Duplex converted to SFR assistance

[J Grant]

From your description, it sounds like he made the changes needed to retrofit, re removed a lower level kitchen and a partion between the units. The zoning is legal for SF use. He did not get permits, however, judging by work he did, he could apply for one, and the use is permitted legally. As far as two electric meters, that is not in violation of any electric "codes", esp as the town does not require conversion to one meter for SF use. The two meters is about who gets billed for electric for each unit ( in this case, floor level), with two meters now for just one owner occupant , the owner will get two elect bills, one for each meter. His paying two bills is between him and the electric company, as long as they get paid, the elext company doesn't care.

I would describe and disclose everything, including the conversations with zoning board and lack of permit, and what was done for retrofitting to a SF res, and submit it as a single family residence with two elect meters, legally permited use under mixed zoning in area.

 

[Webbed Feet]

An "indicator" is not absolute proof.

From your description, it sounds like he made the changes needed to retrofit, re removed a lower level kitchen and a partion between the units. The zoning is legal for SF use. He did not get permits, however, judging by work he did, he could apply for one, and the use is permitted legally. As far as two electric meters, that is not in violation of any electric "codes", esp as the town does not require conversion to one meter for SF use. The two meters is about who gets billed for electric for each unit ( in this case, floor level), with two meters now for just one owner occupant , the owner will get two elect bills, one for each meter. His paying two bills is between him and the electric company, as long as they get paid, the elext company doesn't care.

I would describe and disclose everything, including the conversations with zoning board and lack of permit, and what was done for retrofitting to a SF res, and submit it as a single family residence with two elect meters, legally permited use under mixed zoning in area.

I would probably follow the similar above path with the exception that I would most likely employ Check Box Four that uses an Extraordinary Assumption. MY EA would be that the property owner can prove he/she obtained permits/safety inspections/final approval/occupancy certificate from the jurisdictional authority (JA).

I appreciate the using of either an HC or EA can get confusing. For me, some evidence there is no documentation of permits only means there does not appear to be evidence permits were made and finaled. I view the jury as still out on the issue at that point unless the JA is providing in writing a statement that no permits were obtained as a statement of fact. Therefore, I would use an EA permits were in fact obtained, and the owner can prove it. That allows me to move forward with a value as if permits were in fact obtained. Then the UW has to clear the matter.

Why would I do this? I would do it because that kind of work in the building, with no permits, could invalidate the hazard insurance policy, thereby causing an affect on value I do not care to attempt to address.

A reason to not get permits properly is not only the permit costs, but it could be cheaper tax wise to remain trended as an income property at the assessment department.

 

[J Grant]

Webbed Feet, I don't get why you are doing this. If there is no evidence of a permit being pulled, and in this case the HO said he did not pull permits, why make a HC or EA that permits were pulled? I simply state unknown if permits were pulled, or in this case, owner is telling the appraiser permits were not pulled, so that is what I would disclose. Let the lender deal with the information if the lender feels a lack of permits could invalidate the hazard insurance policy. The lender has to take responsiblity for lending decisions, we provide them with the information to make those decisions.

 

[Mr Rex]

Webbed Feet, I don't get why you are doing this. If there is no evidence of a permit being pulled, and in this case the HO said he did not pull permits, why make a HC or EA that permits were pulled? I simply state unknown if permits were pulled, or in this case, owner is telling the appraiser permits were not pulled, so that is what I would disclose. Let the lender deal with the information if the lender feels a lack of permits could invalidate the hazard insurance policy. The lender has to take responsiblity for lending decisions, we provide them with the information to make those decisions.

So you just go "As-Is" when there is probability that the improvements and the inhabitants are at risk, with some verbiage "hidden" somewhere in the report that there were no permits pulled(remember, they don't RTFR)?

As Mike K has pointed out more than once, no permits represents an illegal use in many jursidictions. Providing an "As Is" value gives the lender (and the HO for that matter, since they are provided a copy, although not an intended user) the idea that the permits are not a big deal and do not impact value or marketability. Misleading is a mild term for this attitude and reporting IMHO. If you know that there are no permits and the location requires permits, then CB4 is a must, again IMHO.

 

[Mr Rex]

FWIW, the reason 2 meters on a SFR is a code violation in most jurisdictions is the inherent danger of intermixing wiring from 2 different sources within the same space. When it is a duplex, the wiring from one unit is distinct and never likely to be confused with the wiring from the adjacent unit. There are exceptions, when it is almost impossible for the wiring to ever become "mixed" but in most cases in Residential construction, it is verboten. I'm sure there are numerous areas of older construction where it is allowed with proper precautions under some form of grandfather clause. If allowed by code, I'd still be willing to bet that the insurance premiums are hirer than typical...

 

[J Grant]

So you just go "As-Is" when there is probability that the improvements and the inhabitants are at risk, with some verbiage "hidden" somewhere in the report that there were no permits pulled(remember, they don't RTFR)?

The verbiage is not "hidden", clearly describe the issue in a place that is easy to see on the report. I usually bold it or put an asterik.

As Mike K has pointed out more than once, no permits represents an illegal use in many jursidictions. Providing an "As Is" value gives the lender (and the HO for that matter, since they are provided a copy, although not an intended user) the idea that the permits are not a big deal and do not impact value or marketability. Misleading is a mild term for this attitude and reporting IMHO. If you know that there are no permits and the location requires permits, then CB4 is a must, again IMHO.

