2nd illegal kitchen

[LI-Appr]

I'd follow the SOW Rule and contact my client. The first thing I would propose to my client would be that, for a fee, I type up an "Inspection Findings" report with interior photos, describing what I found and what the J.A. has to say about second kitchens added in that zoning without permits. In the past, this strategy would typically result in my getting a fee for the inspection and report, then the appraisal services canceled. For me that was always perfect.

Baring the above, I would then recommend I appraise the property "Subject To" the property owner providing evidence of proper permits and final inspections by the J.A. with a certificate of occupancy that included the second kitchen. Using a EA that the owner can provide all of the same to the client. I then appraise the entire improvement as legal as based on the EA the owner can provide all the stuff.

Baring both above, I then inform the client if they want an "As-Is" that it just became a complex real estate appraisal requiring extensive research, much larger fee, and considerably extended turn time. Payment in advance, of course. Plus they better wake up to the fact that the hazard insurance may now be invalidated.

By the time I am done with the above, I rarely have any problems left I can't handle..

Only ducks in Oregon can do that. They quack to a different drummer.

 

[CANative]

Knowing the local law is important.


Correct. As is ascertaining what a local governing municipality's law permits, requires, and prohibits, citing the Municipal Source, and recommending client-direct contact to further confirm info provided by the Municipality if the client has concern in that regard. H&BU "as-improved" must be a legal use, as of the EDA, which must be - in the context of the OP - ascertained, considered, and reported as either "Legal, LNC, or Illegal" as of the Effective Date of Appraisal.

A) The appraiser can only surmise that the use is illegal.
B) The counter staff can only provide basic, off-hand opinions
C) It's only "illegal" when the authority has made an evaluation and determines it is an illegal use and this doesn't happen until the last and highest authority signs the death certificate.
D) GSEs will lend on illegal uses under some conditions.

 

[Couch Potato]

Right, but that is as far as it goes. You don't want to get into how to "fix" an illegal situation. What exists is easy to see, but what to do about a zoning issue is well beyond an appraiser's job in a typical assignment. The client should choose how to proceed based on the information. The appraiser should do it that way if they can, or withdraw from the assignment if they can't.

 

[Webbed Feet]

I think you are being overly dramatic on the whole thing. I don't know that there are many appraisers out there that don't know that.

And furthermore, to say the appraiser is going to give or take value is valid. The appraiser does give or takes away value (by adjusting comps) on the appraisal. Obviously, the adjustment the appraiser gives is based upon market reaction.

If the adjustment is market extracted, it is the market that is deciding the value. The appraiser reflects the market through the developing of the appraiser's opinions. And, if you followed the reviewing section of the forum, you might alter your opinion to knowing what you know instead of not knowing what you do not know. But, there is at least the aspect of you knowing that.

 

[Webbed Feet]

Only ducks in Oregon can do that. They quack to a different drummer.

Indeed we do...

 

[Mike Kennedy]

Right, but that is as far as it goes. You don't want to get into how to "fix" an illegal situation. What exists is easy to see, but what to do about a zoning issue is well beyond an appraiser's job in a typical assignment. The client should choose how to proceed based on the information. The appraiser should do it that way if they can, or withdraw from the assignment if they can't.

"beyond an Appraisers' job in a typical assignment"

FHA Example:
4150.2 1/06 D- 50 Field Protocol

Zoning Compliance​

• Determine whether the current use is in compliance with the zoning ordinances. Mark the box indicating whether the use is Legal, Legal Non-Conforming (Grandfathered Use), No Zoning, or Illegal Use.​

• If the existing property does not comply with all of the current zoning regulations (use, lot size, improvement size, off street parking, etc.) but is accepted by the local zoning authority, enter "Legal Non-Conforming" and provide a brief explanation.​

• If the use is not legal, the property is not eligible for FHA mortgage insurance.
______

FANNIE/FREDDIE example:

B4-1.4-06, Appraisal Report Review: Subject Property Zoning (04/01/2009)
Introduction
This topic contains information on Appraisal Report Review: Subject Property Zoning.
• Subject Property Zoning
• Permissible Use of Land
• Highest and Best Use​

Subject Property Zoning
Lenders must ensure that the specific zoning class has been reported in the appraisal, along with a general statement as to what the zoning permits.​

The appraisal must include a statement that the subject property presents a legal, confirming; legal, non-conforming (grandfathered) use; or an illegal use under the zoning regulations; or whether there is no local zoning.

Permissible Use of Land
Fannie Mae does not purchase or securitize mortgage loans on properties if the improvements do not constitute a legally permissible use of the land.​

Certain exceptions to this policy are made provided the property is appraised and underwritten in accordance with the special requirements imposed as a condition to agreeing to make the exception:

Property Type Loan Eligible for Purchase or Securitization by Fannie Mae?​

A property that is subject to certain land use regulations, such as coastal tideland or wetland laws that create setback lines or other provisions that prevent the reconstruction or maintenance of the property improvements if
they are damaged or destroyed.
No.​

A property that represents a legal, but nonconforming, use of the land and the appraisal analysis reflects any adverse effect that the non-conforming use has on the value and marketability of the property.
Yes, if the mortgage is secured by a one- to four-unit property or a unit in a PUD project.​

A property where the improvements from a project that represents a legal, but nonconforming, use of the land only can be rebuilt to current density in the event of partial or full destruction.
Yes, Fannie Mae will purchase or securitize a condo unit mortgage or co-op share loan, provided the mortgage file includes either a copy of the applicable zoning regulations or a letter from the local zoning authority that authorizes reconstruction to current density.​

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.​

Part B, Origination Through Closing
Subpart 4, Underwriting Property
Chapter 1, Appraisal Guidelines, Appraisal Report Assessment
April 1, 2009
Printed copies may not be the most current version. For the most current version, go to the online version at
http://www.efanniemae.com/sf/guides/ssg/. 465 & 456​

 

[Webbed Feet]

To reach "D," then "B" has to be treated as expert consultation.

