Did I make a huge mistake? Accessory unit?

[gregb]

I agree with Denis's post with the exception that there may be elements of an ethics issue regarding the reason for the appraiser to include a detached accessory unit in the GLA.

It could be argued that if the accessory unit was included in the GLA so that certain comparables that support the sales price were therefore used in the appraisal, then that takes things beyond mere competency issues. It's not always easy to do the right thing and "kill a sale"...sometimes, would be borrowers offer thanks for pointing out their folly, mostly when they end up getting the property at a lower price than they originally were expecting to pay.

 

[smackodu]

If it is legal, you still should not have combined the GLA on the second unit with the main structure, but it should not have created that much of difference on the bottom line value however you added it all up, my guess is the second appraiser gave it no value because of the legal problems of its presence.

I agree with most of what TJSum had to offer. However here we differ greatly. By your own admission, you overstated the size of the subject property by more than 41%. That can have a very big impact on value. If the 2nd appraiser gave the additional unit no value because of legality these 2 items are going to destroy your opinion of value. Now if you you went to superior neighborhoods to get those larger comps you have hit the trifecta. Again this is a matter of competency.

Dennis gave you some great advice to consider. You need to contact your E&O carrier. You made an error. You know it and the AMC knows it. I would never acknowledge the error in writing to the AMC no matter what promises they make to you such as the AMC not turning you in to the state board or the AMC retaining you on their panel. Appraisers are removed from panels all the time. The AMC or lender does not tell the appraiser they are removed, they just never receive another assignment.

I would love to tell you everything is going to be fine. It's not. There is a very upset homeowner right now. They have been told by their lender that the house they purchased last year is now worth much less than what they paid for it. This can happen but the values of homes in Maryland have been rising. In some areas last Spring you might even say skyrocketing. Don't forget the current homeowner paid some of the highest closing costs in the country based on the sales price. If the homeowner now believes they are underwater because of no fault of their own they may be asking themselves how long they might now be stuck in the property. Most likely the homeowner is going to be looking to the lender for answers. If the homeowner does not like the lender's answers to their question about how this will be resolved, the homeowner is going to be running to a lawyer. There it could get ugly real fast. Where it ends would be anyone's guess. Everyone is going to get some mud on them including you, the AMC and the lender. Lawyers like to file suit against everyone but they zero in on he who has the deepest pockets. That is not you but it could be your E&O carrier. Most likely it is is going to be the AMC and the lender.

Again I wish you the best possible outcome.

 

[J Grant]

Since it was a sale, the OP may also want to do, for his own benefit, a retrospective appraisal, to see what the value would have been on retro effective date if he had used smaller comps and the Accessory unit had been valued separately . Whether or not AU is legal of course I have no idea...even if not legal, sometimes market recognizes value in outbuildings or they are grandfathered in. It may very well have been legal, or permited with a variance.

I agree he should contact his e and o. He should also find out if the AU was permited per zoning...get as much information as he can about the property, do a retrospective appraisal on the original date what the value would have been then....if the AU was legal and the OP is lucky, the value might be the same or not too far off. If the value indeed would have been lower at time of sale, at least the OP will know it sooner rather than later.

As for AMC reviews...some review well , while others only do a checklist for form errors (such as forgot to check a box ), and don't analyze report content .

 

[Tim Hicks (Texas)]

Don't take offense, but how does an appraiser get his certified license without knowing the rules regarding accessory units? It is covered in Fannie Mae guidelines, HUD handbooks and ANSI standards. I truly believe any licensed appraiser should know these handbooks front and backwards and at the very least read them occasionally. Then, you should have them for reference materials for things like this that may slip your mind from time to time. Most of these manuals are free on line. if you had taken the time to do this before, you probably would not be in this situation. For all of you giving contrary advice, I suggest you familiarize yourself with these reading materials. It is just knowledge and it is free if you want it.

 

[Tim Hicks (Texas)]

I agree with Denis's post with the exception that there may be elements of an ethics issue regarding the reason for the appraiser to include a detached accessory unit in the GLA.

It could be argued that if the accessory unit was included in the GLA so that certain comparables that support the sales price were therefore used in the appraisal, then that takes things beyond mere competency issues. It's not always easy to do the right thing and "kill a sale"...sometimes, would be borrowers offer thanks for pointing out their folly, mostly when they end up getting the property at a lower price than they originally were expecting to pay.

I did that yesterday. I "killed" a tract home sale by over $20,000 (that is a lot here in TX), because I chose not to go to the neighboring subdivisions for comparable sales. The listing agent was furious and is asking for my head. My argument is that 20 sales from the subject subdivision, support my value and this property is not superior to any of those sales. Sure, I could have cherry picked sales within one mile in other subdivisions that would have hit that sales price, but my license is more valuable than one sale.

 

[Renee Healion]

Pretty much everyone arrived at the same conclusion as facts emerged. That is rare here.

 

[mark hurlock]

Don't take offense, but how does an appraiser get his certified license without knowing the rules regarding accessory units? It is covered in Fannie Mae guidelines, HUD handbooks and ANSI standards. I truly believe any licensed appraiser should know these handbooks front and backwards and at the very least read them occasionally. Then, you should have them for reference materials for things like this that may slip your mind from time to time. Most of these manuals are free on line. if you had taken the time to do this before, you probably would not be in this situation. For all of you giving contrary advice, I suggest you familiarize yourself with these reading materials. It is just knowledge and it is free if you want it.

Tim,

would you happen to know the FNMA or FHA guideline particular to square footage of accessory units and how it is to be addressed?

It has slipped my mind and now I can't find it. Very frustrating.

 

[Joe Flacco]

I agree with TJ that the biggest issue here is that the accessory unit is likely not legal.

However, that doesn't mean the garage converted to living space has no value. It's my understanding it is the kitchen that makes it illegal. A well finished detached structure might even contribute more to value than if it was a larger ranch. Either way I wouldn't have included the detached structure in GLA but would have given it credit as an amenity.

But Smackodu is also correct that 1,200 SF ranch should compare to other 1,200 SF ranch not a 1,700 SF ranch. The contributory value of the detached finished structure needs to be calculated separately.

 

[JSmith43]

Per USPAP Compliant's link, a guy made a similar error in NC and he received a censure & 30 Hr of basic Res. training.

It is a different state, but I wouldn't show up for your in person meeting in orange. In fact, I'd be very wary of the AMC, because it is their CYA time right now. You apparently disclosed enough in your report for them to be on the hook assuming they sell at least, cursory technical reviewing services, and they generally do.

Let me pile on with respect to the legality of the accessory unit use. Locally, one has to actually read the zoning ordinance within the city code very carefully with respect to accessory units. Generally, if they are permitted, it is affirmed in the code & the conditions are spelled out in detail. If it isn't in there, it is probably not permitted.

Read it & then check your understanding, probably with an in person (if practical) visit with a zoning expert at the city or whatever unit of government controls zoning.

Good luck to you. Lots of good insight from several posters, but you might want to fess up with a local appraiser that you respect & offer to pay for his/her analysis of the situation.

 

[Tim Hicks (Texas)]

Tim,

would you happen to know the FNMA or FHA guideline particular to square footage of accessory units and how it is to be addressed?

It has slipped my mind and now I can't find it. Very frustrating.

its obvious from your posts that you have never read them. www.efanniemae.com, www.hudclips, etc. Look it up. Learn them, live them. I can't do it for you.