Mr Rex
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I stand corrected, an addition or susbtraction to the improvements.
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Duplex converted to SFR assistance
- Thread starter Carter Wynn
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I stand corrected, an addition or susbtraction to the improvements.
J Grant
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Of course the market gives value, we all know that...sometimes a poster types "gives it value" to make a sentence in a post. It is insulting to point it out as if a cert appraiser wouldn't know that ( only been doing this 19 years, thank you very much)
RE, Fannie says if market recognizes value in a non permitted but legally permissable use, the appraiser can reflect that value in the report...an addition to a house (most times, as long it is within property boundaries) is legal, but it may not be permitted. Putting carpet down on a floor and running AC into a garage and calling it a bedroom is never legal, because that is considered a safety /health hazard.
I don't think HC/EA are any help in a report where a subject has a change or addition where permit status is unknown or non existant. Tell the truth, no permits may have been pulled or unknown if have been pulled, but the change/addition is market accepted in the area.
An EA may afford the appraiser some slight protection, but it is disengenious you are claiming an assumption that permits have been pulled, and you have no idea if that is true or not. Claiming a further EA for the comps that they have been permitted is also silly. Either non permitted changes to homes are market accepted and typical in an area, or they are not. Know your area and talk to realtors etc.
RE, Fannie says if market recognizes value in a non permitted but legally permissable use, the appraiser can reflect that value in the report...an addition to a house (most times, as long it is within property boundaries) is legal, but it may not be permitted. Putting carpet down on a floor and running AC into a garage and calling it a bedroom is never legal, because that is considered a safety /health hazard.
I don't think HC/EA are any help in a report where a subject has a change or addition where permit status is unknown or non existant. Tell the truth, no permits may have been pulled or unknown if have been pulled, but the change/addition is market accepted in the area.
An EA may afford the appraiser some slight protection, but it is disengenious you are claiming an assumption that permits have been pulled, and you have no idea if that is true or not. Claiming a further EA for the comps that they have been permitted is also silly. Either non permitted changes to homes are market accepted and typical in an area, or they are not. Know your area and talk to realtors etc.
Mr Rex
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Carry on as you wish MsJ, but when folks start "opening up" the foyer (knocking down walls etc) as well as creating potential electrical hazards that I am made aware of or observe, then I am using CB3 or 4 to CYA as well as proper due diligence in informing the lender/client that they might have an albatrosss on their hands.
J Grant
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Mr. Rex, would you tell the lender to make report subject to inspection and permits?
Or would you make an EA or HC to cya? How does an EA or HC protect anyone other than yourself, and does it even do that?
I too would inform the lender of changes made and be honest that permits were not pulled, not try to hide behind an EA that permits were pulled.
As far as an albatross, the zoning allows both SFR and multi family, so expect for the lack of permits, I dont' see this as an albatross.
Or would you make an EA or HC to cya? How does an EA or HC protect anyone other than yourself, and does it even do that?
I too would inform the lender of changes made and be honest that permits were not pulled, not try to hide behind an EA that permits were pulled.
As far as an albatross, the zoning allows both SFR and multi family, so expect for the lack of permits, I dont' see this as an albatross.
Webbed Feet
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23Degrees
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This is not being directed at anyone personally but based on what I run into on a fairly regular basis, I really wish that more appraisers would take these situations a bit more seriously - and by situations I mean those where there is an obvious and readily observable discrepancy with public records. That's the liability radius for the discussion at hand - items outside that can most often be handled by a properly defined and implemented SOW. Within that radius you either have to check one of the ugly boxes or at best take on whatever liability is in play and even risk being misleading despite all of the disclosure.
Sure, you can proceed "as is" and disclose until you are blue in the face but in most instances around here that would mean, among a host of other SOW implications, needing to check the "illegal" box under zoning compliance unless one wants to risk being accused of producing a misleading report in the future. Yes, the zoning code specifically indicates that changes like this require the appropriate permits. No permit - no compliance. We've had this argument in the past about what this means so no need to rehash it - anyone who thinks differently can argue it in court if that unfortunate venue becomes necessary. In the event of a problem the E and O lawyers will most certainly just settle quietly and leave you with either no insurance or a massive premium hike.
