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FHA Unpermitted Addition

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KYLECODY

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Senior Member
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Apr 26, 2003
Professional Status
Certified Residential Appraiser
State
Arizona
I will call the HOC tomorrow but does anyone have a direct cite in the Handbook regarding this? The online handbook is like a maze to me.

Original 900 SF home with an additional 700 SF added roughly 10 years ago without permits. To the naked eye they are similar and look as its all original. The addition is properly vented and "consistent" with everything else. The market does accept this as GLA readily as long as its well done in this area.

It is FHA though and the MLS listing even states "no permits" were obtained..Any steadfast rules? Due to lack of building permits was thinking of making it subject to an inspection by a structural engineer to state it is sound. Ideas?
 

CANative

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Professional Status
Certified Residential Appraiser
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California
You can now download a pdf of the 4000.1 and the Data Delivery Guide. There are two links at HUDCLIPS.

Not permitted. Not allowed (as in you can't have a bigger house)? Or something that is allowed but requires a permit and a permit was not obtained?
 

KYLECODY

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Senior Member
Joined
Apr 26, 2003
Professional Status
Certified Residential Appraiser
State
Arizona
You can now download a pdf of the 4000.1 and the Data Delivery Guide. There are two links at HUDCLIPS.

Not permitted. Not allowed (as in you can't have a bigger house)? Or something that is allowed but requires a permit and a permit was not obtained?
Addition, larger house, permissable. No building permits were obtained.
 

CANative

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Certified Residential Appraiser
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California
Okay. With the exception of certain programs and products, there is nothing in the 4000.1 that I can find them discusses legal structures where a permit was not obtained. And why should it? Describe the addition in objective terms, the permitting process, and the affect on value and marketability of properties where permits were not obtained. If it looks odd or not completed in a workmanlike manner then condition the appraisal on inspection. Otherwise just follow the Fannie Mae lead on this.
 

J Grant

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Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
My recollection from when I found an advisory on this is that FHA does allow financing on properties with non permitted additions, to receive credit for market returned value they want to see two comps with similar non permitted additions, that it is typical or market accepted in area and the work has to be done in a workmanlike manner. I dont' recall a rule about including it or not in GLA sf living area, I personally would not include permitted in as living area but if the addition is so integrated with original space it's hard to separate it out and there were two times in the past years I did include it with lengthy explanations and reports were accepted by lenders ,

I see no need to make it subject to engineer inspection unless you see visible damage or structural issues or exposed wiring or the like that would impact health/safety. I have done appraisals for FHA and non FHA with non permitted additions and did not make them subject to an inspection, I just disclosed that they were no permits were found /or done without permits.
 

Mike Kennedy

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Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
http://portal.HUD.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

.Appraiser and Property Requirements for Title II Forward and Reverse Mortgages (On June 30, 2016, this section will become section II.D)

PDF PAGE 508

.b. Application of Minimum Property Requirements and Minimum Property
Standards by Construction Status
i. Existing Construction
Definition
(A) Existing Construction refers to a Property that has been 100 percent complete for over
one year or has been completed for less than one year and was previously occupied.
Standard
(B) For Existing Construction, the Appraiser must notify the Mortgagee of the
deficiencies when the Property does not comply with FHA’s MPR.

ii. New Construction
Definition
(A) New Construction refers to Proposed Construction, Properties Under Construction,
and Properties Existing Less than One Year.

Proposed Construction refers to a Property where no concrete or permanent material has been placed. Digging of footing is not considered permanent.

Under Construction refers to the period from the first placement of permanent
material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.


Existing Less than One Year refers to a PropertY that is 100 percent complete and
has been completed less than one year from the date of the issuance of the CO or
equivalent. The Property must have never been occupied.

PDF PAGE 509

iii. Determination of Defective Conditions
Definition
(A) Defective Conditions refer to defective construction, evidence of continuing
settlement, excessive dampness, leakage, decay, termites, environmental hazards or
other conditions affecting the health and safety of occupants,

collateral security or structural soundness of the dwelling.

iv. Inspection by a Qualified Individual or Entity
If the Appraiser cannot determine that a Property meets FHA’s MPR or MPS, an
inspection by a qualified individual or Entity may be required.
Conditions that require an inspection by qualified individuals or Entities include:
•standing water against the foundation and/or excessively damp basements;
•hazardous materials on the site or within the improvements;
•faulty or defective mechanical systems (electrical, plumbing or heating/cooling);
•evidence of possible structural failure (e.g., settlement or bulging foundation wall,
unsupported floor joists, cracked masonry walls or foundation);
•evidence of possible pest infestation;
•leaking or worn-out roofs; or
•any other condition that in the professional judgment of the Appraiser warrants
inspection.

Appraisers may not recommend inspections only as a means of limiting liability. The
reason or indication of a particular problem must be given when requiring an inspection.

PDF Pg 533
iv. Conditions Requiring Inspection by a Qualified Individual or Entity
The Appraiser must notify the Mortgagee and make the appraisal subject to an inspection
by a qualified individual or Entity when the observation reveals evidence of a potential
safety, soundness,
or security issue beyond the Appraiser’s ability to assess.
_____________________________________________________________________

Poster p.s.
1. Which governing Municipality?

2. Does the Municipality require not only Build Permit but an Inspection and Compliance Certificate / Cert. of Occupancy?

IN MUNICIPALITIES WHICH REQUIRE COMPLIANCE
Typically BPs are issued to allow specific construction or changes to existing structures to be done in compliance with Building Ordinance(s). Upon completion, Bldg or Bldg./Zoning officer (in some cases dual role) - inspects the improvements and determines whether or not the improvement meets and/or complies with Municipal Ordinances for both Building and Zoning.)

When completed in compliance with plans submitted and approved, the Muni issues a close-out Completion / Compliance Certificate which supercedes the prior building permit(s).

Further - IN MUNICIPALITIES WHICH REQUIRE COMPLIANCE with Building and Zoning Ordinances/local/county/state (codes/laws) - building permits typically are dated and specify either one, or several, Muni Inspections (for ex. when a substantial addition to GLA is done).

Subsequent to Municipal Inspection, when the improvement(s) meet(S) ordinance requirements and appear to have been completed in a professional, workmanlike manner by either a property owner or licensed building professionals (that can vary Muni by Muni) - a Certificate of Completion/Compliance/Occupancy is recorded and issued.

IN MUNICIPALITIES WHICH REQUIRE COMPLIANCE
Lack of required BP(s), expired BP(s) typically represent violations of local, county and/or state Laws - construction done which is deemed by the Municipality NOT to meet required Building Ordinances may be ordered to be removed or reconstructed to meet Code(s) to make a dwelling legally habitable.
 
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glenn walker

Elite Member
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Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
Call your HOC and see what they say *** ask the appraiser to E-mail you his-her recommendation in this situation. !!
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
pg 491

iii. Additions and Converted Space 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. 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. The Appraiser must not add an ADU or secondary living area to the GLA.
 
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