Duplex converted to SFR assistance

[J Grant]

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.

This is opposite to what you wrote before. So now you are saying you would make the appraisal subject to the owner getting a permit and you seeing it? Because before you wrote that you would do the same as me, only you would make an EA that permits had been pulled. So which is it?

 

[J Grant]

Making an EA that permits were pulled gives no more protection to the lender, or no more protection of value if a non permitted change violates hazard insurance. The only protection an appraiser can provide is making the report subject to and then going back and reinspecting and seeing a permit and making a copy of the permit an putting it in the file.

As to comps sold, call the realtors. Sometimes they know about permits, sometimes not. Quite a few homes, partic in lower price level areas, are sold with legally permissable but non permitted changes to the structure. Often these changes still are shown in the market to have value. Lenders and FHA and Fannie have their own guidelines, give the client the information and let them apply their guidelines. If you want to play electrical code inspector or building inspector and make a report subject to owner getting permits, go for it. In the case of any unpermitted addition or illegal wiring, any condition that impacts safetly or health or is a zoning violation per legal use, then it is the appraiser's resonsiblity to make a report subject to. But don't claim making an EA that permits were pulled protects anybody, because it doesn't.

 

[J Grant]

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...

In the subject example, which is what we are addressing, the original use was duplex, now a few int changes were made to the walls, re removing a partition that separated access, but no changes made to the source of the electric. So the electric didn't change, the way the people use the house has changed. Your assertion this presents a safety hazard is baseless, as no wires have been changed, or "mixed" (in this case). The only thing that has changed is the owner's personal use of the house. The elect source has not changed because the owner is not renting the second floor out anymore.

 

[Webbed Feet]

This is opposite to what you wrote before. So now you are saying you would make the appraisal subject to the owner getting a permit and you seeing it? Because before you wrote that you would do the same as me, only you would make an EA that permits had been pulled. So which is it?

No it is not opposite. More, I cannot find where the original poster ever said the property owner specifically stated they did not get permits. What I read is the original poster merely stating no permits were obtained without any statement regarding the source of that information or if it was oral information, written information, or internet web site information.

Regardless, depending on the strength of information and the source, I would say an appraiser would be wise to either HC permits existed or EA permits existed, and appraise as if they did and were final approved. Along with requiring the property owner to prove permits were obtained and final approved. My suggested use of the EA was based on I did not read that the lack of permit information was in writing nor did I read a statement that the property owner had agreed permits were not obtained. So I gave the owner the benefit of the doubt. Others may do as they wish...

I disagree about the above not protecting somebody. It would protect me as well as reduce costs that I would charge for the extensive research needed, in my location, to find comps with similar issues in order to produce a CB1 report. I also disagree with many of your statements regarding the electrical, as I did not note that level of detail out of the original poster, so how could you know? Did the orginal poster state a electrical inspection was obtained, did the original poster personally inspect the electrical and posted confirming what you are now posting about it? Not that I see.

Again, I liked the original path you laid out.. I just would go a wee bit more myself on one as described. Again, I did not cause the appraisal problems, the lender did not cause the lending problems, the property owner did. I'd happily allow the property owner to solve all the problems, and I never need to see any permits for that to be accomplished.

 

[Mr Rex]

In the subject example, which is what we are addressing, the original use was duplex, now a few int changes were made to the walls, re removing a partition that separated access, but no changes made to the source of the electric. So the electric didn't change, the way the people use the house has changed. Your assertion this presents a safety hazard is baseless, as no wires have been changed, or "mixed" (in this case). The only thing that has changed is the owner's personal use of the house. The elect source has not changed because the owner is not renting the second floor out anymore.

Your ignorance of electrical or structural code is no excuse for a free pass, thats why CB3 & CB4 are there. The OP mentioned that they had "opended up the foyer" . Are you comfortable as a structural engineer that no permits are necessary? What if they removed key structural supports, load bearing walls etc?

 

[J Grant]

So Mr Rex, you would make the appraisal subject to the owner getting permits? Just so I am clear with what you are saying. RE your point of view, are we also home inspectors responsible for safety of occupants? Or does our interest in permits pulled and safety issues relate to value, what we are hired to do?

When we do an FHA appraisal, the sow assigns us specific areas where we perform a visual home inspection, and make the apprasial sujbect to curing the condtion and inspections, whether or not if affects value (lead based paint evidence pre 1978 etc). But in a non FHA loan, where do our duties lie? Are we home inspectors, calling for permits on everything an owner does that is not original, or are we sent there to estimate value, and whether or not the owner pulled permits, we derive our opinion on how the market reacts to the change as a value issue?

