Did I make a huge mistake? Accessory unit?

[Tharax]

It looks like I made a big mistake, but I would like to run it past people with more experience than I. I would really appreciate any constructive guidance or suggestions you could offer.

Last July I appraised a property for a mortgage transaction in MD. The subject was a rancher of about 1,200 sq ft above grade. It also had a second separate 500 sq ft building with separate heating/cac/ kitchen 1 br 1ba but not separately metered (which I referred to as an in-law apt in the report). I combined both areas for the total GLA and used comparables of similar size.

Now the new owner tried to refi and the new appraiser did not count the separate building as part of the GLA and his value came in way lower than mine. The lender has now put me on probation for 45 days and is going to have a meeting in which I get to defend my decision and then possibly (likely) terminate me.

This is my best client and I would hate to lose them (the income loss will be devastating for my family), but also very importantly I am really upset that I may have made a really bad mistake with this report.

My reasoning behind including the area in the GLA was that it was perfectly livable space, constructed in a workmanlike fashion, heated/cooled, with adequate entrance and exgress, all above grade.

So basically did I make a huge mistake? Does my reasoning behind my decision make any sense to you? Is there anyway that I could salvage my relationship with this lender?

I am a long time lurker on this forum, I hate that my first post is one of such ignorance. But thank you very much for any assistance you can offer.

 

[mark hurlock]

It looks like I made a big mistake, but I would like to run it past people with more experience than I. I would really appreciate any constructive guidance or suggestions you could offer.

Last July I appraised a property for a mortgage transaction in MD. The subject was a rancher of about 1,200 sq ft above grade. It also had a second separate 500 sq ft building with separate heating/cac/ kitchen 1 br 1ba but not separately metered (which I referred to as an in-law apt in the report). I combined both areas for the total GLA and used comparables of similar size.

Now the new owner tried to refi and the new appraiser did not count the separate building as part of the GLA and his value came in way lower than mine. The lender has now put me on probation for 45 days and is going to have a meeting in which I get to defend my decision and then possibly (likely) terminate me.

This is my best client and I would hate to lose them (the income loss will be devastating for my family), but also very importantly I am really upset that I may have made a really bad mistake with this report.

My reasoning behind including the area in the GLA was that it was perfectly livable space, constructed in a workmanlike fashion, heated/cooled, with adequate entrance and exgress, all above grade.

So basically did I make a huge mistake? Does my reasoning behind my decision make any sense to you? Is there anyway that I could salvage my relationship with this lender?

I am a long time lurker on this forum, I hate that my first post is one of such ignorance. But thank you very much for any assistance you can offer.

Here is a link to an FHA case study on accessory units. Hope it helps and good luck.

http://www.huduser.org/portal/publications/adu.pdf

 

[J Grant]

It looks like I made a big mistake, but I would like to run it past people with more experience than I. I would really appreciate any constructive guidance or suggestions you could offer.

Last July I appraised a property for a mortgage transaction in MD. The subject was a rancher of about 1,200 sq ft above grade. It also had a second separate 500 sq ft building with separate heating/cac/ kitchen 1 br 1ba but not separately metered (which I referred to as an in-law apt in the report). I combined both areas for the total GLA and used comparables of similar size.

Now the new owner tried to refi and the new appraiser did not count the separate building as part of the GLA and his value came in way lower than mine. The lender has now put me on probation for 45 days and is going to have a meeting in which I get to defend my decision and then possibly (likely) terminate me.

This is my best client and I would hate to lose them (the income loss will be devastating for my family), but also very importantly I am really upset that I may have made a really bad mistake with this report.

My reasoning behind including the area in the GLA was that it was perfectly livable space, constructed in a workmanlike fashion, heated/cooled, with adequate entrance and exgress, all above grade.

So basically did I make a huge mistake? Does my reasoning behind my decision make any sense to you? Is there anyway that I could salvage my relationship with this lender?

I am a long time lurker on this forum, I hate that my first post is one of such ignorance. But thank you very much for any assistance you can offer.

Sorry but from imo, it was a mistake...the separate building should have been reported as an accessory unit and GLA not included in main living dwelling area....due to separate entrance and utility. This is not a hard and fast rule , just how it is typically done by a number of appraisers (peer standard)

It stinks that one weak report may jeopardize the relationship with client. I don't know if the new appraisal far lower value is a good value or not. I often find that in my area at least, the contributory value of a sep accessory unit is equivalent to the same sf as if it were in main dwelling.

Perhaps prepare, your own report (for free), valuing subject on today's effective date (assuming no changes have taken place), this time with sep building as an AU and not including 500 sf in living space. Use appropriate comps ( with new main dwelling living area and find comps with guest houses/accessory units to bracket)

See if the value is lower than your previous value, and if so, by how much (or is value the same?). Be honest...don't try to manipulate the value do the appraisal and see where the value is . (is it also possible home values have declined since your last appraisal? To check, look up larger comp sales similar to sf you did last time)

Bring the report and results of your analysis to the meeting. If you want to run results by people here on board, that could help as well.

 

[Tharax]

Thank you very much guys. I am going to read the HUD publication right now Mark. That is a great idea J, I will work on writing up a new report right now.

Thank you so much again!

 

[Lee Lansford]

Yes, you erred in judgment.

An accessory unit, I surmise, but, not to be combined with the main dwelling to arrive at GLA.

 

[Deleted member 128537]

Yes, it should be an accessory unit. So come to the meeting in humble repentance. It's kind of funny they didn't catch it on the first appraisal however. It would clearly show up in the pictures and the floor sketching.

Anyway we have lots of accessory units in the market I appraise in. It's very difficult to determine value because of the wide variety. But typically if they are average quality I use the GLA adjustment for average quality construction. It seems to work out pretty well for my market. In one recent situation I used the cost approach because it was rather atypical and to use any other approach didn't seem credible. So if you did one of these two approaches your value may not really change much.

I guess I would want to see how the other appraiser adjusted for the accessory unit. It may or may not be credible. In fact he/she may have just picked a number out of the air if he/she didn't bracket it (which is often very hard to do.)

 

[stangtime]

I agree with JGrant. We're all human though. Take a deep breath and work through the situation.

It is interesting how different appraisers handle accessory units though. And even how some appraisers handle what is clearly a multiple unit property. I received an order a few months ago of an old Victorian-style home. No biggie. But then when I got into the order I saw that the first floor and second floors were individual units with individual access doors, separate meters, and they each had a kitchen. I let the client know that this was not a single family with an in-law apartment. Each floor was about 1,000 s.f. The client, and agent, seemed baffled that this was now a 2-4 unit report with income analysis required. (To make matters more clear each unit had been separately rented recently) I'd bet that the last couple times this property transferred (and it had transferred several times during the previous 5 to 8 years) it was reported as a single family with an in-law suite.

Dan

 

[Tharax]

I definitely plan to take the humble route (since I am sure I made a mistake).

Yes it was very clear on my sketch and in pictures as well as comments that the secondary area was detached. It is built with the same materials/ quality as the subject.

Based on the research I've been doing I can't find any hard written rules saying not to add it to the GLA, but that definitely seems to be the consensus, like J said the "peer standard". In the future when I come up with something I am unsure about I will definitely seek out assistance from more experienced appraisers.

 

[Pittsburg_22_m]

It's definitely a mistake to combine the GLA of two separate buildings. I've seen people get the hammer dropped by the State for that.

 

[J Grant]

Can you ask them to provide you with a copy of the other appraisal? (unless it is too awkward and weird to ask)

It was a mistake , however doesn't mean the other appraiser used good comps or came to a well supported value either (though he might have)

Research the subject area and see if values declined as well for the subdivision/homes of that type.