A) The appraiser can only surmise that the use is illegal.
B) The counter staff can only provide basic, off-hand opinions
C) It's only "illegal" when the authority has made an evaluation and determines it is an illegal use and this doesn't happen until the last and highest authority signs the death certificate.
D) GSEs will lend on illegal uses under some conditions.

In a sense, I agree with you. To do my job, I have to view it a bit differently.

• 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.

If my assignment is to reflect GSE standards, and most of them regarding mortgage work have to, a determination must be made. It's not optional. Not unless somehow we see a credible result can be obtained using EA's and HCs. But we have to get very careful about those in these cases. You make good points in your A, B, C, and D. However, to obtain any practical results for most clients, your C and D are in conflict with your A and B. Because your C and D would, in all such cases, cause them to be forced into a written authorized determination by the J.A. in order to proceed with a determnation of a SOW. Must all these cases suffer a delay of that kind? I don't think so.

The reason I don't think so is, even though I strongly recommend questioning "counter-staff" if what they say doesn't make sense against the code (Hence, make them get the code out and read it with you as they explain), that the counter-staff should be taken to represent the J.A. "expert" consulted by the appraiser for the basis of the appraiser's opinions regarding the situation. So at that point one names the counter-staff, day and time consulted, copies the code into one's report, then combines that with one's "as an expert appraiser" inspection findings to arrive at an opinion to use for consulting the client on the situation. The really smart appraiser also uses their own handwritten diary notes (dated of course!) of the J.A. "expert" consultation as work file backup. Then, as well, sometimes the ol' "I need that in writing" should be asked for. This later one should always be used anytime one's red lights and warning bells are all going off. Because years later, having that in one's work file may be needed for a Teflon coating of one's hide..

:new_smile-l:

 

[CANative]

Here's a snip from a report I did a few months ago.

Zoning description, compliance and highest and best use summary:

Located in the Public Facilities (PF) district. This district is intended to create and preserve those properties which are properly used for or are proposed to be used for public purposes or for specified public utility purposes. Single Family Residential use requires a minor use permit. Counter staff at the Planning and Building Department in Ukiah told the appraiser that a minor use permit had not been applied for and that the subject's improvements are likely an illegal use until a minor use permit is approved. On the other hand, the staff at the building inspection office at County Planning and Building stated that all permits for construction, foundation and other requirements had been approved and the current use is legal. These two determinations by county officials appear to contradict each other and the matter is beyond the expertise of the appraiser. The extraordinary assumption is made that the determination of the current use (single family residence) as being in compliance with all permitting processes and requirements would prevail and no signficant issues exist. Should this assumption prove to be false the appraiser would have to modifiy the opinions and conclusions summarized in this report.

The PF district has no mimimum parcel size, set backs, or minimum front, side and rear yards. Permitted uses are numerous but of these uses a single family residential use will return more on sale than other uses. Highest and best use is as improved.

 

[Mike Kennedy]

http://www.cityofukiah.com/pdf/planning/ConstDevWhatYouNeedToKnow.pdf


PF Zone - Article 15, 9170.8
http://www.sterlingcodifiers.com/CA/Ukiah/index.htm

 

[Webbed Feet]

CB4 demanded if a Fannie 03/05 form used.

Zoning description, compliance and highest and best use summary:

Located in the Public Facilities (PF) district. This district is intended to create and preserve those properties which are properly used for or are proposed to be used for public purposes or for specified public utility purposes. Single Family Residential use requires a minor use permit. Counter staff at the Planning and Building Department in Ukiah told the appraiser that a minor use permit had not been applied for and that the subject's improvements are likely an illegal use until a minor use permit is approved. On the other hand, the staff at the building inspection office at County Planning and Building stated that all permits for construction, foundation and other requirements had been approved and the current use is legal. These two determinations by county officials appear to contradict each other and the matter is beyond the expertise of the appraiser. The extraordinary assumption is made that the determination of the current use (single family residence) as being in compliance with all permitting processes and requirements would prevail and no signficant issues exist. Should this assumption prove to be false the appraiser would have to modifiy the opinions and conclusions summarized in this report.

The PF district has no mimimum parcel size, set backs, or minimum front, side and rear yards. Permitted uses are numerous but of these uses a single family residential use will return more on sale than other uses. Highest and best use is as improved.

And if reported on a Fannie 03/05 mortgage reporting appraisal form, IF you used CB4 and required an "inspection" of the J.A. to clear the matter up.... it sounds great to me! However, if using those forms for reporting and CB4 was not used, that would violate the prohibition against modification of the SOW. As long as everyone understands that, great example of a solution.

That said, I would have confronted both staff members of both departments with their own contradiction and asked them to sit down, join hands while singing Kumbaya, and get their crap together... IF they refused, I'd do what you did, after taking names and numbers of course! As well as renegociating the SOW with the client, with 03/05 forms if demanded, taken into consideration.