There is a diff between illegal use, aka changes that are illegal and violate building /elect codes/zoning codes, and changes that are legal, but made without pulling permits. In this case, the use is legal, since the zoning is both SFR and multi family, and no wiring or plumbing was changed and no addition to the structure was made. Changes were made to the interior for use. If an individual appraiser wants to make the loan subject to owner getting a permit, they can do so, however, the use is legal and permitted so I think it is up to the lender to decide.

This issue has been discussed many times on prior older threads, there is a diff between market reaction to unpermitted changes, and as appraisers , that is our job to measure market reaction. It is also our job to report illegal changes to structures, as well as non permitted changes to structures. They are two different issues. I would make a report "subject to", in case of illegal changes that could endanger safety, such as rigged wiring, or that violate zoning, such as an addition that infringes on property line. The unpermitted changes that are legal but the owner did not pull a permit, that is a lender and underwriting issue and they have their own guidelines.

 

[Webbed Feet]

Webbed Feet, I don't get why you are doing this. If there is no evidence of a permit being pulled, and in this case the HO said he did not pull permits, why make a HC or EA that permits were pulled? I simply state unknown if permits were pulled, or in this case, owner is telling the appraiser permits were not pulled, so that is what I would disclose. Let the lender deal with the information if the lender feels a lack of permits could invalidate the hazard insurance policy. The lender has to take responsiblity for lending decisions, we provide them with the information to make those decisions.

And, I must take responsibility for the report I sign. Are you saying that you intend, in such a case, to find comps that were sold with the same circumstances at play with both seller and buyers well-informed of them? The buyer aware that hazard insurance, insurance required by the lender and that the buyer now has to pay for valid or not, could be invalidated over it as well? Because if you don't have such comps, how did you reflect the "as is" market reaction?

P.S. Read your post 16. How does the appraiser know that no electrical wiring changes were made? I always get curiously interested when I read appraisers on this forum willing to stick their necks out for property owners that refused to get required permits. Clearly, they are such honest rule abiding folks that we should believe everything they say....

 

[Mr Rex]

There is a diff between illegal use, aka changes that are illegal and violate building /elect codes/zoning codes, and changes that are legal, but made without pulling permits. In this case, the use is legal, since the zoning is both SFR and multi family, and no wiring or plumbing was changed and no addition to the structure was made. Changes were made to the interior for use. If an individual appraiser wants to make the loan subject to owner getting a permit, they can do so, however, the use is legal and permitted so I think it is up to the lender to decide.

This issue has been discussed many times on prior older threads, there is a diff between market reaction to unpermitted changes, and as appraisers , that is our job to measure market reaction. It is also our job to report illegal changes to structures, as well as non permitted changes to structures. They are two different issues. I would make a report "subject to", in case of illegal changes that could endanger safety, such as rigged wiring, or that violate zoning, such as an addition that infringes on property line. The unpermitted changes that are legal but the owner did not pull a permit, that is a lender and underwriting issue and they have their own guidelines.

No wiring was changed, creating a potential hazard to the improvements and it's inhabitants. This is a case of "rigged wiring" since most jusrisdictions would require 1 feed to the SFR. I don't expect most appraisers to be knowledgeable of the potential hazards to the improvements and life safety from irresponsible owners, not cognizant of electrical code and hazards, I do expect them to not be irresponsible in their reporting.

 

[Webbed Feet]

Clearly I am with Brother Rex on this one. Appraisers should all draw a line where they stop trying to be experts on such matters. As well as all of us should more often draw a line regarding going out of our ways to make this lending game as easy as possible on our clients by us taking on liability that we should not be taking on.

The property owner did this without required permits. Let the property owner show all is well. It is my stand it is "not my scope" to pretend all is well by dancing around the matter by simply "commenting" or "mentioning" the matter in a CB1 employing appraisal report. I will use CB4, provide a value as if all is well, now other people can document that all is well.

or.. oh well...some other appraiser can do the assignment.

 

[J Grant]

I would probably follow the similar above path with the exception that I would most likely employ Check Box Four that uses an Extraordinary Assumption. MY EA would be that the property owner can prove he/she obtained permits/safety inspections/final approval/occupancy certificate from the jurisdictional authority (JA).

I appreciate the using of either an HC or EA can get confusing. For me, some evidence there is no documentation of permits only means there does not appear to be evidence permits were made and finaled. I view the jury as still out on the issue at that point unless the JA is providing in writing a statement that no permits were obtained as a statement of fact. Therefore, I would use an EA permits were in fact obtained, and the owner can prove it. That allows me to move forward with a value as if permits were in fact obtained. Then the UW has to clear

Webbed Feet, the above is what you wrote, which seems less about true disclosure , and seems an end way around it. Per above statement, you are still appraising "As Is", but to cover yourself, you throw in an EA that permits have been pulled, even though you have no proof, and in this case, the owner clearly told you that permits were not pulled.

So why is this "better", then disclosing what is true, that the appraiser does not know if permits were pulled (if that is the case), or that per owner, the work was done without permits pulled? Why is stating that the report is done per EA permits were pulled, any more protective of a value re hazard insurance than not making that EA? Either the work was permitted or it was not, making an EA to CYA does not change that.