Did I make a huge mistake? Accessory unit?

[mark hurlock]

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.

As previously stated, it has slipped my mind. And I am unable to find any such guidelines.

Maybe you can't find them either.

 

[smackodu]

t's my understanding it is the kitchen that makes it illegal.

It is not a kitchen unless it has a stove.

 

[EddieB]

Two links that I keep handy:

FHA FAQ 1/2013

AI Case Study - Appraising Residential Properties with ADUs

[url]http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&cad=rja&ved=0CCQQFjAA&url=http%3A%2F%2Fportal.HUD.gov%2Fhudportal%2Fdocuments%2Fhuddoc%3Fid%3Daprval.pdf&ei=5mz2UtueE4frkAf4_4CoBw&usg=AFQjCNGb0YC89wapMNLWOigchZjBBDny1A[/URL]


[url]http://www.appraisalinstitute.org/accessory-dwelling-units-may-have-higher-values-when-using-income-approach-the-appraisal-journal/[/URL]

 

[Terrel L. Shields]

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

https://www.fanniemae.com/content/guide/sel102213.pdf#page=608

A one- or two-unit property that includes an
illegal additional unit or accessory apartment
(sometimes referred to as a mother-in-law,
mother-daughter, or granny unit).
Yes, provided that:
• The illegal use conforms to the subject
neighborhood and to the market
• The property is appraised based upon its
current use.
• The borrower qualifies for the mortgage
without considering any rental income from
the illegal unit.
• The appraisal must report that the
improvements represent an illegal use.
• The appraisal report must demonstrate
that the improvements are typical for the
market through an analysis of at least three
comparable properties that have the same
illegal use.
• The lender ensures that the existence of the
illegal additional unit will not jeopardize
any future hazard insurance claim that might
need to be filed for the property.

Improvements Analysis Requirements
The appraisal must provide a clear, detailed, and accurate description of the improvements that
is consistent with the level of fieldwork required in connection with the appraisal assignment. It
must be as specific as possible, commenting on such things as needed repairs, additional features,
modernization, etc., and should provide supporting addenda, if necessary. If the subject property
has an accessory apartment, the appraisal should describe it.

 

[mark hurlock]

Eddie and TS, thanks

all good sources which I am already familiar with but neither specifically address the GLA from detached units.

If you find it I would appreciate you posting it because I can not.

It is frustrating searching through hundreds of pages of guidelines when you can't find what you're looking for.

Tim Hicks was no help.

 

[timd354]

OK. I don't want to pile on here. Since the report was prepared for the AMC of a large lender, was the work all your own? Or were you coached and guided by one of their so called quality(choke) experts(gag) who helped you circumnavigate their strict underwriting guide lines? If the 2nd scenario is the case, I would compile every piece of communication you had with them when you prepared the report.

As difficult as this is for you to believe, not every appraisal error is the result of the machinations of an AMC.

 

[Tim Hicks (Texas)]

This is from HUD:

Accessory Unit / Accessory Dwelling Unit
The accessory unit is defined as a habitable living unit added to, created within, or detached from a single-family dwelling that provides the basic requirements for living, sleeping, eating, cooking, and sanitation.
Accessory Dwelling Units (ADUs) are commonly understood to be a separate additional living unit including separate kitchen, sleeping, and bathroom facilities, attached or detached from the primary residential unit, on a single-family lot. ADUs are usually subordinate in size, location, and appearance to the primary unit and may or may not have separate means of ingress or egress.
Attached units, contained within a single-family home, known variously as "mother-in-law apartments," are the most common type of accessory dwelling unit. Accessory units usually involve the renovation of a garage, basement, or small addition to a single-family home.
FHA Criteria
“Accessory dwelling unit" means a subordinate dwelling unit may or may not be incorporated within, or detached from a single-family structure. Accessory units may not be subdivided or otherwise segregated in ownership from the primary residence structure.
Some accessory units may predate the adoption of local zoning ordinance and may therefore be classified as legal nonconforming units.

 

[mark hurlock]

This is from HUD:

Yea, you found the definition of accessory unit. Now find the guideline for comparing GLA of detached units to comparables with interior or attached units.

Let me know when you do because I definitely want to read it.

Did I spell everything to your satisfaction?

 

[TJSum]

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.

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.

https://www.fanniemae.com/content/guide/sel102213.pdf#page=608

Let me first say that Denis provided excellent advice regarding this matter.

It is my understanding this is not a conversion of any type but a separate detached structure which is a second living unit. Yes, sometimes illegal uses do have market value, but this has to be demonstrated by market evidence. Per the OP, there are no comps or market data to show the market does in fact value detached second living units. So those who are saying it could still have market value, it does not meet that standard either because there is no market evidence and it certainly does not conform to the market.

From my experience in Maryland, the only way to be sure if it is legal or not is to contact the county and let them make that determination on any particular property. Zoning regulations are general in nature, and exceptions are made and can be seen in the market. Also, even if the zoning allows something, it does not mean a property followed the proper procedures to make it legal (permits, etc.).

When faced with a situation like this, I always shoot the client an email first to obtain permission to contact the county regarding any particular property, in case there is any blow back from the HO if the county is alerted to any potential illegal uses.

 

[mark hurlock]

Yes, sometimes illegal uses do have market value, but this has to be demonstrated by market evidence. Per the OP, there are no comps or market data to show the market does in fact value detached second living units. So those who are saying it could still have market value, it does not meet that standard either because there is no market evidence and it certainly does not conform to the market.

http://www.appraisalinstitute.org/a...-using-income-approach-the-appraisal-journal/