FHA: Zoning and Mother-in-law Suite

[DanesinMI]

I am hoping someone can shed some light on this situation and point me in the right direction. I am looking into buying a home in Michigan and it is a foreclosure home through Fannie Mae. I've already had the inspection done, home is a 10 year old custom built and in ideal shape.

We just got the FHA appraisal back and they are saying the house is illegal due to it having an in-law suite built into the home. They are saying it has to do with zoning. The house is now in a R-1C zone as of the 03/2011 zoning map and in-law suites are only permitted in R1 and R1-A zones. I am not sure if the zoning has changed since the house was built. Would that make a difference?

Initially I thought it may have to do with the accommidations within the suite, but having read through the zoning and building codes for my area there are no regulations on what is included so long as they space is no more that 1400 sq ft. The city does allow for a full kitchen, full bath, seperate heat/ac and wiring.

I desperately want this house and need some guidance on what to do next. Having read through some of the forums and the report, I'm not sure if our appraiser was the most qualified person for the job. The bank handled the selection, I just paid the money. He has deemed the whole house illegal and thus not eligible for financing. Is there anyway to rectify or work around this?

I'm going to contact the Codes and Building offices in the morning to see if the house plans were approved, if there are any special permits on file for the property and if the zone has changed since the home was built. If the zone has changed, will FHA accept that as a grandfathered condition or does the zone have to be correct at time of inspection? Is there anything else I can do?

Thank you for any assistance!

 

[CANative]

If it was legal when built it is still legal. If the zoning has changed since then and in-law units are no longer legal to build it would now be considered "legal, non-conforming." FHA allows this.

The issue will likely be caused by a lender "overlay" which is their own peculiar requirement above and beyond what is required for FHA. They may demand to know if the addition can be rebuilt if destroyed.

 

[AnonApprsr]

Pull the stove if it isn't legal non-conforming (legal when built but not at current zoning.) IMHO a ADU (legal or not) is not an ADU without a proper kitchen including a stove. If this is a gas powered stove you may need a "plumber" or such to cap the pipe. If it's Electric, throw that bad boy in the garage, or under a sheet in a closet. I'm not making any determinations about morality but do what has to be done.

 

[Michigan CG]

Where in Michigan are you and what bank are you using?

 

[DanesinMI]

Lol Anon, we had a similar idea about just pulling out the kitchen cabinets. None of the appliances are in that kitchen anyways...just the spots and hookups for them. So it's cabinets and a sink right now.

"If it was legal when built it is still legal. If the zoning has changed since then and in-law units are no longer legal to build it would now be considered "legal, non-conforming." FHA allows this." That's what we figured...zoning laws change too often to expect all homes to be conforming and if it was illegal 10 years ago it wouldn't have been financed then either!


I went to the Codes/Zoning and Building Departments this morning and they said everything is fine with the house from their perspective, it is legal and in code. They were able to pull up the permit history for the house, it had 9 inspections on it during the building process and a final inspection at completion. The only thing they noted was there wasn't a paid permit for the second kitchens plumbing, but said that shouldn't be a problem if the house inspector said it was okay. We'd just need to file a copy of the inspection with them once the house is transferred to us. They said it is "legal, non-conforming" for the zone and there is a newer ordinance that covers such houses. As long as we don't rent out the inlaw suite or try to give it a seperate address the city doesn't have a problem with it. My realtor is going by this afternoon to get something in writing from them.

Hopefully that will resolve everything and I can still close this week before the city does tax reassessing on May 1! It took me about 20 minutes this morning at the city building to get all the information I needed, wish the appraiser would have done the same thing!

 

[CANative]

Lol Anon, we had a similar idea about just pulling out the kitchen cabinets. None of the appliances are in that kitchen anyways...just the spots and hookups for them. So it's cabinets and a sink right now.

"If it was legal when built it is still legal. If the zoning has changed since then and in-law units are no longer legal to build it would now be considered "legal, non-conforming." FHA allows this." That's what we figured...zoning laws change too often to expect all homes to be conforming and if it was illegal 10 years ago it wouldn't have been financed then either!


I went to the Codes/Zoning and Building Departments this morning and they said everything is fine with the house from their perspective, it is legal and in code. They were able to pull up the permit history for the house, it had 9 inspections on it during the building process and a final inspection at completion. The only thing they noted was there wasn't a paid permit for the second kitchens plumbing, but said that shouldn't be a problem if the house inspector said it was okay. We'd just need to file a copy of the inspection with them once the house is transferred to us. They said it is "legal, non-conforming" for the zone and there is a newer ordinance that covers such houses. As long as we don't rent out the inlaw suite or try to give it a seperate address the city doesn't have a problem with it. My realtor is going by this afternoon to get something in writing from them.

