will detemine how to treat the converted area. None of my clients will not accept converted area or additions without knowning that permits/inspections were in affect. In your example the exterior work may be beautiful but you do not know about what you don't see.

 

[Smokey Bear]

Now, you'd better take those permit plans back to the property and make sure it matches exactly - some folks are known to push the walls out an extra foot or two, or add something after the inspector came out etc. Yup, as an appraiser, you want to be responsible for those permits and making sure they match the work. :-( Whatever happened market reaction to what's there?

 

[CANative]

Contact/visit the local municipal building permit office, investiage of a permit was applied for and closed after all inspections were compelted. Most municipalities where permits are required have extensive data bases and should have data dating back 20+ years. Reserach, then you report your findings.... which will detemine how to treat the converted area. None of my clients will not accept converted area or additions without knowning that permits/inspections were in affect. In your example the exterior work may be beautiful but you do not know about what you don't see.

Legal use, visual observations of apparent good quality workmanship, no permit: How should we "treat" this converted or new area?

 

[The Warrior Monk]

Clients do NOT expect us to consider such things if it's clearly set out in the scope of work.

If it affects value, I wouldn't make the assumption that the appraiser can scope it away. Communication with the client is important.

In fact, why don't we also make it the appraiser's responsbility to dig into the background of the past and present occupants. What if the present owner/tenant was a registered sex offender or had a criminal history? Would that impact the sale or rental of our subject property?

Where does it end?

This is different than zoning and permit issues.

Scope of work. Use it constructively. This is getting way too ridiculous.

Our job is value the property as of the effective date or inspection date (except in the case of Zaio) of the property and we have the right to limit our liability by clearly setting out the extraordinary asssumptions that the improvements are legal. Let the lender order a title opinion/search and a permit history check and a background check on the owners/occupants, etc.

Our job can be summed up quite simply in a market value appraisal: value the property.

All of my reports clearly set out in the SOW what I'm assuming. I did one the other day that I'm 60% the recent updates don't meet code. How many times do you guys have to contact the local authorities to red flag the borrowers? Damned if we do, damned if we don't.

It is very enlightening once one gets into appraising complex residential and commercial properties. Looking a property, slapping some comps on a form, and firing it out the door is no longer sufficient. HBU issues become very important (which includes zoning regs, current use, potential future use, etc.).

Here are some recent examples:

• Commercial property, with improvement under construction, in a residential zone. I checked the use variance, which did not match up with what was actually being built on the property. Further research was required to determine the actual permitted use of the property, which of course affects the income stream and thus the value.
• Improved commercial property whose improved area does not match what is allowed. That is a serious issue, since all improved areas must be reported, due to health department (septic) issues. The town will require the owner to stop using that unapproved area until the proper permits are in place.
• Improved bayfront residential property - The property appears to be underimproved, given the type of homes that exist in the area. However, further research revealed that it was in fact not underimproved, due to flood insurance issues; new construction, or substantial improvement of the existing structure, in this area, if even at all possible, means that structures on the property cannot be insured (through normal means).
• 200+ year old, two-family residence recently subdivided from a larger parcel. Town does not allow two-family residences in this zone, or the creation of nonconforming lots due to subdivision, which means either use is illegal, or other factors are in play. It turns out the owner gave up some property rights in the rest of the subdivision to permit the nonconforming use to continue.

If appraisers want to survive in the current market, it would seem a given to simply do their due diligence as valuation professional, rather than scoping issues away.

 

[Joyce Potts]

Gosh David, for 25 years all I've ever done are cookie cutters.

 

[The Warrior Monk]

Gosh David, for 25 years all I've ever done are cookie cutters.

Then you understand.

FWIW, I've been involved in quite a few situations lately where appraisers are missing important points like these; they "scope it away." While it may or may not be appropriate doesn't matter; appraisals for the opposing side are getting tossed. Good for my business; not so good for those scoping it away.

 

[CURT VAN HOOSER]

I wish all I had were cookie cutters. You're sooooo lucky!

 

[Mike Garrett RAA]

I am concerned that the new generation of appraisers view our job as something other than estimating value. We are not the permit police. We are not home inspectors. We are appraisers.

The acceptability of our Scope of Work lies in two things. The expectations of REGULAR users of appraisals AND what our PEERS WOULD DO IN A SIMILAR ASSIGNMENT. Commercial appraisers are not my peers. What they must and should do is often much different than what a licensed or certified residential appraiser must and should do.

IN MY MARKET, it is not common for residential appraisers to check for building permits for additions, finished basements, or remodeling. If my clients decide they want more I can do it but the fee will be more.

 

[CANative]

Hear, hear Mike.

I don't "scope things away" if by that you mean ignore something by saying it wasn't my job. I've got over 6 years in the same two counties and if my experience says something doesn't have an adverse effect on value or marketability then that is my opinion. My problem comes from butting heads with lender clients with their own internal quirks and policies wanting me to do something that results in value opinions that don't reflect actual market reaction.