I have, fortunately, only had two situations similar to the one presented by the OP.
The first was in 2009. It was a 1950's era, ranch-style house in a small, suburban neighborhood within a largely rural Township that had zoning. I was engaged to complete a SFR, 1004, FHA appraisal for a borrower who was purchasing it. At that time, I was a recently-minted CR and my dad was still accompanying me to my inspections. The house had originally had a two car attached garage, and, the owner/seller at the time had added a third stall garage parallel to the existing two-stall garage. The third stall “appeared” to both myself and my dad to be very near the western property boundary. I got back to the office and immediately pulled up the local zoning code to find out what the side-yard set backs were. I also searched the forum for advice on how to handle it (I may have even started a thread about it~although I doubt it) and consulted a few other appraisers in the area. Once I read the side-yard set-back requirements for the designated zoning area, I knew that it was illegal, and, had not been permitted. Keep in mind, I’m not someone who sets out looking for illegal additions, but, I’m fully aware that when those situations present themselves, the issue of HBU must be considered and warrants additional research because it is fundamental to the valuation process (i.e. HBU is more than a box that gets checked on page 1) and white-washing it as, “not my job,” does no one any good. I called the zoning inspector and had a very lengthy discussion with him regarding the specifics of the property. I felt I had to disclose the dwelling to find out about the legality of the addition, itself. I was less concerned with confidentiality at that point. Anyway, he told me that a permit had, in fact, not been issued, and, that any future uses may be impacted as a result of the illegal presence of the third stall garage. Keep in mind, also, that I try to report what I would like to know as a borrower/client (any user of my services), If someone were doing appraisal work for me. If this poor girl bought that house, and, wanted to add a patio to the rear of the garage, or expand the GLA, she would have likely been rudely introduced to the world of zoning, permits, lawsuits against the former owner, the lender, and me.
If I recall, the original appraisal was done in September. I notified the client and the realtor(s) of the situation and completed the appraisal, “subject-to,” an inspection by the jurisdictional zoning authority to confirm or deny the legality of the addition, and, its future use as a sfd with a 3 car garage. As I write this, it’s all starting to come back now, btw. The appraisal was done for a regional bank that no longer exists. It was ordered by a now taken over AMC, and, they were in the process of being swallowed by Quantrix. This is one of my first and last appraisals for them, if any of you can imagine that. My wife and I were scheduled to leave for Vegas at the beginning of November, 2009, with about 45 people as were getting married out there. I knew that all of this crap would hit the fan then. Well, sure enough, the zoning inspector, I believe a Township Trustee, the realtors, the buyer, and seller all went to the property for the inspection after the appraisal was submitted, and, the inspector called it illegal and wouldn’t issue a retro-active permit. Some time in late October, I got a request from Quantrix, some specific manager but I forget his name, asking me to do a new appraisal because the addition was going to be removed. This was one of my first and last experiences with Quantrix (big boy AMC). The previous AMC, aside from requiring report conversion utilizing Lighthouse, was actually a good AMC based upon my short experience with them. Quantrix tried to screw me on the fee for the new assignment immediately, but, they eventually caved and paid the same fee that I had been paid for the first appraisal. I was already starting to have doubts about them as an AMC client then. Well, I looked at the property again about 1 day before I left for Vegas to get married, and, I told the d-bag at Quantrix that I was going out of town, and, that he’d have it some time after I got back. I think he called my cell phone 3 or 4 times when I was in Vegas (even though I asked him for privacy), and, the following Monday morning, he called me at, like, 7:00 a.m for a status update. Sorry about the AMC anecdote, I try to never miss an opportunity to bash them when I can.
Anyway, long story short, the zoning officer made the former owner take down the garage addition and the girl got her house, although without the third stall garage. Once it was all said and done with, the listing agent called and thanked me for doing what I did and told me that the wife of the former seller wanted her to apologize to me because she apparently said some nasty things about me while it was going on. The realtor told me that the wife had warned her husband to get the permit, but, he just didn’t do it. I didn’t need her to do that, but, it was nice anyway. I never heard how their marriage was working out, btw.
I’ll spare you the details of the second situation, but, it involved a 10 acre estate-type property with a custom-built dwelling, a large barn, an attorney owner/occupant, and a custom-built, 300 sf log cabin that he paid $30,000 to have added just off the rear of his back deck where he and his paralegal worked. He didn’t get a permit and the zoning officer (whom he knew) was ticked. I simply called to confirm the legality of the cabin installation so that I could answer HBU/legality/use questions. In that case, the zoning inspector issued a retro-permit.
Anyway, thought I’d share. I think, “it depends,” most aptly characterizes our individual responses to situations like these, but, hiding behind your own interpretation of what is expected vs. actually doing your job is doing a disservice to your clients. I tend to revert to the, “how would I want this handled if it were me on the client/borrower end,” to guide me through situations like these and it has served me well, so far.
