Are we required to obtain permits?

[23Degrees]

I say $100k. If the market doesn't care about no stinking permits, I'd value it as such, disclose lack of permits, and move on. The lender can decide if they are OK with the non permitted basement.


Maybe they see it as a risk factor apart from value.
It would go in your adverse factors summary.
If anyone did those anymore. :laugh:

And assuming the "legal" and "as is" boxes were checked here we might need to hope that the loan disappears into the ether never to be heard from again. In a buy back situation or other unexpected nightmare the fact that "legal" for the zoning compliance question was checked on an "as is" report could be a good excuse for an E and O treasure hunt. The lender might not care about it now but they will suddenly gain a keen interest with a GSE breathing down their neck. Unless of course one can claim that discovery of the basement apartment or whatever qualifies as not being a reasonable expectation of research done while performing the appraisal. A light fixture yes, a garage conversion or basement apartment no. Statement 1 again. Need to stay under that umbrella, but that probably would not happen for this example.

It's one little box. Think before you check it next time. If you are checking "as is" and "legal" on homes with garage apartments that don't have paperwork here it is a misleading report.

Zoning code is linked to building code here by General Provision.

There are plenty of enforcement links in that data base you linked that refer to garage conversions. I've bumped into quite a few. Ask those people if the city never cares about the issue, regardless of whether you think that is a good excuse to downplay the situation or to not care if the zoning compliance question was answered credibly.

 

[Tim The Enchanter]

Garage conversion, no permit. Cost to sure and return to garage use, under $1,000. In some areas, typical buyer might just convert it back, again w/o permit.
< $1,000 is peanuts to a value of $250k or $350k. BFD.

 

[23Degrees]

A few assumptions there to the BFD. There are some other possibilities as well - Hazard insurance null and void - BFD. Loan went bad and Fannie wants her money back claiming they were misled as to the zoning compliance - BFD. Buyer cites certification 23 and goes after the appraiser who misled them on the zoning compliance of their garage apartment when the city dings them - BFD. How about actually answering that question truthfully on the form? - I know.... BFD.

 

[Lee Lansford]

IF the governing municipality in fact HAS a mandatory building code compliance ordinance:

Mine would also be $100k (as the finished basement existed as of the EDA) based on an Extraordinary Assumption that the site improvements which exist - including the finished basement - represent a Legal Use and subject to municipal compliance confirmation by the owner or the Client. Should Municipal confirmation clearly indicate to the contrary, re-appraisal will be required.

Mike, continuing with my previously described scenario (which you are responding to here), if "re-appraisal" were "required" because there had been no permit for the finish in the basement, and if there be an abundance of market data (closed sales etc.) having the same status as the subject, am I understanding you correctly that you would revise the opinion of MV to $90k?

BTW, I would not revise my opinion of MV.

 

[Mike Kennedy]

Mike, continuing with my previously described scenario (which you are responding to here), if "re-appraisal" were "required" because there had been no permit for the finish in the basement, and if there be an abundance of market data (closed sales etc.) having the same status as the subject, am I understanding you correctly that you would revise the opinion of MV to $90k?

BTW, I would not revise my opinion of MV.

That would depend on the Municipality's subsequent remedy, and attendant time-line, to cure the violation:

a. Municipal inspection of the basement, no changes needed, improvement complies with code requirements, fine levied, paid, C. of O. issued - Appraisal Update as of a new effective date, new comp search, walk-through, etc. - the Market may, or may not indicate a change in the contributory value of the converted garage and a change in the OMV.

b. Municipal inspection of the basement, brother-in-law's non-licensed electric, and/or other "improvements" are determined to be non-compliant and potentially hazardous. Additional work necessary to bring basement into code compliance. Municipality cites a specific time period max for re-inspection. No Appraisal Update. Upon client request to perform an Appraisal Update - see a. above

c. Municipal inspection of the basement determined resulted in a demand for removal of the illegal "finish". (though unlikely - it is possible). If this occurs, re-appraisal of the subject with an unfinished basement as of a new effective date would be required.

BTW - Your turn (see posts 114 & 116) your appraisal approach to the illegal improvement?

Post 134 "BTW, I would not revise my opinion of MV."

Should we assume your OMV of $100k is "as-is"??

 

[CANative]

Have you ever done any appraisal work or do you just teach theoretical appraisal?

 

[hastalavista]

So, why might permits vs. non-permits matter for an as-is appraisal?

From a recent assignment I did: subject had a permitted bonus room that could function as an in-law (no kitchen, but a bath), comps were a mix of permitted and unpermitted finished areas:
From one market participant who was interviewed on finished bonus rooms, unpermitted and permitted in-laws:
Finished bonus room maybe $20-25k.
Permitted in-laws, $50k to $75k, unpermitted, about half that value.

