Lender says give no vale to illegal accessory unit

[Deanie]

Lender says give no value to illegal accessory unit

I am appraising a single-family home with an illegal accessory unit. The listing agent described it as a "detached 4-season porch" but it is a 1000 sf structure with a kitchen,bath,bedroom and living room. The main house is 1100 sf. The unit is an illegal use (verified by the city) and cannot be rebuilt as is. I called the client and I have been advised to give no value to the accessory unit. This is an FHA assignment. My question is can I value this property as though it does not have this accessory unit as the client has instructed me? I have never ran into this before. Thank you for any and all help on this.

 

[CANative]

Do illegal improvements contribute any value to the property in that area?

 

[hastalavista]

I am appraiser a single-family home with an illegal accessory unit. The listing agent described it as a "detached 4-season porch" but it is a 1000 sf structure with a kitchen,bath,bedroom and living room. The main house is 1100 sf. The unit is an illegal use (verified by the city) and cannot be rebuilt as is. I called the client and I have been advised to give no value to the accessory unit. This is an FHA assignment. My question is can I value this property as though it does not have this accessory unit as the client has instructed me? I have never ran into this before. Thank you for any and all help on this.

(my bold)

The second unit creates an illegal use (are you sure), or is the 2nd unit a non-permitted structure?
I suggest you look at Appendix D (4150.2), page D-19 under "Zoning Compliance".


But, the short answer to your question is this: The instruction to "just not give it value" is incorrect and I wouldn't follow it.

 

[Deanie]

The building is permitted. They actually did get a building permit but it was for an office and storage. I can not find any comparables. Would I value the structure as it was described in the building permit? I can do that. There are many properties here with pole barns, extra garages etc.

 

[hastalavista]

The building is permitted. They actually did get a building permit but it was for an office and storage. I can not find any comparables. Would I value the structure as it was described in the building permit? I can do that. There are many properties here with pole barns, extra garages etc.

OK, I don't want to over-complicate the issue, but let's back-up a couple of steps.

The building is permitted. Can this permitted building (which I assume is the detached summer porch... I didn't know a porch could be detached, but hey, I'm from California ) be rebuilt if damaged or destroyed? That isn't quite what I understood in the original report.

 

[J Grant]

Variations of this question have been posted in numerous past threads...you might want to search back , one was fairly recent.

Short answer, ( because, sorry, but it's repetitive, been addressed numerous times) short answer is that the market determines value, a lender can't dictate not to "give" value. And btw, FHA guidelines in their handbook state that if non permitted additions are acceptable per market, they can be valued as whatever market returns. If the present use is illegal (renting it out), is not the question, the question is whether r or not the structure itself is "illegal" per zoning, and apparently it is legal, (and permitted per your post). If the construction is inferior to main dwelling /non permitted, I dont' include these in living area but if market is returning value then that I put that on grid on a separate line. Imo, comparing it to find contributory value of detached garages or pole barns or workshops etc is a reasonable way to handle it.

 

[Lee Lansford]

The building is permitted. They actually did get a building permit but it was for an office and storage. I can not find any comparables. Would I value the structure as it was described in the building permit? I can do that. There are many properties here with pole barns, extra garages etc.

You are appraising for Market Value.

As to the physical components, you are appraising what exists...you can't ignore the accessory unit at the request of the lender.

Lenders ask for a whole lot of things...every once in a while, what they ask of the appraiser is actually appropriate ...but not this time.

 

[Mike Kennedy]

"FHA APPRAISAL FAQ 08/13/2012

Two Unit Properties - Q In Hawaii and Florida it is quite common to have two-unit properties where there are two single family (unattached) homes on one property? We have been told that HUD denies this type of property even though they have a high value. FHA does accept two unit properties comprised of two detached or unattached dwellings on one property provided it is a single real estate entity having a legal use.
[FONT=&quot]

Can you please provide a definition of Accessory Dwelling Unit? [/FONT][FONT=&quot]An accessory dwelling unit (ADU) is defined as a habitable living unit added to, created within, or detached from a primary single-family dwelling and contained on one lot.

ADU’s are commonly understood to be a separate additional living unit, including kitchen, sleeping, and bathroom facilities.

ADU’s are subordinate in size, location, and appearance to the primary home and may or may not have separate means of ingress or egress.

An attached unit contained within a single-family home, also known as a "mother-in-law apartment," or a “garage apartment” that may or may not be attached to the primary residence are the most common types of accessory dwelling unit.

An accessory dwelling unit sometimes involves the renovation of a garage, basement, or a small addition to a primary residence.

The determination of whether or not an ADU is a second dwelling unit is to be made by the appraiser and indicated in the site analysis section of the report where zoning, highest and best use, and legal use are addressed.

The fact that an ADU is rented or generates income should not categorically result in a determination that the property contains two dwelling units." [/FONT]

 

[CANative]

Why are you posting FHA related quotes?

 

[PropertyEconomics]

An appraiser .. DOES NOT GIVE VALUE .. tell your client its an unacceptable assignment condition .. it may well lead to a misleading appraisal.