FHA - Garage Conversion

[Chase UW]

Hello, I am an UW and have the following question. Does FHA allow a non-permitted garage conversion?

The customer converted a garage into a living area without permits. The appraiser is stating that the work was completed in a workmanlike manner, Can the appraiser give this area value? Does this area have to have a permanent heat source if there is a bedroom if he is giving it value? Would it be considered a health and safety issue without it?

 

[Mr Rex]

The Appraiser must treat room additions and garage conversions as part of the GLA of the dwelling, provided that the addition or conversion space:
• is accessible from the interior of the main dwelling in a functional manner;
• has a permanent and sufficient heat source; and
• was built in keeping with the design, appeal, and quality of construction of the main dwelling.

From the 4000.1 HUD Handbook

Room additions and garage conversions that do not meet the criteria listed above are to be addressed as a separate line item in the sales grid, not in the GLA. The appraiser must address the impact of inferior quality garage conversions and room additions on marketability as well as Contributory Value, if any. The appraiser must analyze and report differences in functional utility when selecting comparable properties of similar total GLA that do not include converted living space. If the Appraiser chooses to include converted living spaces as GLA, the Appraiser must include an explanation detailing the composition of the GLA reported for the comparable sales, functional utility of the subject and comparable properties, and market reaction. Alternatively, the Appraiser may consider and analyze converted living spaces on a separate line within the sales comparison grid including the functional utility line in order to demonstrate market reaction.

 

[Mike Kennedy]

https://www.HUD.gov/sites/documents/40001HSGH.PDF

ii. Appraisal Conditions Definition Appraisal Conditions refer to anything the Appraiser requires to occur or be known before the value of conclusion can be considered valid. Standard Conclusions about the observed conditions of the Property provide the rationale for the opinion of Market Value. The completed appraisal form, together with the required exhibits, constitutes the reporting instrument for FHA-insured Mortgages. Conditions of the Property, mortgage type and the market will determine if the appraisal is to be performed as-is, or if the value opinion needs to be conditioned upon an extraordinary assumption(s), a hypothetical condition(s), subject to an additional inspection, or completion of construction, repairs or alterations.



Pg 526 (3) Required Analysis and Reporting If the appraisal has no conditions, the Appraiser must render an as-is value opinion.

If the Appraiser must conclude the report under a hypothetical condition or extraordinary assumption, the Appraiser must report the issues and requirements as one of the following:
• “subject to completion per plans and specifications on the basis of a hypothetical condition that the improvements have been completed;”
• “subject to the following repairs or alterations (list them) on the basis of a hypothetical condition that the repairs or alterations have been completed;”
or • “subject to a required inspection based on the extraordinary assumption that the condition or deficiency does not require alteration or repair.”

 

[Mike Kennedy]

 Additions and Converted Space o Room additions and garage conversions are encountered frequently in the practice of residential appraisal. In general, HUD wants the Appraiser to treat them as part of the GLA — with some stipulations. B. Handbook 4000.1 confirms that “[t]he Appraiser must treat room additions and garage conversions as part of the GLA of the dwelling, provided that the addition or conversion space: ƒ. is accessible from the interior of the main dwelling in a functional manner; ƒ. has a permanent and sufficient heat source; and ƒ. was built in keeping with the design, appeal, and quality of construction of the main dwelling.” (Sec. II.B.3.d.iii)

https://www.appraisalinstitute.org/assets/1/29/Handbook_examples.pdf

 

[Howard Klahr]

Doing an FHA appraisal in California and the subject has an evaporative cooling system (http://smarterhouse.org/cooling-systems/types-cooling-systems). Does anyone know if FHA will have an issue with this type of cooling system?

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The appraiser states "the home was found to be cluttered with a large amount of personal property but no physical or functional inadequacies".

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Do the agencies have any issues with this type of roof?

Hello, I am an UW and have the following question. Does FHA allow a non-permitted garage conversion?

I am once again wondering, as an Underwriter, at what point your employer actually trains you to do your job? If there are issues for which YOU might be unaware I would imagine that somewhere in the vast resources of your company that originates FHA loans that someone there would have the answer to your question. Or is that such an unreasonable assumption? Do you not have access to the exact same appraisal guidelines for FHA that appraisers use?

 

[fractal7221]

I am once again wondering, as an Underwriter, at what point your employer actually trains you to do your job? If there are issues for which YOU might be unaware I would imagine that somewhere in the vast resources of your company that originates FHA loans that someone there would have the answer to your question. Or is that such an unreasonable assumption? Do you not have access to the exact same appraisal guidelines for FHA that appraisers use?

As a reviewer for a bank (though not an underwriter), I have often wonder why this poster has repeatedly asked underwriting questions on an appraiser's forum instead of consulting their company's policies and procedures, FHA or Fannie/Freddie guidelines, or simply asking their boss. It is also worrying that they are underwriting FHA loans. At least where I work, FHA underwriters are well seasoned conventional loan underwriters first. I feel bank reviewers already have a poor enough reputation on this site without added fuel to the flame.

 

[Fritz in NY]

Mike must have 4000.1 on his IPad and indexed to topics... But always right. Heat; check, access/egress, check, similar work quality, check
permits what are those? Not our SOW to find/obtain/verify/attach etc. just stating the facts ma'm.

 

[Terrel L. Shields]

I don't "give" value. Permits or not, the contributory value is what it is. It is not invisible.