Does anyone disagree that it might make a difference in the as-is value of a property (in the market I reference) if the subject's bonus/in-law unit was "permitted" or "not permitted"?
Would an appraiser, given this market data (and, assume this isn't the only market data, but all the market data points to a value difference based on permits) choose not to determine if the subject's amenity was permitted or not permitted, or would the appraiser just make an assumption that it was one-way or another without at least trying to verify the status?

And, assume that verification was as simple as looking it up-on line... if that's all an appraiser had to do, should the appraiser do that much?

Because if the answer is "yes, the appraisal should at least take a look on-line", then this argument isn't about verifying permits, its about the process of verifying permits (or, the still one outstanding argument about additional liability when verifying permits. I have an email into my E&O carrier asking them if they've ever heard of a case where an appraiser has been sued for verifying permits. The initial reaction was "no", but they said they'd circulate my email among the claims department to see if any of those folks have heard of such a case).

 

[Lee Lansford]

No doubt about it, the appraiser's opinion must be in keeping with the market.

 

[Lee Lansford]

...

[/B]Should we assume your OMV of $100k is "as-is"??

Given everything in my example, yes.

 

[Mike Kennedy]

Given everything in my example, yes.

Thank you. Based on which Definition of Highest and Best Use?

Another example in Illinois:

Village of Carol Stream IL
Chapter 13, Article 6

SECTION 108 (IFGC) VIOLATIONS
108.4 Violation penalties. Persons who shall violate a provision of this code or shall fail to comply with any of the requirements thereof or who shall erect, install, alter or repair mechanical work in violation of the approved construction documents or directive of the code official, or of a permit or certificate issued under the provisions of this code, shall be guilty of a (SPECIFY OFFENSE) misdemeanor, punishable by a fine of not less than 75.00 dollars or more than (AMOUNT) 750.00 dollars or by imprisonment not exceeding (NUMBER OF DAYS) 180 days, or both such fine and imprisonment. Each day that a violation continues after due notice has been served shall be deemed a separate offence.


SECTION R105 PERMITS
R105.2 Work exempt from permit. Permits shall not be required for the following. Exemption from the permit requirements of this code shall not be deemed to grant authorization for any work to be done in any manner in violation of the provisions of this code or any other laws or ordinances of this jurisdiction.
Building:
1. One-story detached accessory structures, provided the floor area does not exceed 200 50 square feet (18.58m2 16.58 4.65m2).
2. Fences not over 6 feet (1829mm) high. Reference the Carol Stream Village Code, Chapter 6, Article 12, (Fence Code) for fence permit requirements.
3. Retaining walls that are not over 4 feet (1219mm) in height measured from the bottom of the footing to the top of the wall, unless supporting a surcharge. Contact the Carol Stream Engineering Department for permit requirements.
4. Water tanks supported directly upon grade if the capacity does not exceed 5,000 gallons (18 927L) and the ratio of height to diameter or width does not exceed 2 to 1.
5. Side walks and driveways not more than 30 inches (762mm) above adjacent grade and not over any basement or story below.
6. Painting, papering, tiling, carpeting, cabinets, counter tops and similar finish work.
7. Prefabricated swimming pools that are less than 24 inches (610mm) deep.
8. Swings and other playground equipment accessory to a one- and two-family dwelling and Park Districts.
9. Window awnings supported by an exterior wall which do not project more than 54 inches (1372 mm) from the exterior wall and do not require additional support.
Electrical:
Repairs and maintenance: A permit shall not be required for minor repair work, including the replacement of lamps or the connection of approved portable electrical equipment to approved permanently installed receptacles.
Gas:
1. Portable heating, cooking and clothes drying appliances.
2. Replacement of any minor part that does not alter approval of equipment or make such equipment unsafe.
3. Portable fuel cell appliances that are not connected to a fixed piping system and are not interconnected to a power grid.
Mechanical:
1. Portable heating appliance.
2. Portable ventilation appliances.
3. Portable cooling unit.
4. Steam, hot or chilled water piping within any heating or cooling equipment regulated by this code.
5. Replacement of any minor part that does not alter approval of equipment or make such equipment unsafe.
6. Portable evaporative cooler.
7. Self-contained refrigeration systems containing 10 pounds (4.54 kg) or less of refrigerant or that are actuated by motors of 1 horsepower (746 W) or less.
8. Portable fuel cell appliances that are not connected to a fixed piping system and are not interconnected to a power grid.
Plumbing:
The stopping of leaks in drains, water, soil, waste and vent pipe; provided, however, that if any concealed trap, drainpipe, water, soil, waste or vent pipe becomes defective and it becomes necessary to remove and replace the same with new material, such work shall be considered as new work and a permit shall be obtained and inspection made as provided in this code.
The clearing of stoppages or the repairing of leaks in pipes, valves or fixtures, and the removal and reinstallation of water closets, provided such repairs do not involve or require the replacement or rearrangement of valves, pipes or fixtures.


