Converted Garage = obsolete space?

[mom2g]

Question from North Carolina: Is there a balance somewhere between our considering our finished garage heated living space (i.e. adding to our home's value), and the appraiser considering it a converted garage of obsolete space, not usable as a garage, (i.e. reducing our home's value)? Each of the homes used for comps had similar style and square footage to the main part of our home, but none of the comps had a converted garage. While I understand that right now there may not be homes with converted garages that have sold recently, there are in fact many homes in our neighborhood which have converted their garages. It is in fact something that is popular in our neighborhood because it gives a family the extra needed square footage, whether as a bonus/family room, a bedroom, or as in our case an office. It shouldn't be ignored or downgraded just because others haven't recently sold. And it's definitely not obsolete space, and it's definitely a positive selling point in our specific neighborhood....many others have done it, and we have folks stopping and asking us about "how to" quite often.

Our two car attached 29x20 garage (less 9x8 laundry room at top of stairs) is now our office as follows:

--In lieu of the one garage door we have two sets of french doors with a door's width of siding matching the home in between (sheetrock on the inside). It's pretty and does not look garage-y from the outside.

--walls & ceilings sheetrocked & painted (yellowy-tan, with the back wall sponge-rolled yellow-y & burnt orange to blend with the brick)...leaving the brick foundation exposed (we liked it that way).

--Carpeted. except for the few stairs leading up into the house. We have carpet for it, but never got around to installing it. Instead we put decorative non-slip guards on the stairs.

--Heated & cooled via booster off of the downstairs system of our home, in addition to a permanently installed to the ceiling electric heater.

--Built-in storage above the garage door. We kept the garage door in place for several reasons: a) store it in place, b) to put down as extra security (but then the contractor miscalculated & we can't put it down w/o scratching the wall), and c) in case we and/or a future buyer wanted to convert it back to a garage.

From browsing around the forum, I learned the term "converted garage," and I'm guessing on the following:

--The fact that the entry from the office to the home is via the laundry room is a drawback?

--The garage door & storage above are a drawback? Not to us, of course; an as a matter of fact those who stop in to see love it (because we all need more storage space!!).

--Something about it not being comparable to the rest of the home?

Please help!! Our refinance is hinging this issue. We expected some more value, and instead we're slammed with not even garage value but less. We've even told them that if we need to then we'll take the french doors/wall out & put the garage door down, and the appraiser can come back out and count it as a garage!!

Much thanks!
mom2g

 

[Restrain]

Normally, if the floor is not brought up to grade, and access is through the utility room, it has a lesser utility, in that it does not have the typical function of the rest of the home. That being said, the appraisal should have included at least one sale of a home with an enclosed garage to prove the obsolescence and effect of loss of parking, vs the additional living area.

Beyond that, I would contact a local appraiser for an opinion for your specific property.

 

[Lobo Fan]

This is a tough one. Garage conversions and additions must pass a series of criteria before being counted in the GLA (gross living area). Is it of a similar quality to the main house? Do you step down? Are the walls insulated? Are the floor coverings equal? Is it permanently heated and cooled? Most tract home mechanical systems are sized to barely handle the original load, let alone another 400 square feet.

Finally, was it permitted and inspected? If you can answer yes to all these questions, then it comes down to market acceptance. Would a typical buyer expect to get a garage or a bonus room? That comes down to the research performed by the appraiser.

The worst case scenario is that you get zero for the space, plus a cost-to0cure to restore it back to a garage. The best case is that you would get full credit as GLA for the space. The real answer is probably somewhere in between.

Your appraiser may be referring to functional obsolesence which is appraiser lingo for a floor plan problem. A good example is having to go through a bedroom to get to the kitchen. Your appraiser has apparently determined that the garage is a problem of some sort.

Most lenders will require at least one or two of the comps to have a converted garage to demonstrate market acceptance. If there are few if any resales og homes with converted garages that would demonstrate the market resistance noted by your appraiser.

I would suggest finding a Realtor buddy that can help you look for comps that your appraiser may have overlooked. Keep in mind that lender restrictions are getting fairly onerous as far as comp selection goes. Try to stay within a mile, and closed in the last 90 days and be fairly close on the square footage.

Good luck.

