• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Added SF,No Permit

Status
Not open for further replies.

Gregt

Thread Starter
Sophomore Member
Joined
Jan 8, 2008
Professional Status
Licensed Appraiser
State
Arizona
I'm appraising an REO in which the carport was converted to a guest quarter/mother in law type setup. Separate kitchen, bath, but not connected to main heating/cooling. And of course, nobody got any permits for the addition. On the comp grid I noted the quarters and made what I thought was the correct adjustment. My client wants a second adjustment made on the grid that has the net effect of giving no market value to the add on. On the REO repair section I included a "cost to cure". My problem is that the add on has market value, regardless of permit status. If I follow my clients directives, I eliminate the market value. Please, advise this struggling rookie on the best and most accurate way to proceed.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
Well, this is probably not a big problem, in the future, i would suggest doing any non permitted additions as follows with the statement something like: There is an addition or enclosed area ( Garage car port ect ) that was completed with no permit, the appraiser gave it no value in the Sales comparison approach but it was done in a workman like fashion and appears to have an overall positive effect on the home. Since it does have some utility value the appraiser did included it in the Cost Approach. Based on workman like condition, if junk just exclude it from the GLA and give no value in the sales comparison approach, also normally at least in CA if there is an enclosure with a kitchen , it needs a permit or dont include it , if you are not sure E-mail me at [email protected] and I will try to walk you thru it .. this is just an opinion lots of appraisers handle this different but I have done hundreds on FHA/Fannie with no problems. just remember also I think the issue may be differnt in different states especially rural areas, I am in the Los Angeles area of Ca were every other home in east la has a unpermitted addition :))) LOL
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
Well, this is probably not a big problem, in the future, i would suggest doing any non permitted additions as follows with the statement something like: There is an addition or enclosed area ( Garage car port ect ) that was completed with no permit, the appraiser gave it no value in the Sales comparison approach but it was done in a workman like fashion and appears to have an overall positive effect on the home. Since it does have some utility value the appraiser did included it in the Cost Approach. Based on workman like condition, if junk just exclude it from the GLA and give no value in the sales comparison approach, also normally at least in CA if there is an enclosure with a kitchen , it needs a permit or dont include it , if you are not sure E-mail me at [email protected] and I will try to walk you thru it .. this is just an opinion lots of appraisers handle this different but I have done hundreds on FHA/Fannie with no problems. just remember also I think the issue may be differnt in different states especially rural areas, I am in the Los Angeles area of Ca were every other home in east la has a unpermitted addition :))) LOL


That is fine Mr Walker .. UNLESS .. your market data shows the addition to have value. One can not simply state it does have value or it doesnt ... let the market tell you if there is value or not.
No underwriter, loan officer, or anyone else should ever tell you not to include something that has value ... IF ... the market says it has value.

Go to the market and measure its value there. It could be positive, it could be negative, or it could be zero .. but until you measure it with adequate sales data ... your opinion is not worth what they are paying for it.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
Well, this is probably not a big problem, in the future, i would suggest doing any non permitted additions as follows with the statement something like: There is an addition or enclosed area ( Garage car port ect ) that was completed with no permit, the appraiser gave it no value in the Sales comparison approach .. ,because afterall appraisers are gods and can ignore anything the market is really doing,... but it was done in a workman like fashion and appears to have an overall positive effect on the home. Since it does have some utility value the appraiser did included it in the Cost Approach. This one is because, again as gods, consistancy between the approaches to value is only required if one pays any attention to USPAP at all! ... Based on workman like condition, if junk just exclude it from the GLA and give no value in the sales comparison approach, because we can use hypothetical conditions without checking to see what the market is doing, or if the hypothetical is really hypothetical! also normally at least in CA if there is an enclosure with a kitchen , it needs a permit or dont include it , this again makes sense as long as you make your report utterly confusing as to if you are using a hypothetical or not, or actually reflecting the market or not. if you are not sure E-mail me at [email protected] and I will try to walk you thru it .. this is just an opinion lots of appraisers handle this different but I have done hundreds on FHA/Fannie with no problems. I always remember a quote from an old hooker who once said, "Shucks Honey! I've done it hundreds of times and nuttin ain't happened yet!" just remember also I think the issue may be differnt in different states especially rural areas, I am in the Los Angeles area of Ca were every other home in east la has a unpermitted addition :))) LOL

Mr. Walker,

Thought I'd add some extra sentences in red font for the entertainment value. Obviously, since every other home in east LA has an unpermitted addition.... the market there says they have no value at all.. .... Except in the Cost Approach that is!

Now I am saying "LOL."

