FHA ?

[CCAAMO]

I do know HUD will not loan on an illegal use. But a residential addition to a residential property is not an illegal use

Say what? If its a guest house or a second or third unit that were added or converted without permits and the property is not zoned for those uses it is an illegal addition which is an illegal use.
m2:

 

[CANative]

Say what? If its a guest house or a second or third unit that were added or converted without permits and the property is not zoned for those uses it is an illegal addition which is an illegal use.
m2:

Not necessarily. They could have been built prior to zoning, Variances can be granted. And different reigns of royalty at the planning and building department can interpret things different ways. And sometimes there are details within the code that can turn what appears to be illegal into something that just requires an administrative permit and a nominal fee. etc., etc., etc., etc., etc., etc.

And besides if it's an illegal use, the question of permits is moot.

These are not simple questions and answers and cannot be answered with any reliability on an internet forum.

 

[Darrel Clark]

I know that the topic of market value for illegal improvements usually generates a lot of different opinions. Each appraiser will have access the amount of risk, if any, they are willing to accept. From classes that I have taken with appraisers from various states, I know that in some areas the municipalities or counties don’t really care and in other areas it is of major concern. In some areas, the illegal improvements are forced to be removed or uncovered to the point that the proper inspections can be made. So, you wouldn’t want to appraise something for a lender and then have it removed because it was illegal – that could get rather nasty – I believe it is called “defrauding the lender”. I have been told by a friend who often testifies as an expert witness, that these cases generally get turned over to the FBI.

But, just from a theoretical point of view – one part of the appraisal process is determining highest and best use. Isn’t part of highest and best use about it being legally permissible?

 

[CCAAMO]

Not necessarily. They could have been built prior to zoning, Variances can be granted. And different reigns of royalty at the planning and building department can interpret things different ways. And sometimes there are details within the code that can turn what appears to be illegal into something that just requires an administrative permit and a nominal fee. etc., etc., etc., etc., etc., etc.

OK Mike, I will meet you 1/2 way. If the home was the Flintstones house and built before there were zoning laws, or in a county where banjo's play Deliverance in the background and they do not have or require permits, let alone can spell it, then you have point.

If a variance was granted, there would be a record and that too would then be a legal use, although it may not or not be rebuilt if destroyed.

In areas which have zoning laws, require permits and have records of permits, which is most areas, apparently not all but most, there are not may ways for the royalty to interpret a permit, either it is there or it is not.

 

[CANative]

OK Mike, I will meet you 1/2 way. If the home was the Flintstones house and built before there were zoning laws, or in a county where banjo's play Deliverance in the background and they do not have or require permits, let alone can spell it, then you have point.

It's Greg. And you have described much of the rural areas of Northern California. But if you came up here and started saying stuff like that they'd be fighting words.

I just came back from 4 days in the Inland Empire and between the rooftop to rooftop development, smog, and obnoxious CA newbies, I'm glad to be back in my Flintstone house in Mendocino.

 

[ZZGAMAZZ]

I resemble that remark !

 

[Ross (CO)]

....and what's also unfortunate is that the original poster's client obviously did not ask a series of pertinent and critical questions of their applicant/borrower, about their property, at the time the loan deal was being started ! If only the client had the common sense to seek answers to reasonable questions that would have revealed this garage conversion matter in the beginning.....

The o.p. did say that the "previous owner" had converted the garage. Does that mean the the current owner bought the property WITH the conversion already there ? Has the property already fulfilled a test of marketability by selling WITH such a conversion ? Was this property purchased and mortgaged with a (current) mortgage that did NOT have acknowledgment of the conversion for additional GLA ? What is the Intended Use of the report just recently completed ? Is it a re-fi of another existing mortgage ?....and happens to be going to FHA this time ?

If the quality of workmanship appears adequate and matches the style, materials and appeal of the original structure......and has sold before with the conversion.....then there is value there. The permit, code and local administrative matters could be reconciled between the homeowner, the lender and others in the underwriting and funding process. Did you say ?.......is the converted area a bedroom or a family room ? Whatever, is it adequately heated, have a window and clear access to the main home ? Did that converted area appear to FAIL the test of structure, safety and soundness in your opinion ?

So, you select other comparables that match total living area and room compliment to the best of your ability from the database that you search. You include any possible comp that might also have had any similar addition or conversion. You report that your research does not reveal that a(ny) building permit had been issued nor that any final inspection record acknowledging the conversion could be found from your efforts. You might therefore also be clearly able to show that the county's record of total living area sq.ftg. does NOT match what your calculations show from your visit to the property. Be certain to comment on the last sale/purchase of the property and what was known about the house then.

Give the house your stated opinion of value, revealing the facts and history of the property that your research concludes......and let others wrestle with underwriting and loan decision issues that come along later. You would have done your job accordingly. We are NOT the guarantors that loan deals come to closure. You can still make pertinent quotes from passages in the 4150.2 and leave it to the u/w to reconcile.

What a shame that the client did not ask their applicant a few select and prime questions about any unique or ypical aspects of the home !

 

[CCAAMO]

Greg,
I never said or implied northern Calif. There are a lot of rural areas there but i don't recall any banjo's or home built prior to the the beginning of time. Most of the developed area there, as it is most places do have building permits, zoning laws, master plans etc. There is alway an exception to every rule, but for most of these discussions the home is not 100 years old but built in the 1960's with a garage with is now a second unit and the city has been incorporated since 1920.

Give my regards to the Rubbles and Mr. Flint.

 

[Mike Boyd]

I did disclose the added GLA but I didn't give it any value. I explained that it did not appear that there was a bldg permit so it was not included in the GLA of the home. In addition, Fieldstone Bank is also saying that they will not accept an appraisal from me because I haven't been licensed for 5 years. Now, I'm FHA approved, have been a Licensed Certified Appraiser for the past 2 1/2 years and I've completed over 1,700 appraisals and now, after they send over the letter of approval for the loan, they decide that I don't have enough experience and reject the appraisal?? Is that even legal??

Were you a LICENSED trainee? If so, count your trainess years as well as your fully licensed years.