Hopefully that will resolve everything and I can still close this week before the city does tax reassessing on May 1! It took me about 20 minutes this morning at the city building to get all the information I needed, wish the appraiser would have done the same thing!

Congratulations and well done. I'm sorry that some appraisers don't do a better job or take on assignments for which they may not be fully qualified. It happens. A few years ago HUD/FHA lowered the bar for entry on their appraisal fee panel.

I'm glad you posted that long paragraph describing your research. There are some on this forum who believe that not getting a permit means that the improvements are "illegal" by definition. Your information tends to prove my point that this is not the case.

 

[23Degrees]

Not by definition - but if there is a requirement in the zoning code for a permit for a situation like this then checking legal could be viewed as misleading if an EA or HC has not been applied. And if no such requirement is in the zoning code then checking illegal could be viewed as misleading, barring the presence of any other zoning code infractions related to the structure, and I'd have to side with you.

As to proving your point across the board, as indicated before I believe we have clarity on this issue and the two groups can continue to amiably disagree. We can let the lawyers and E and O providers sort it out on a case by case basis.

And we must note:

"The only thing they noted was there wasn't a paid permit for the second kitchens plumbing, but said that shouldn't be a problem if the house inspector said it was okay. We'd just need to file a copy of the inspection with them once the house is transferred to us."

So all is good after the inspector comes out and says its OK and they file a copy with the city. Hopefully the inspector will say it is OK and all will be well. That is not always a guarantee and it might be prudent for someone to cover their rear end on situations like this. Without knowing more details it is difficult to say if this appraiser was absolutely in the wrong by checking illegal, but it seems as though there might have been better ways to handle the situation.

 

[Mike Garrett RAA]

Let your congressman know about this. There are far too many doing assignments they should not be doing. This primarily because of appraisal management companies hiring the lowest bidder rather than competent and knowledgeable appraisers. There are presently a number of bills making their way through congress dealing with real property appraisal and this is the kind of things your representatives need to know.

 

[Mike Kennedy]

Not by definition - but if there is a requirement in the zoning code for a permit for a situation like this then checking legal could be viewed as misleading if an EA or HC has not been applied. And if no such requirement is in the zoning code then checking illegal could be viewed as misleading, barring the presence of any other zoning code infractions related to the structure, and I'd have to side with you.

As to proving your point across the board, as indicated before I believe we have clarity on this issue and the two groups can continue to amiably disagree. We can let the lawyers and E and O providers sort it out on a case by case basis.

And we must note:

"The only thing they noted was there wasn't a paid permit for the second kitchens plumbing, but said that shouldn't be a problem if the house inspector said it was okay. We'd just need to file a copy of the inspection with them once the house is transferred to us."

So all is good after the inspector comes out and says its OK and they file a copy with the city. Hopefully the inspector will say it is OK and all will be well. That is not always a guarantee and it might be prudent for someone to cover their rear end on situations like this. Without knowing more details it is difficult to say if this appraiser was absolutely in the wrong by checking illegal, but it seems as though there might have been better ways to handle the situation.

You got it. Failure to do required Due Diligence and "assuming it all away". If he had done what he was required to do - the info provided to the OP by the Muni would have most probably been communicated to the appraiser and the Value OPinion rendered based on an H.C. Further, IF "all was not well" as of the Effective Date of appraisal i.e. required cert.of completion/compliance on file a - DETAILED explanation was required.

Concurrent thread:

http://appraisersforum.com/showthread.php?t=178394

 

[CANative]

You got it. Failure to do required Due Diligence and "assuming it all away". If he had done what he was required to do - the info provided to the OP by the Muni would have most probably been communicated to the appraiser and the Value OPinion rendered based on an H.C. Further, IF "all was not well" as of the Effective Date of appraisal i.e. required cert.of completion/compliance on file a - DETAILED explanation was required.

Concurrent thread:

http://appraisersforum.com/showthread.php?t=178394

The "misleading" part goes away by simply disclosing the observed property characteristics. An EA or HC is not necessarily necessary. The client can then make a decision as to what they want to do with the information. The appraisers job is to develop and report an opinion of value, as is.

The problem with dealing with improvements which lack necessary permits is that there can be some unknowns because there is no official seal of approval.