Comparable Square footage and public records do not agree

[MHansen]

I have a comparable that I cannot ignore for this appraisal I'm working on. It closed the day before my inspection and is most comparable in condition, age and the nearest comparable to the subject as well. While researching my public records data for this one I noted the square footage was very different. MLS showed 1,752SF and public records showed 1,379 SF. I called the agent and questioned the difference and they stated that the dwelling had an addition that was included in the square footage per the prior appraisal on the property. I asked if the addition was permitted? He said no. I asked if it was heated and cooled? He said no, just attached to the home. He informed me that the appraiser suggested the addition might be grandfathered in cause it happened so long ago and included it in the GLA.

I'm very newly licensed and under the impression that when you come across this situation the square footage would not be included in the physical GLA but valued separately based on how the local market would react to it.

Now, I'm faced with how to enter it in my report. Do I enter it with the square footage that is on public records or as the square footage listed on MLS, based on what information I now know? (As a newbie I'm still terrified of making a stupid mistake.) Either way I'm going to note it in the report regarding the discrepancy. But I'd love to hear someone's opinion with more experience than me of how you would handle this situation.

I threw in a photo of the comparable's addition just for reference. If I'm way off please give it to me straight, I know I'm new.
Thanks!

 

[Terrel L. Shields]

Yes, a problem. I would go ahead and segregate the two parts. I would compare the GLA to the Subject GLA, but from the looks of it, I would say the addition is reasonably comparable in finish and quality and might even adjust much the same as the GLA but on a separate line. But sounds like you might be in the situation of an across the board adjustment.

Do you have a comp with an unpermitted finished area (I am betting no??) So, I would comment that A - the addition has no heat nor air source and question whether the rest of the house AC is up to heating and cooling the additional space. B - the addition is unpermitted and may have regulatory issues as a result. Did the agent feel that the area was fully valued by the buyer?

Finally, in the reconciliation I would give lesser weight to the comp because it isn't permitted nor may not be properly heated and cooled but only a HVAC expert could determine if the existing system is sufficient to do the job properly.

 

[OSU Beavers]

Take it from someone who worked in a County Assessor's Office, so called "Public Records" are a nightmare! The problem is that the auto-reviewer and underwriters take that reported GLA as the gospel. You may use my universal "go pound sand" GLA statement to ward off the inevitable stips:

The Gross Living Area stated in this report may or may not agree with Gross Living Area published by the tax assessor, the MLS, or the builder for the subject or for the comparables. Comparable GLA figures varied from MLS, building permit and tax roll records. The most reliable number for each comparable was selected.

 

[gregb]

What is the GLA of the subject property? You say this is the perfect Comparable to the subject, assuming that the addition is not included as GLA (I am assuming), but otherwise its lines up well with the factors that matter in the market. The addition to the comparable looks like it might be comparable to the original residence in quality of construction and condition. The lack of separate heating and AC is not a factor in most CA markets. The wiggle room is that the addition was not reportedly permitted. So, would a typical buyer in the market discount the addition and not pay the same amount as permitted GLA in your market? Also, does the 373sf addition to the Comparable represent an over improvement that in your market area, most will say its nice but not needed?

 

[MHansen]

Well, its not perfect (it has a pool/owner solar and my subject doesn't), but it certainly is most similar in condition,(similar age, similar updates), similar lot size, and distance (it is the closest) plus it's the most recent sale. I just know they are going to ask why I didn't use it so I want to include it. My subject is 1,799SF, so with the addition, they are of course similar in size as well which is why I initially picked it. But with the adjustments, it's not in line with my other similar, yet older (sold) comparables and drops my value.

I'm curious for future, if I was to be the one that appraised the one with the unpermitted addition would I directly include that in the GLA? I was told when I was training, that I would not include it in the GLA if it was unpermitted + not heated and cooled. Then comment that there was an unpermitted addition and that say it was built in a workmanlike manner (if it actually was) and that it would not affect marketability (if it didn't). I just don't want to shortchange someone in the future if that's incorrect.

What is the GLA of the subject property? You say this is the perfect Comparable to the subject, assuming that the addition is not included as GLA (I am assuming), but otherwise its lines up well with the factors that matter in the market. The addition to the comparable looks like it might be comparable to the original residence in quality of construction and condition. The lack of separate heating and AC is not a factor in most CA markets. The wiggle room is that the addition was not reportedly permitted. So, would a typical buyer in the market discount the addition and not pay the same amount as permitted GLA in your market? Also, does the 373sf addition to the Comparable represent an over improvement that in your market area, most will say its nice but not needed?

 

[MHansen]

Yes, a problem. I would go ahead and segregate the two parts. I would compare the GLA to the Subject GLA, but from the looks of it, I would say the addition is reasonably comparable in finish and quality and might even adjust much the same as the GLA but on a separate line. But sounds like you might be in the situation of an across the board adjustment.

Do you have a comp with an unpermitted finished area (I am betting no??) So, I would comment that A - the addition has no heat nor air source and question whether the rest of the house AC is up to heating and cooling the additional space. B - the addition is unpermitted and may have regulatory issues as a result. Did the agent feel that the area was fully valued by the buyer?

Finally, in the reconciliation I would give lesser weight to the comp because it isn't permitted nor may not be properly heated and cooled but only a HVAC expert could determine if the existing system is sufficient to do the job properly.

Thank you Terrel, no I do not have another comp with an unpermitted addition...I have some unpermitted ADU comparables but that's different ha! Most of the residences in the area have a Living Room and a Family room so now this one has the extra room with the addition I suppose. The agent just seemed to get quiet after I asked if it was permitted and didn't want to discuss much more.

 

[MHansen]

Take it from someone who worked in a County Assessor's Office, so called "Public Records" are a nightmare! The problem is that the auto-reviewer and underwriters take that reported GLA as the gospel. You may use my universal "go pound sand" GLA statement to ward off the inevitable stips:

The Gross Living Area stated in this report may or may not agree with Gross Living Area published by the tax assessor, the MLS, or the builder for the subject or for the comparables. Comparable GLA figures varied from MLS, building permit and tax roll records. The most reliable number for each comparable was selected.

I supervised an office under our local County Assessor for 17 years, not directly in the Assessor's office, but I have seen some idiots at work HA! Thank you for tip! I wish I could just sit and have coffee once a week with a bunch of experienced appraisal guys (and gals). I'd have a field day just picking their brains but I suppose this will have to do.

 

[gregb]

If you were to appraise the Comp in the future, its hypothetical if you would count the unpermitted addition as GLA or not. I like where you are going with considering how and if, but that is not what is on the table. Grid the perfect comp, which becomes less than perfect, because you should put the addition on another line and consider its contributory value. One sale does not make a market, the market data is not perfect, and you are right not to exclude the comp from you report. What we don't know is the intended use of the appraisal, the client, or what your supervisor appraiser is saying, assuming you are a trainee in CA.

 

[MHansen]

I haven't updated my profile. I'm Certified Residential now, as of September last year, and I'm only on my 4th solo appraisal. I just really really want to be good at it, so I over analyze everything. I'm scared I'm going to be the girl in the news getting sued over some stupid mistake.

 

[J Grant]

I have a comparable that I cannot ignore for this appraisal I'm working on. It closed the day before my inspection and is most comparable in condition, age and the nearest comparable to the subject as well. While researching my public records data for this one I noted the square footage was very different. MLS showed 1,752SF and public records showed 1,379 SF. I called the agent and questioned the difference and they stated that the dwelling had an addition that was included in the square footage per the prior appraisal on the property. I asked if the addition was permitted? He said no. I asked if it was heated and cooled? He said no, just attached to the home. He informed me that the appraiser suggested the addition might be grandfathered in cause it happened so long ago and included it in the GLA.

I'm very newly licensed and under the impression that when you come across this situation the square footage would not be included in the physical GLA but valued separately based on how the local market would react to it.

Now, I'm faced with how to enter it in my report. Do I enter it with the square footage that is on public records or as the square footage listed on MLS, based on what information I now know? (As a newbie I'm still terrified of making a stupid mistake.) Either way I'm going to note it in the report regarding the discrepancy. But I'd love to hear someone's opinion with more experience than me of how you would handle this situation.

I threw in a photo of the comparable's addition just for reference. If I'm way off please give it to me straight, I know I'm new.
Thanks!
View attachment 95564

I do residential lender appraisals on a regular basis, so my advice reflects that experience.

Imo, the quality of the construction of the comp and the fact that it is open into the living room, receiving heat or AC from being open to it - I would include the sf as it shows on MLS, and comment in the narrative on the reason for the difference from public record.

You would only need to address permits wrt to having non-permitted comps if the SUBJECT has a non-permitted addition as part of its SF.

If the subject does not have a non-permitted addition, the diffuse is not relevant. though you can, if you want to, state the addition may not have been permitted, but the quality and finish per MLS photos was workmanlike and had tile floors, windows, etc.