 

[Jungle Boy]

Mom

I don't know your area, as I'm from Florida.
However, in most areas down here, a garage conversion would not take value away from the house. In some areas, it could even enhance marketability. But even with better marketability, it's difficult to adjust the comps up for this, as many times market data is lacking to support an adjustment.

I've treated garage conversions differently, depending on the neighborhood.
I have never felt that it has brought the value of the property down though, even if it was done without a permit (see paragraph below the next one).

Basically, you're losing something (garage space) to gain something else (living area). Unless the appraiser has market data showing that the value would be less, he's treating your situation unfairly.

But, did you pull a permit for the work? If not (and if your municipality requires a permit for such work), then the appraiser is just covering his behind, and has the law on his side. Even if typical market reaction would be, "hey, this is great", the appraiser has to consider that he cannot put his signature behind it, in case it comes back to bite his behind. Personally, I have verbiage in the report to cover myself in these situations, and therefore I don't worry about it too much.

Sorry, I'm extremely tired while typing this, and it jumps around a bit. But hopefully this his helped.

 

[ZZGAMAZZ]

Every jurisdiction is different so you'll need advice from a local appraisal.

In my opinion the worst case scenario for an appraiser is a property that "isn't what it is supposed to be" especially because of the implications of conversions being made without legal building permits because of the potential health & safety hazard created when a modification is made without public approval--which is a bugaboo but one that is designed to ensure safe living conditions.

It's also possible that because you don't have a functional garage your property no longer complies with local zoning ordinances; and because the re-configuration was done recently (rather than prior to the current General Plan requirements) you have inadvertently created what in appraisal nomenclature becomes "illegal" compliance, as opposed to "legal non-conforming" if the conversion was made prior to the current Plan, where the standards might have been less restrictive.

The appraisal philosphy that the "market reaction" to the garage is more important than the legal status of the building permits because the appraiser isn't the "code police" is an entirely different school of thought that I can't address; however you must remember that the additional benefit of the enhanced living area could be countered with the loss in value from not having a garage when most of the comps do.

Also remember that the County Assessor or the real estate agents or the mortgage broker or the loan officer or anybody else might not be concerned with these issues, but the appraiser must because his or her responsibilit is to determine whether the end-line under, or the entity that extends the loan to, should or shouldn't do so; and the issues that can be inherent in a conversion might present a liability significant enough that collaterization of the loan isn't feasible.

(just my take on things from my relatively limited experience.)

 

[Mountain Man]

The problem with a converted garage is there are good quality additions, and poor quality. For a poor conversion, you'd look at the front of the house and say... that used to be a garage. Then step inside to see carpet on the slab grade, entrance through the kitchen or utility, and a HVAC grill. All it would take to re-convert into a garage is removing carpet, removing a framed door, and re-installing garage doors. In those cases, I deduct for the cost to cure... to convert back to a garage.

In a proper conversion/addition it looks like a part of the house... IE: floor is same elevation, access is by means other than through the kitchen or utility, HVAC and insulation is added, and it doesn't scream "I was a garage".
However, even in the best remodeling cases, the houses are often an over improvement for the area and do not increase value dollar for dollar. Cost does not necessarily equal value.

Without physically inspecting it, and knowing your market, it's hard to give a decisive opinion over the net.

 

[Sally Glassberg]

If there are many homes in your neighborhood with garage conversion then it is considered to be typical for the market, therefore it will not effect the marketability of your home. But if your house is the only one, then it is a negative and will take away from your value.

 

[Dennis J. Black ASA IFAS]

The fact that you discribed the technique to paint the garage tells me you watch too many cable shows about real estate.

If the majority of properties in your neighborhood are in a certain size range and have a garage, you may now have an overimprovement in sqaure fooatge (too big for the neighborhood) and lack an amenity (a garage) that most in your neighborhood want.

 

[Sid Pachter]

Lobo Fan makes some good points, including the concern of the need for permits. Does your municipality require building permits for garage conversions? If so did you pull a permit and were all the necessary inspections completed and the permit finally closed? If so then the appraiser has to analyze the market to mearure the reaction to converted garages vs. homes having a functioning garage. If permits are required then the appriaser should disclose if permits were used for conversion of the comps selected as well. Also the level of the conversion of the comps may be supeior, similar or inferior to yours. The local appraiser should have the experience to correctly assess your situation and analyze current makert conditions. Good luck.