Converted Garages in SoCal

[23Degrees]

I am posing this from the viewpoint of liability for appraisal practices in Southern California. Would there be any difference in potential liability between the two following reporting options:

Scenario - Garage has been converted to living area without permits. Just to be clear, in both examples the garage is not being appraised as living area and the unpermitted conversion has been fully disclosed and documented within the report.

Reporting option 1 - Appraise "as is" with estimated cost to cure to restore vehicle access to the garage area.

Reporting option 2 - Appraise "subject to" via CB3 - hypothetical condition is that the converted garage has been restored to accommodate vehicle access.

Let's assume worst case scenario - fire in garage utilized as living area has resulted in deaths. Is the appraiser who used reporting option 1 more vulnerable than the appraiser who utilized reporting option 2.

 

[Randolph Kinney]

I am posing this from the viewpoint of liability for appraisal practices in Southern California. Would there be any difference in potential liability between the two following reporting options:

Scenario - Garage has been converted to living area without permits. Just to be clear, in both examples the garage is not being appraised as living area and the unpermitted conversion has been fully disclosed and documented within the report.

Reporting option 1 - Appraise "as is" with estimated cost to cure to restore vehicle access to the garage area.

Reporting option 2 - Appraise "subject to" via CB3 - hypothetical condition is that the converted garage has been restored to accommodate vehicle access.

Let's assume worst case scenario - fire in garage utilized as living area has resulted in deaths. Is the appraiser who used reporting option 1 more vulnerable than the appraiser who utilized reporting option 2.

Depends on what zoning calls for. If a garage or onsite parking is mandatory, it won't meet zoning. If that is the case, option 2.

If the lack of any onsite parking passes zoning, the fact that the garage is used for something other than a garage calls for option 1 with comparable properties with garage conversions to show marketability and market value.

 

[nstanbru]

I am posing this from the viewpoint of liability for appraisal practices in Southern California. Would there be any difference in potential liability between the two following reporting options:

Scenario - Garage has been converted to living area without permits. Just to be clear, in both examples the garage is not being appraised as living area and the unpermitted conversion has been fully disclosed and documented within the report.

Reporting option 1 - Appraise "as is" with estimated cost to cure to restore vehicle access to the garage area.

Reporting option 2 - Appraise "subject to" via CB3 - hypothetical condition is that the converted garage has been restored to accommodate vehicle access.

Let's assume worst case scenario - fire in garage utilized as living area has resulted in deaths. Is the appraiser who used reporting option 1 more vulnerable than the appraiser who utilized reporting option 2.

According to your scenario, full disclosure has been made in the report. Also, I am assuming that, although maybe not called for, but that a recommendation was made for inspections by qualified people (electrician, plumber, etc.) to ascertain if there are safety hazards. Therefore, the user of the report is aware of the situation. Both of your scenarios only apply to restoring vehicle access, not any other possible issues. So your worst case scenario wasn't covered by either option. IMO, I don't think the appraiser is less or more vulnerable with either option. If the appraiser is vulnerable at all, I think that full disclosure with inspection recommendations does more to limit any liability than your reporting options.

 

[CANative]

Appraisal reports don't cause fires.

 

[23Degrees]

No, those scenarios did not specifically call for inspections and based on the wording in the first post, none is implied.

Lets change the wording:

Reporting option 1 - Appraise "as is" with estimated cost to cure to return garage area to its original use and to within compliance of local codes.

Reporting option 2 - Appraise "subject to" via CB3 - hypothetical condition is that the converted garage has been restored to its original use and to within compliance of local codes.

There was an old thread that got me thinking about this -

http://appraisersforum.com/showthread.php?t=151742

Post 25 got my attention in particular -

 

[residentialguy]

Appraisal reports don't cause fires.

If there was a fire, don't worry about. The appraisal was probably burned up along with the homeowner. :new_ukliam2:

 

[Randolph Kinney]

No, those scenarios did not specifically call for inspections and based on the wording in the first post, none is implied.

Lets change the wording:

Reporting option 1 - Appraise "as is" with estimated cost to cure to return garage area to its original use and to within compliance of local codes.

Reporting option 2 - Appraise "subject to" via CB3 - hypothetical condition is that the converted garage has been restored to its original use and to within compliance of local codes.

There was an old thread that got me thinking about this -

http://appraisersforum.com/showthread.php?t=151742

Post 25 got my attention in particular -

The county of San Diego use to be nonchalant about code enforcement. Today, they are collecting all kinds of fees and fines for additions or alterations done with out permits. They need the money. They wil issue a retroactive permit providing the set backs are met and building codes are met.

I had one that was a short sale that turned into a nightmare for the existing lender because it had all kinds of code violations that had to be remedied before the county would clear it and another lender would lend on it.

Of course, 2 prior appraisals didn't mention the code violations. I suspect the lender will sue those appraisers if they are still around.

 

[nstanbru]

If I had to choose from your post #5, I would pick door #2.

 

[23Degrees]

Probably the better choice nstanbru. Option 1 from post 5 puts the appraiser on the hook specifically for determining a cost to cure estimate that brings the subject into code compliance. Probably not a road to go down.

Taking this a step further, the lender can either waive the requirement of the CB3 HC or require repairs and a 1004D. With the language from post 5, the appraiser would need to confirm both the completed repairs as well as a sign off of some sort from the city or appropriate professional who would now be on the hook for code compliance.

Most appraisers I've spoken to handle this situation as "as is" with cost to cure. The more I think about this it seems off and possibly leaves one exposed. It seems like it crosses a line in the sand with regard to reasonableness of applying a cost to cure. Broken windows, paint, reasonable levels of deferred maintenance seem in bounds for a C2C - Change of use from garage to living area for a portion of the building or lack of permits for an entire addition and you are now in HC/EA territory with appropriate box checked. Thoughts?

 

[JohnCCarlson]

Converted Garages in So. CA.

None of the posts that I've read so far talks about permits for the garage conversion. Several have talked about Code and Zoning, but nothing about Permits.

Case-in-point, if anyone appraises in the City of Azusa, and finds a property with an addition, you'd better check permits. Azusa has a specific ordenance that says: no permits - tear it down, no permitting after-the-fact.

I'm have a pending litigation case where the appraiser appraised a property as 4-units. Problem is, one of the "units" was an illegally converted garage. Buyer closed & went to get permits for some kind of improvement - City discovered unpermitted garage conversion & required garage to be returned to parking. Now property is 3-units, we'll see what the difference in value is. Appraiser is being sued & I will be working with Plaintiffs Council.

So, don't forget about permits!

John C. Carlson
Diamond Bar, CA