Basement Apartments

[Marko11]

I am performing an FHA refi on a 2 family home. The basement is rented as an apartment, kitchen, bath. Town hall states it is a legal 2 family dwelling. It appears to be an illegal apartment.
I think I should stop at this point. Unhappy owners send in complaints to the board. They are not going to remove the kitchen and cap all plumbing. Any thoughts?

 

[glenn walker]

I am performing an FHA refi on a 2 family home. The basement is rented as an apartment, kitchen, bath. Town hall states it is a legal 2 family dwelling. It appears to be an illegal apartment.
I think I should stop at this point. Unhappy owners send in complaints to the board. They are not going to remove the kitchen and cap all plumbing. Any thoughts?

No I would finish it but don't call it a "illegal apartment "it's called a Un-Permitted Unit if its not allowed by your City-County Etc. I say this because illegal means someone is committing a crime and sometimes you may find a City-County that will allow it.

If the Owner wants the loan and if the Underwriter requires them to Cap Off and remove the range and oven they will most likley do it.

We all know after you do a 1004-D and drive off they will just reinstall it anyway. I tell folks a Air Fryer and Microwave is best to install in these situations . Anyway finish it and collect your fee you earned it and you may be surprised as many say they won't do this or that but in the end they do.

 

[Dublin ohio]

I am performing an FHA refi on a 2 family home. The basement is rented as an apartment, kitchen, bath. Town hall states it is a legal 2 family dwelling. It appears to be an illegal apartment.
I think I should stop at this point. Unhappy owners send in complaints to the board. They are not going to remove the kitchen and cap all plumbing. Any thoughts?

What does zoning say. Also since it is FHA. Can the basement pass safety and health requirements. Starting with required egress.

 

[Terrel L. Shields]

I am performing an FHA refi on a 2 family home. The basement is rented as an apartment, kitchen, bath. Town hall states it is a legal 2 family dwelling. It appears to be an illegal apartment.
I think I should stop at this point. Unhappy owners send in complaints to the board. They are not going to remove the kitchen and cap all plumbing. Any thoughts?

Smart decision - You'll be fighting this one a long time and regardless still have a potential complaint to deal with. For the kind of fees we get, appraisers should never hesitate to back off from these assignments. I've turned down two assignments this past few weeks. I am not big on falling on my own sword.

 

[Fernando]

I am performing an FHA refi on a 2 family home. The basement is rented as an apartment, kitchen, bath. Town hall states it is a legal 2 family dwelling. It appears to be an illegal apartment.
I think I should stop at this point. Unhappy owners send in complaints to the board. They are not going to remove the kitchen and cap all plumbing. Any thoughts?

Is it or is it not an illegal apartment. You need to know the status first.
Also are you saying there's two family dwelling and an ADU?

 

[sputnam]

You are the appraiser. Your job is to do research, form an opininon of value, and report that opinion to your Client. You are not code enforcement. You are not the lending police. Presuming that your assignment is to develop an opinion of the current, as is market value of the subject property then you describe what you observe and you research and analyze market reaction to the property. It's reasonable and professional to contact your Client, explain the situation as you know it, and let them make the decision whether to proceed or not. If you now aren't sure that you are competent to complete the assignment, or just don't want to because it's going to be complicated, then withdraw.

 

[J Grant]

I am performing an FHA refi on a 2 family home. The basement is rented as an apartment, kitchen, bath. Town hall states it is a legal 2 family dwelling. It appears to be an illegal apartment.
I think I should stop at this point. Unhappy owners send in complaints to the board. They are not going to remove the kitchen and cap all plumbing. Any thoughts?

Why are you calling it a 2-family home"? Because the basement is rented? Many single-family dwellings are built in zoning that allows up to two units or allows occupancy of up to 2 families. Does the basement apartment have windows? What makes it "illegal?"

if you make it subject to them removing the kitchen - (usually, it is just removing the stove ), how can you predict they will not do it ? All we can do is call for subject to X, whether the owner chooses to comply or not is up to them.

 

[Tom D]

confusing, is it a legal 2 family unit with an additional basement apartment. illegal units gives the fire insurance co an excuse not to pay for fire damages.
if the basement unit is vacant then like above, usually removing the stove is sufficient. now if there is a tenant in that unit, that is a problem.
without the stove you count it as a finished basement, or make it part of the 1st level unit, if there is an interior stair to it. you describe it, it's a lending & FHA decision.

 

[J Grant]

confusing, is it a legal 2 family unit with an additional basement apartment. illegal units gives the fire insurance co an excuse not to pay for fire damages.
if the basement unit is vacant then like above, usually removing the stove is sufficient. now if there is a tenant in that unit, that is a problem.
without the stove you count it as a finished basement, or make it part of the 1st level unit, if there is an interior stair to it. you describe it, it's a lending & FHA decision.

Your post is excellent, however, a tenant in there does not change anything about the property itself. Disclose in the report that the basement is rented to a tenant and let the client decide if that is a problem or not for their lending program.