The lenders are fully aware that CB1/"legal" in cases like this puts any potential target squarely on the appraiser, regardless of how much disclosure or how many improperly incorporated EA's or HC's one places within the text which is why it often turns into a big deal whenever CB3 or CB4 ends up with the mark. The use of CB3 or CB4 in cases like this is almost always to the benefit of the appraiser and the lenders know it.
For now it becomes the job of the appraisers that do take these situations seriously, and will not just take on any painfully obvious potential liability, to clean up after those that don't mind doing so or are ignorant that they are doing so. I just ran into one this morning that had an obviously boot legged situation in sharp contrast to public records and was given the "as is" and "legal" pass by no less than two prior appraisers in the past three years - no doubt they did not want to rock the boat with the client and either willingly or ignorantly became the owner of this problem in the eyes of any potential plaintiff.
Sure, you can proceed "as is" and disclose until you are blue in the face but in most instances around here that would mean, among a host of other SOW implications, needing to check the "illegal" box under zoning compliance unless one wants to risk being accused of producing a misleading report in the future. Yes, the zoning code specifically indicates that changes like this require the appropriate permits. No permit - no compliance. We've had this argument in the past about what this means so no need to rehash it - anyone who thinks differently can argue it in court if that unfortunate venue becomes necessary. In the event of a problem the E and O lawyers will most certainly just settle quietly and leave you with either no insurance or a massive premium hike.
The lenders are fully aware that CB1/"legal" in cases like this puts any potential target squarely on the appraiser, regardless of how much disclosure or how many improperly incorporated EA's or HC's one places within the text which is why it often turns into a big deal whenever CB3 or CB4 ends up with the mark. The use of CB3 or CB4 in cases like this is almost always to the benefit of the appraiser and the lenders know it.
For now it becomes the job of the appraisers that do take these situations seriously, and will not just take on any painfully obvious potential liability, to clean up after those that don't mind doing so or are ignorant that they are doing so. I just ran into one this morning that had an obviously boot legged situation in sharp contrast to public records and was given the "as is" and "legal" pass by no less than two prior appraisers in the past three years - no doubt they did not want to rock the boat with the client and either willingly or ignorantly became the owner of this problem in the eyes of any potential plaintiff.
J Grant
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23 Degrees, are you using the word zoning codes and building codes interchangeably? Because a subject that has undergone changes structural or otherwise from public records might still have legal zoning, but be in violation of county building codes by not getting a permit for certain work done. Therefore, checking legal in zoning would not be misleading.
Zoning addresses the use of a property, residential or commerical, single family use or two family use, as well as setbacks and how many stories can be built etc. But zoning codes are one thing and building codes another.
In the case of the original post, the poster said the county had dual zoning allowed in the area, a structure could either be used as single family or dual family and either was allowed (not my area so I am assuming the poster reported that accurately). Therefore, the change from two family to one family is still legal under zoning, but the change did not get the proper permits from the building departments. The building dept sends out code inspectors who are inspecting if quality and methods of material, electrical and other factors on conform to code, and if the plans/specs and materials/workmanship and contractor licenses are all correct, they grant a permit. I don't think these same inspectors are also looking for how many families live in the house or if they are running a business out of the basement (zoning issues)
As to appraisers taking it seriously, I think most appraisers do. One of the measures of SOW is what are an appraiser's peers doing. If more appraisers take the view that we are hired to provide value opinions and are not home inspectors, which is the case, that is one measure of how seriously to take the issue of changes to a subject that is not permitted. You and a few others here are using HUD terms CB 3 etc to apply to non HUD appraisals. FHA/HUD specifically asks in the SOw that appraisers take on a partial home inspector role for certain visible defects. At the same time, both FHA and Fannie state in guidelines that if market shows value for non permitted improvements or additions, that the appraiser can relay that value in the market despite lack of permits.
IF an appraiser discloses what was done, any changes made from original and reseraches if it is legally allowed, even though non permitted, they are not producing a misleading report. It is misleading to pertend permits exist when they don't, or that the changes were there from original plans etc. As to potential electrical hazards etc from non permitted work, are we building inspectors? Is that part of our SOW? To date, it is not. If we see conditions that visibly affect value of property through causing a health and safety issue, we have to disclose it and that is cause for subject to, because it is such that would affect value.
No matter what, we can never predict the presence of unknown hazards in a home. Even with permits, a home can have shoddy construction, improper electrical work, radon, mold in certain areas, leaks we can't see etc. So where does it end? Should we also carry a mold detector kit and test air samples? A radon kit? What level of responsiblity are we taking, and should we be taking any of it, when it does not relate to the assignment, deriving an opinion of value?