Webbed.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
I'm appraising an REO in which the carport was converted to a guest quarter/mother in law type setup. Separate kitchen, bath, but not connected to main heating/cooling. And of course, nobody got any permits for the addition. On the comp grid I noted the quarters and made what I thought was the correct adjustment. My client wants a second adjustment made on the grid that has the net effect of giving no market value to the add on. On the REO repair section I included a "cost to cure". My problem is that the add on has market value, regardless of permit status. If I follow my clients directives, I eliminate the market value. Please, advise this struggling rookie on the best and most accurate way to proceed.

Mr. Gregt,

A) Who is the appraiser here? Did they hire you for YOUR analysis and opinion as an appraiser? Or as their puppet who should just do as he is told? ( I don't mean you are a puppet. I mean this is nonsense your client is attempting to manipulate your sales comparison grid results by telling you what and how to adjust.)

B) Do they want a SOW using a Hypothetical Condition the accessory dwelling unit (ADU) has no value in that market? Or that the ADU does not exist at all? The first question under an HC may require subtraction of demolition costs.

I assume you proved if this is really a SFR with unpermitted ADU, versus illegally converted SFR to a two unit income property. I also assume you proved with comparable sales the ADU has market value, what that market value is, and supported your adjustment. You are going to have to explain to us on the forum what you meant by "Cost to Cure", because cost to cure what is a big lingering question you left dangling.

Anytime a client begins to tell you what and how you are to adjust something you've got a problem. Tactfully, you're going to have to remind them who signs those certifications.. you ... or them. It is YOUR unbaised opinion of value, NOT THEIRS! .. IF they only wanted their own opinion... why did they bother hiring a real estate appraiser?

Webbed.
 
Last edited:

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
"My problem is that the add on has market value, regardless of permit status."

demonstrated by "gut instinct", wishful thinking of owner? loan originator ? or ......actual comparables?????

if actual comparables............ demonstrate the contributory value - IF the market dictates - NOT an Underwriter.

Market Value "is what it is" because the MARKET says so.

p.s. if C.of O. IS required. $$$$ "subject to"

H&BU "legally permissible" applies.
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
If the client wants to know what the value is without the addition, do it that way.

What's the problem?

This is an REO assignment; it is not for lending consideration. The client wants to make a decision what they can sell the house for. In their decision making process, they don't want that sales price skewed by some addition that was put on without a permit.

Take the assignment the way the client requests and not what the form says. Put a comment in the report about the addition and state that at the specific instructions, no value is assigned to the non-permitted addition.

It is not going to FNMA, Freddie or anyone else except the people within the lender who make the pricing decisions.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
Mr. Carlsen,

I agree with you. If the client wants a HC "The ADU does not exist." then fine! But if it is done the right way explaining the client approved HC..., not some hokus pokus of add a positive adjustment, based on the market, and then subtract it back out again based on some client staff objections.

Webbed.
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
Well not so fast Mr Carlsen .. one can not simply IGNORE something that has value unless they issue the Hypothetical Condition that the improvement doesnt exist and state why the HC has been invoked.
I dont give a tinkers damn who the report is going to it still must be credible and not misleading.
I would state, if market evidence showed the improvement to have value that it did, what that value was, and that I have issued an HC at the request of the client.
My guess is they didnt like the adjustment because it wasnt explained well and yet a big deal was made of it being a non paper permitted conversion.
I personally think hypothetical conditions should be issued with great care and caution and I would request that in writing from my client.
Doing this at the request of the client is no different than adding an additional $50,000 to the value becasue they want it.
The value is what it is ... they can decide to market it or sell it at any darn price they want. Issue the HC with great care and explaination.
I suspect the client doesnt really have a clue here. Then again, maybe the appraiser doesnt either.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
On a deck or a patio without permits, no big deal. On an addition, well, you have no clue as to whether it is built to code and what the problems might be with it.

There was a rear room addition installed nearby without permits and after the new owners moved in severe settlement affected the slab and a side wall. It turned out the slab wasn't poured deep enough and stress cracked the foundation like a cracker. The walls were caving it and it became a mess. Had the previous owners built the house to code, i.e., had they pulled permits, the problem would never have happened. The new owners sued everyone involved, agents, lenders, sellers, appraiser, yada, yada.

When valuing an illegal addition, it is not as easy as it sounds. You have to find a house with a similar addition, you have to know that the addition is equal to yours AND it was added on without a permit, and you have to know the buyer was fully aware of the situation. Once you find that one, you have to remind yourself that one sale does not make a market, and you really need to find one or two more before doing a market analysis.

It is my experience that when the owners disclose that a garage or a carport is finished to living area without permits, the MLS typically states something like "Inlaw suite can be easily converted back to a carport". With a bank taking possession, and with you telling them they have an illegal apartment, their ethical obligation is to disclose the situation to a prospective buyer. I seriously doubt you can find a bank owned sale with an illegally finished carport to an inlaw suite where the bank has disclosed everything to the buyer and the buyer actually paid more for the house because of it. Without having at least one, and preferably two similar sales, you have no proof that the illegal unit adds value.

But that's just my 2 cents.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks