Comps with unpermitted additions

[WadeKoutnik]

Do you guys give credit for heated square footage to a comparable that has an un-permitteg additon (for example a finished patio with CH/A added). MLS is saying 2200+/- SF and public records say 1500+/-.

I spoke with the selling agent and he said they just closed in a screened patio and finished it and heated it. "long before they worried about permits".

 

[Jerry Bone Jr]

The permit status is not the issue. Does your subject have a similar addition? Just make sure you're comparing apples to apples.

 

[Mike Kennedy]

select different comp

 

[Richard Carlsen]

Normally, one would not know if changes in a comp were done with or without permits. If I knew about it from first hand experience having inspected the property, I would base my judgment on that inspection. If not, then yes I would use it. If the indication in the listing or the listing photo/virtual tours is that the room is what we commonly call a 3 season room (suitable for use in all but the coldest months) then no, I would not use it but given it credit for that amenity.

If one is to discount all of the non-permitted changes to houses, perhaps as many as 25% of the older houses in our markets would have to have adjustments since it has been a very common practice to cover/enclose front porches, incorporating them into the living room or front parlor for additional living space. This is perfectly market acceptable so the area should be counted as living space regardless of the existence of permits.

*****

Another thought just crossed my mind. Are you going to take the word of the listing broker in this case or are you going to make a call to the building department? Remember that we are to use sources that we consider reliable. Do you really think that the broker knows if a permit was pulled or not and are you willing to make an adjustment based on that? I've known brokers that do not know if the house has a well/septic or if it is hooked to city utilities. I doubt that if it were so important to so as to lop off 250SF or so from the living space, I really would want to make sure that my information was reliable.

 

[WadeKoutnik]

If the addition was permitted and was done long ago, wouldn't iy be recorded in public records as heated living area?

The subject has a golf view and the lender wants an additional comp with a golf view and this is the only one sold within 12 months.

There are basically only about 15 homes with a golf view in the entire city. Much less ones that have sold recently. So basically this is my only choice.

"Another thought just crossed my mind. Are you going to take the word of the listing broker in this case or are you going to make a call to the building department? Remember that we are to use sources that we consider reliable. Do you really think that the broker knows if a permit was pulled or not and are you willing to make an adjustment based on that? I've known brokers that do not know if the house has a well/septic or if it is hooked to city utilities. I doubt that if it were so important to so as to lop off 250SF or so from the living space, I really would want to make sure that my information was reliable."

So basically we cannot trust a single thing in MLS. We all have our opinions about realtors. Some do a good job and some, well not so much. However, unless we go out and measure each comp, we have to rely on someone else and public records has proven to be wrong as well.

 

[PropertyEconomics]

select different comp

Mr Kennedy .. now you are telling us that even if the market recognizes that such addition has value .. its not a good comparble?
Ahhh ... we appraisers that know so much more than the market participants.

It is a market transaction, the market has spoken, my vote is you can use it as a comparable, and should, if it is simplar to your subject and provides an accurate representation of the value of your subject (after all adjustments are considered).

 

[WadeKoutnik]

My only problem with this is that we are relying on the realtors to determine with is heated living area or not. I have done plenty of appraisals for homebuyers who walked after I measured the house and they realized the home was 500 or so less SF. That enclosed patio with a window unit and cement floors doesn't quite count.

Also, how do we know that the appraisal done on a comparable when it was purchased showed a smaller living area? Does the realtor have to adjust the MLS listing even when the home still closes?

Basically, its just a crapshoot I guess.

 

[Richard Carlsen]

If the addition was permitted and was done long ago, wouldn't it be recorded in public records as heated living area?

You have got to be kidding, right?

Public records are, especially up here in the north country, and I'm sure in many other places, a joke.

Example that I've used here before. I bought a little house in 1994 that was built in 1954. 40 years old. 2 bedroom, 1 bath 850 or so sq ft, with a full basement. One day, while at the township offices, I pulled a copy of the assessor "official" records of the house. Guess what. My house was listed as being built on a crawl space. Even a simple walk around would have disclosed typical basement windows. What that means is that in the 40 years that my house was in existence, not once was the property looked at by the assessor.

Rely on official records? I seriously doubt that I would hang my hat on that. Besides, we do not appraise to official records. We appraise to the definition of market value and if the market accepts the space as living space and is not significantly functional, there is no reason not to include it in the GLA with an explanation of what you did.

 

[WadeKoutnik]

Rely on official records? I seriously doubt that I would hang my hat on that. Besides, we do not appraise to official records. We appraise to the definition of market value and if the market accepts the space as living space and is not significantly functional, there is no reason not to include it in the GLA with an explanation of what you did.

Lets say you buy a house listed on MLS for sale at $200,000 and 3,000SF. You get an appraisal done and it comes in at $180,000 and 2,600SF. You negotiate and decide to purchase the home for $180,000. So Mr. Realtor goes and closes the MLS listing as "SOLD". Does she change the 3,000SF to 2,600SF? Most likely they don't.

So Mr. Appraiser comes alone looking for comps and sees a sale for $180,000 at 3,000sf. I wonder how often this happens?

 

[Richard Carlsen]

Lets say you buy a house listed on MLS for sale at $200,000 and 3,000SF. You get an appraisal done and it comes in at $180,000 and 2,600SF. You negotiate and decide to purchase the home for $180,000. So Mr. Realtor goes and closes the MLS listing as "SOLD". Does she change the 3,000SF to 2,600SF? Most likely they don't.

But couldn't it be argued that the buyer bought a 3000SF house?

Look, most buyers do not have a clue as to the sq footage. They only regurgitate what the listing broker puts on the data sheet.

And yes, lacking any evidence to the contrary, I would use the 3000SF from the data sheet in my sales grid. I consider the MLS to be reliable. Granted there are several brokers whose numbers I will not use but by and large, I find the sq footage to be fairly accurate. Interestingly enough, on the last two sales that I have done, I found the sq footage to be understated and not over. Was ist ein Schätzungsexperte zu tun?