Converted Garage

[Tom Woolford]

I've had it in the back of my head that if a garage was converted without a permit, that FHA will not recognize it as living area. I'll be danged if I can find a reference in 4000.1. Have I finally lost my mind, gone senile, or just need new glasses?

 

[Tom Woolford]

To clarify, I don't need a reference, just whether or not I'm right or wrong.

 

[Ms. Janet]

4000.1 Page 499
iii. Additions and Converted Space The Appraiser must treat room additions and garage conversions as part of the GLA of the dwelling, provided that the addition or conversion space: • is accessible from the interior of the main dwelling in a functional manner; • has a permanent and sufficient heat source; and • was built in keeping with the design, appeal, and quality of construction of the main dwelling.
Room additions and garage conversions that do not meet the criteria listed above are to be addressed as a separate line item in the sales grid, not in the GLA. The Appraiser must address the impact of inferior quality garage conversions and room additions on marketability as well as Contributory Value, if any. The Appraiser must analyze and report differences in functional utility when selecting comparable properties of similar total GLA that do not include converted living space. If the Appraiser chooses to include converted living spaces as GLA, the Appraiser must include an explanation detailing the composition of the GLA reported for the comparable sales, functional utility of the subject and comparable properties, and market reaction. Alternatively, the Appraiser may consider and analyze converted living spaces on a separate line within the sales comparison grid including the functional utility line in order to demonstrate market reaction.


Hang on, I am trying to attach the permit part from the FAQ

 

[Tom Woolford]

4000.1 Page 499
iii. Additions and Converted Space The Appraiser must treat room additions and garage conversions as part of the GLA of the dwelling, provided that the addition or conversion space: • is accessible from the interior of the main dwelling in a functional manner; • has a permanent and sufficient heat source; and • was built in keeping with the design, appeal, and quality of construction of the main dwelling.
Room additions and garage conversions that do not meet the criteria listed above are to be addressed as a separate line item in the sales grid, not in the GLA. The Appraiser must address the impact of inferior quality garage conversions and room additions on marketability as well as Contributory Value, if any. The Appraiser must analyze and report differences in functional utility when selecting comparable properties of similar total GLA that do not include converted living space. If the Appraiser chooses to include converted living spaces as GLA, the Appraiser must include an explanation detailing the composition of the GLA reported for the comparable sales, functional utility of the subject and comparable properties, and market reaction. Alternatively, the Appraiser may consider and analyze converted living spaces on a separate line within the sales comparison grid including the functional utility line in order to demonstrate market reaction.


Hang on, I am trying to attach the permit part from the FAQ

Yeah, I got that part but it doesn't address permits. Maybe it was retired with 4000.1 but I could have sworn it was a requirement.

 

[J Grant]

As far as I know, FHA does not state a permit is needed on converted garage, there was a section ( I think) that says if using non permitted areas, to find one or two comps with same kind of non permited area as a contributory value.

An individual lender might have their own permit requirments apart from FHA so check with your client

 

[Ms. Janet]

Ok, sorry. Got on the phone. Here is the permit FAQ

 

[CANative]

FHA is the same as Fannie in regards to permits.

 

[CANative]

Q. Are un-permitted spaces allowed? For example a garage that is turned into a bedroom but no building permit was obtained for the renovation. Is that acceptable?

A. A borrower can convert parts of their home to anything, whether it is their garage to a beauty salon, or converting their garage to another bedroom. But to answer the question, the appraiser would need to determine the Highest and Best Use. For that determination the appraiser would look at the jurisdiction, zoning and legality of that addition. The appraiser would determine if the bedroom in question is legally permissible. If permits are required, and you cannot build on the property without getting a permit, it would not be legally permissible. Other factors could include whether or not the bedroom has a heat source, or if the space is insulated. Does the change to a bedroom from a garage look acceptable to the structural integrity of the property? Is the appeal of the home affected by it positively, or negatively?

The FAQ is wrong and self contradicting.

 

[CANative]

From the same document:

Q. If the appraiser cannot access the attic, would the appraiser call for an inspection of the attic from a qualified entity? If not, why not?

A. They (sic) appraiser absolutely should call for inspection. Anytime the appraiser believes that there is something to be looked at and they can't observe, they should call for an inspection. The inspection does not have to be by an appraiser. It could be by a home inspector or some other qualified entity. Even the underwriter can inspect that if they want.

From the 4000.1

If there is no access or scuttle, the Appraiser must report the lack of accessibility to the area in the appraisal report. There is no requirement to cut open walls, ceilings or floors.

 

[Mike Kennedy]

Ok, sorry. Got on the phone. Here is the permit FAQ

from the link:

Q. Are un-permitted spaces allowed? For example a garage that is turned into a bedroom but no building permit was obtained for the renovation. Is that acceptable?
A. A borrower can convert parts of their home to anything, whether it is their garage to a beauty salon, or converting their garage to another bedroom. But to answer the question, the appraiser would need to determine the Highest and Best Use.

For that determination the appraiser would look at the jurisdiction,
zoning and legality of that addition.
The appraiser would determine if the bedroom in question is legally permissible.

If permits are required, and you cannot build on the property without getting a permit, it would not be legally permissible.

Other factors could include whether or not the bedroom has a heat source, or if the space is insulated. Does the change to a bedroom from a garage look acceptable to the structural integrity of the property? Is the appeal of the home affected by it positively, or negatively?