R105.3.2 Time limitation of application. An application for a permit for any proposed work shall be deemed to have been abandoned 180 days after the date of filing, unless such application or a permit shall have been issued; except that the building official is authorized to grant one or more extensions of time for additional periods not exceeding 180 90 days each. The extension shall be requested in writing and justifiable cause demonstrated.
R105.5 Expiration. Every permit issued shall become invalid unless the work authorized by such permit is commenced within 180 days after its issuance, or if the work authorized by such permit is suspended or abandoned for a period of 180 days after the time the work is commenced. The building official is authorized to grant, in writing, one or more extensions of time, for a periods not more than 180 days each. The extension shall be requested in writing and justifiable cause demonstrated.
R105.6 Suspension or revocation. The building official is authorized to suspend or revoke a permit issued under the provisions of this code wherever the permit is issued in error or on the basis of incorrect, inaccurate or incomplete information, or in violation of any ordinance or regulation or any of the provisions of this code, or for failure to call for and pass the inspections called for by the permit.


Once a building permit has been suspended or revoked, it shall only be reinstated with the approval of the building official and with the payment of fees as set forth in Chapter 6, Article 13, of the Village Code. No further inspections shall be performed by the Village until the permit is reinstated.


R105.9 Change of use. The change of use of a structure or portion thereof shall not be permitted without first obtaining permission of the building and zoning officials and securing the appropriate permits.

ECTION R109 INSPECTIONS R109.1 Types of inspections. For on-site construction, from time to time the building official, upon notification from the permit holder or his agent, shall make or cause to be made any necessary inspections and shall either approve that portion of the construction as completed or shall notify the permit holder or his or her agent wherein the same fails to comply with this code. The permit holder, owner, contractor or his or her agent shall make requests to the Building Division at least one working day (24 hours) before inspections are desired. If an inspection fails, a re-inspection charge of seventy-five ($75.00) dollars shall be paid prior to any subsequent inspections. Inspections need not be requested in the order listed.
Required Inspections
Footings: After forms are placed or trenches are excavated and before the placing of concrete. Inspection shall be made after poles or piers are set or trenches or basement areas are excavated and any required forms erected and any required reinforcing steel is in place and prior to the placing of concrete.
Foundations: When constructed of reinforced concrete, before concrete is placed. The foundation inspection shall include excavations for thickened slabs intended for the support of bearing walls, partitions, structural supports, or equipment and special requirements for wood foundations.
Backfill: When damp-proofing and drain tile is in place and before backfilling.
Underground Electric, Heating, Plumbing, Insulation: Prior to fill being placed and the area being completed for concrete placement.
Slabs & Floors: After underground mechanical and insulation have been inspected and after appropriate fill material, vapor barrier and/or wire mesh is installed, and before the placing of concrete.
Before Placing Lumber (new construction only): Submit a spot survey for approval, showing (1) elevation to top of foundation; (2) location of foundation with ties to front, side, and rear lot lines; (3) accurate dimensions of foundation.
Electric Service: After meter base, distribution panel and service wire is installed.
Rough Electric: Before covering or concealment, before fixtures or appliances are set or installed, and prior to the framing inspection.
Rough Heating: Before covering or concealment. Rough inspection mechanical, and gas systems shall be made prior to covering or concealment, before fixtures or appliances are set or installed, and prior to the framing inspection.
Rough Plumbing: Before covering or concealment. Rough inspection of plumbing, systems shall be made prior to covering or concealment, before fixtures or appliances are set or installed, and prior to the framing inspection.
Framing: Before covering, concealment or any insulation is installed inspection of framing and masonry construction shall be made after the roof, masonry, all framing, fire stopping, draft stopping and bracing are in place and after the plumbing, mechanical and electrical rough inspections are approved.
Insulation: In walls and ceiling, after rough inspections and before drywall is applied.
Final for Certificate of Occupancy: Consists of three inspections:
1. Building Division
2. Public Works Department
3. Engineering Services Department

http://www.amlegal.com/nxt/gateway.dll/Illinois/carol/carolstreamillinoiscodeofordinances?f=templates$fn=default.htm$3.0$vid=amlegal:carolstream_il