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Finished Basement w/No Permit in NC

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Brookie

Thread Starter
Sophomore Member
Joined
Oct 10, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
I'm working on the assignment of a refi in Union Co, NC of a newer property. It was purchased with an unfinished basement from the builder and the homeowner finished about 75% of the basement. He did a nice job- very nice addition to the living space. He had a bath rough-in installed with a lift pump for a future bathroom. BUT- he did not pull permits. How would you treat this in the report?
 

Michigander

Senior Member
Joined
Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
Would the typical buyer pay extra for it regardless of permits?
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Fannie, VA, FHA, non-mortgage assignment?
 

Brookie

Thread Starter
Sophomore Member
Joined
Oct 10, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
If permits were not an issue definitely yes- it adds value.
 

Michigander

Senior Member
Joined
Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
Do most buyers check?

What if you were looking at basement finish that was say, 5 years old; would you be checking permits then? Would buyers be?
 

Ken B

Elite Member
Joined
Feb 18, 2004
Professional Status
Certified General Appraiser
State
Florida
Can you assign value to an illegal use?

Legally, could the code compliance department require the non-permitted improvements be removed?

If you appraised the property at $zzz bucks and included a value for the non-permitted improvements and the property was insured based upon the results of your appraisal, could you be sued should the insurance company, if the improvements burn down, refuse to honor a claim when it discovers that no permits were issued for the basement work?
 

Brookie

Thread Starter
Sophomore Member
Joined
Oct 10, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
If I disclose, which of course I would, in the report that the improvements are not permitted but are given value and also state, which I do, that my report is not to be used for determination of insurance value, would an insurance company have a case?
 

Ken B

Elite Member
Joined
Feb 18, 2004
Professional Status
Certified General Appraiser
State
Florida
You might want to ask your E&O carrier that question.
 

Michigander

Senior Member
Joined
Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
Much depends on your area. Some communities have lax standards and would only require a fine, others might require inspection and a fine, while some others would require removal. You could ask the building department, hypothetically (not giving any information about where the property is) what they would do if they found an unpermitted basement finish. Remember, this is not an addition, this is work within the house. It might not be a big deal depending on the standards of that community.
 
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