No matter how we think it affects value, we must disclose lack of permits, or uknown status of permits.

Webbed feet is saying that by giving an EA that the subject has permits pulled, he has solved the value issue, but I disagree with that. The value is in market reaction to the subject "as is", if we are appraising "as is". In some areas, changes to homes that increase utility and appeal command more in the market whether they are permitted or not. This is typical in less affluent areas.

In less affluent the market may not show a difference, because much of the times none of the work has permits to the older, depreciated homes.

In more affluent areas there is emphasis on getting proper permits and homes with non permitted work will often be penalized in the market, but in those areas, due to greater income levels, permits are pulled most of the time. So as in everything in appraisal, we are looking for market reaction,( asuming the changes on a home that may be non permitted, but are legally permissable.)

IF a non permitted change is also not legally permissable, then we cannot use market evidence that it is worth more, because it is illegal .

IFA garage has been illegaly converted to living space, for example, I will still call it a garage and not look for any market reaction, because this is a non legal change to the house. I will give a cost to cure to retrofit it back to legal garage use.

 

[Mr Rex]

If I am made aware of an addition that was made without permits, then you are damn right I'm CB3 or 4. You don't have to be a Home Inspector to realize you don't know what you don't know. Apparenently in your area no permits are so common that you can include that in you comparable search parameters so that you can make adjustments easily based on market reaction...:Eyecrazy:

 

[J Grant]

Now you've inserted the word Addition, which was not the specific issue we were talking about, a non permitted addition was not the subject of OP...that was a change of use from duplex to SF, not an addition..but for a non permitted addition, I would insist on permits or it would not get value.

When you say CB3 or 4, you would make a HC that permits were pulled, or always make a report subject to?

 

[Webbed Feet]

Oh Boy.

Brother Grant, we are really off track here...

<......snip........> IF a non permitted change is also not legally permissable, then we cannot use market evidence that it is worth more, because it is illegal .

Really? Then why would Fannie even place it in print that she'll lend on such creatures (to an extent in some situations) as long as we can show marketability via comps?

IFA garage has been illegaly converted to living space, for example, I will still call it a garage and not look for any market reaction, because this is a non legal change to the house. I will give a cost to cure to retrofit it back to legal garage use.

Ahhhhhh then I'd have to say you just appraised a hypothetical property. That no workie on current Fannie forms to do that lacking use of the proper reconciilation check boxes that bring in a hypothetical.

<.....snip....>..but for a non permitted addition, I would insist on permits or it would not get value.

Gag..... ahhhhh the market giveth and taketh away value, not us. Last I checked anyway.

When you say CB3 or 4, you would make a HC that permits were pulled, or always make a report subject to?

Too broad of a question. What it leaves out is that we don't have Xray vision and normally not the expertise to be declaring serious safety code violations to be what they are. Couple this with most lender/clients strongly resist providing the third party inspections needed for such declarations prior to seeing a completed appraisal report.... and you have the total and final answer why appraisers should be using HC and EA based appraisals far more than what they do. This general lender/client demand for CB1 appraisal reports, without third party inspections that are clearly needed, is nothing more than smoke and mirrors shifting of liability to appraisers in order to sell more loans.

The real problem is all the appraisers that have bitten down on the "We are not the permit police" mantra have swallowed the bite of the apple. They now procede to provide CB1 using reports on properties with problems, with no third party inspections, and with no similar comps to prove market reaction. They make unsupported, completely BS, adjustments, calling them "cost to cure" when the truth is they have no dependable information documented from any source to be making those adjustments with. Oh sure, they may have a book from Sears on remodeling, it's just that they really have no idea what is wrong or what is not wrong with the improvements to properly use their book. But they certainly are good at making crap up, as well as inserting HCs and EAs into reports that aren't supposed to have them. The appraiser that really has the background and skill to be taking on such assignments, while lacking any and all third party expert inspections, is probably one out of a thousand of us. Even then, I bet that one out of a thousand still has not done the needed inspection, most of the time, to really make it credible. Cuz that's tough to do consistently for $250 to $350 a pop.

 

[J Grant]

Webbed Feet, I'm a "sister", ( Grant is a last name used in screen name) Have a nice night!