When a roof inspector comes over, they don't start taking on other roles and adding to their report comments about traffic in the neighborhood and how the houses are being devalued. Appraisers are the only ones taking on un asked for roles that they have no expertise in and that their clients don't even expect them to do.
Zoning addresses the use of a property, residential or commerical, single family use or two family use, as well as setbacks and how many stories can be built etc. But zoning codes are one thing and building codes another.
In the case of the original post, the poster said the county had dual zoning allowed in the area, a structure could either be used as single family or dual family and either was allowed (not my area so I am assuming the poster reported that accurately). Therefore, the change from two family to one family is still legal under zoning, but the change did not get the proper permits from the building departments. The building dept sends out code inspectors who are inspecting if quality and methods of material, electrical and other factors on conform to code, and if the plans/specs and materials/workmanship and contractor licenses are all correct, they grant a permit. I don't think these same inspectors are also looking for how many families live in the house or if they are running a business out of the basement (zoning issues)
As to appraisers taking it seriously, I think most appraisers do. One of the measures of SOW is what are an appraiser's peers doing. If more appraisers take the view that we are hired to provide value opinions and are not home inspectors, which is the case, that is one measure of how seriously to take the issue of changes to a subject that is not permitted. You and a few others here are using HUD terms CB 3 etc to apply to non HUD appraisals. FHA/HUD specifically asks in the SOw that appraisers take on a partial home inspector role for certain visible defects. At the same time, both FHA and Fannie state in guidelines that if market shows value for non permitted improvements or additions, that the appraiser can relay that value in the market despite lack of permits.
IF an appraiser discloses what was done, any changes made from original and reseraches if it is legally allowed, even though non permitted, they are not producing a misleading report. It is misleading to pertend permits exist when they don't, or that the changes were there from original plans etc. As to potential electrical hazards etc from non permitted work, are we building inspectors? Is that part of our SOW? To date, it is not. If we see conditions that visibly affect value of property through causing a health and safety issue, we have to disclose it and that is cause for subject to, because it is such that would affect value.
No matter what, we can never predict the presence of unknown hazards in a home. Even with permits, a home can have shoddy construction, improper electrical work, radon, mold in certain areas, leaks we can't see etc. So where does it end? Should we also carry a mold detector kit and test air samples? A radon kit? What level of responsiblity are we taking, and should we be taking any of it, when it does not relate to the assignment, deriving an opinion of value?
When a roof inspector comes over, they don't start taking on other roles and adding to their report comments about traffic in the neighborhood and how the houses are being devalued. Appraisers are the only ones taking on un asked for roles that they have no expertise in and that their clients don't even expect them to do.
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J Grant
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Imo, it is the lenders who are dropping the ball and if they want to know how well built a home is and how it conforms to building codes and that there is no adverse undetected conditions present, they should order a home, mold, env, and roof inspection for every house and condo they underwrite. That they don't do so is amazing, considering that they let hundreds of thousands out on an EA that no env conditions are present (like, how would we know?)
Instead of foisting more responsiblity on the appraiser, they should spend a few $ and do their own inspections. Appraisers are not home, electrical, roofing, plumbing, env or mold inspectors. If we see a visible conditon that would affect value (because health and safety issues affect value), then we report it (dangling wires roofs with holes etc). And FHA asks to condition a report on certain items. But our purpose for being sent to a house is to derive an opinion of value, with code and permit issues and zoning issues analyzed as to how they affect VALUE, not as to how they affect the safety and health of occupants. When the two intersect, when conditions affecting health/safety are value issues, or zoning violations impact value, that is our obligation to the purpose of the assignment (with expanded scope per VA or FHA instructions)
Instead of foisting more responsiblity on the appraiser, they should spend a few $ and do their own inspections. Appraisers are not home, electrical, roofing, plumbing, env or mold inspectors. If we see a visible conditon that would affect value (because health and safety issues affect value), then we report it (dangling wires roofs with holes etc). And FHA asks to condition a report on certain items. But our purpose for being sent to a house is to derive an opinion of value, with code and permit issues and zoning issues analyzed as to how they affect VALUE, not as to how they affect the safety and health of occupants. When the two intersect, when conditions affecting health/safety are value issues, or zoning violations impact value, that is our obligation to the purpose of the assignment (with expanded scope per VA or FHA instructions)
Mr Rex
Elite Member
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- Certified Residential Appraiser
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- North Carolina
From Fannie Mae:
17. What is expected with regard to the appraiser’s inspection of a property?
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[FONT=Arial,Arial][FONT=Arial,Arial]
17. What is expected with regard to the appraiser’s inspection of a property?
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Fannie Mae’s requirement of the appraiser’s property inspection for an appraisal based on an interior and exterior inspection is a complete visual inspection of the accessible areas of the property. The appraiser is responsible for noting in his/her report any adverse conditions (such as, but not limited to, needed repairs; deterioration; the presence of hazardous wastes, toxic substances, or adverse environmental conditions
that were apparent during the inspection of the property
that were apparent during the inspection of the property[/FONT]
[/FONT][FONT=Arial,Arial][FONT=Arial,Arial]or [/FONT][/FONT][FONT=Arial,Arial][FONT=Arial,Arial]that he/she became aware of during the research involved in performing the appraisal.
The appraiser is expected to consider and describe the overall quality and condition of the property and identify items that require immediate repair as well as items where maintenance may have been deferred, which may or may not require immediate repair. On the other hand, an appraiser is not responsible for hidden or unapparent conditions. In addition, Fannie Mae does not consider the appraiser to be an expert in all fields, such as environmental hazards. In situations where an adverse property condition may be observed by the appraiser but the appraiser is not qualified to decide whether that condition requires immediate repair (such as the presence of mold, an active roof leak, settlement in the foundation, etc.), the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender may need to ask the appraiser to update his or her appraisal based on the results of the inspection, in which case the appraiser would incorporate the results of the inspection and measure the impact, if any, on his or her final opinion of market value.
The appraiser is expected to consider and describe the overall quality and condition of the property and identify items that require immediate repair as well as items where maintenance may have been deferred, which may or may not require immediate repair. On the other hand, an appraiser is not responsible for hidden or unapparent conditions. In addition, Fannie Mae does not consider the appraiser to be an expert in all fields, such as environmental hazards. In situations where an adverse property condition may be observed by the appraiser but the appraiser is not qualified to decide whether that condition requires immediate repair (such as the presence of mold, an active roof leak, settlement in the foundation, etc.), the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender may need to ask the appraiser to update his or her appraisal based on the results of the inspection, in which case the appraiser would incorporate the results of the inspection and measure the impact, if any, on his or her final opinion of market value.
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18.
In what situations should a property be appraised "as-is" versus "as-repaired"? [FONT=Arial,Arial][FONT=Arial,Arial]
Fannie Mae permits an appraisal to be based on the "as-is" condition of the property as long as any minor conditions, such as deferred maintenance, do not affect the livability, soundness, or structural integrity of the property, and the appraiser’s opinion of value reflects the existence of these conditions. Minor conditions and deferred maintenance items include worn floor finishes or carpet, minor plumbing leaks, holes in window screens, or cracked window glass. Minor conditions and deferred maintenance typically are due to normal wear and tear from the aging process and the occupancy of the property. Such conditions generally do not rise to the level of a "required repair." Nevertheless, they must be reported.
The appraiser must identify physical deficiencies that could affect the soundness, structural integrity, or livability of the property as part of his or her description of the physical condition of the property. These may include cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, inadequate electrical service or plumbing fixtures, etc. In
[/FONT][/FONT][FONT=Arial,Arial][FONT=Arial,Arial]© 2009 Fannie Mae. Trademarks of Fannie Mae. FM Updated 0309 Page 4 of 7 The appraiser must identify physical deficiencies that could affect the soundness, structural integrity, or livability of the property as part of his or her description of the physical condition of the property. These may include cracks or settlement in the foundation, water seepage, active roof leaks, curled or cupped roof shingles, inadequate electrical service or plumbing fixtures, etc. In
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situations where an adverse property condition may be observed by the appraiser but the appraiser is not qualified to decide whether that condition requires immediate repair, the property must be appraised subject to an inspection by a qualified professional. In such cases, the lender must have the property inspected and any material conditions repaired before it delivers the mortgage loan to Fannie Mae. The appraiser may be asked to update his or her appraisal based on the results of the inspection, in which case the appraiser would incorporate the results of the inspection and measure the impact, if any, on his or her final opinion of market value.
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