Garage Conversion Being Used As Bedroom With No Closet

[Mr Rex]

Never and no one I have talked to can ever support that adjustment.

Big difference here between 3 or more and 2 or less. BIG.

 

[George Hatch]

The purpose of the assignment is to develop the opinion of market value. Which in this case means figuring out how the market will react to this attribute. Not how the lender or even Fannie will react to the attribute. At whatever point the lender's policies start infringing on your analysis you are moving away from your honest opinion of the value in the market and instead reflecting the value to the lender - a mortgage lending value that's being mischaracterized as MV.

In the case of unpermitted garage conversions one possibility is that the everyone involved will treat it as a bedroom regardless of its permit status. Also possible that the local jurisdiction will allow that use to continue without requiring its removal. However, that depends on the jurisdiction - some jurisdictions are real strict about prohibiting such uses to continue once they come to light. Knowing the answer to that question may require looking into it with the city - that can be asked over the phone as a hypothetical without identifying the specific property in question.

Another question that arises is whether the property is insurable when there's an unpermitted improvements onsite. What happens if a fire starts in an unpermitted area and spreads to the rest of the house?

One thing I've done on a number of occasions is to treat the unpermitted area as an additional feature, similar to a patio or pool or solar. I will sometimes base the adjustment on what I think the market participants are actually doing with those. Maybe that factor is equal to the GLA adj factor and maybe it isn't.

I think these are opinions to be developed, not assumptions to make.

 

[CANative]

I use 4 for 4 and I have to put in at least one no matter what. The reconciliation process (including narrative comments and additional data) is needed.

4 bedrooms in a 3 bedroom size house is functionally obsolescent and there is sometime wrong there. Unless it is a Brady Bunch neighborhood, but then the 4 bed houses are just bigger.

3 bedrooms in a large house can indicate quality and a different class of housing/buyers.

 

[CANative]

Another question that arises is whether the property is insurable when there's an unpermitted improvements onsite. What happens if a fire starts in an unpermitted area and spreads to the rest of the house?

This is not a safety hypothetical. It is a matter of how the most likely buyer would react to slightly higher risk of their family burning to death due to the converted garage. How many buyers think that rather than "Snap, an extra big bedroom or a place to play pool and drink beer!"

 

[ramrcdk]

The purpose of the assignment is to develop the opinion of market value.
One thing I've done on a number of occasions is to treat the unpermitted area as an additional feature, similar to a patio or pool or solar. I will sometimes base the adjustment on what I think the market participants are actually doing with those. Maybe that factor is equal to the GLA adj factor and maybe it isn't.
I think these are opinions to be developed, not assumptions to make.

Per Specific Thread Post: WELL then, Ditto-ed. You get an " A " and need to do nothing more than respond back to your client, as you said earlier.

 

[Tim The Enchanter]

"Snap, an extra big bedroom or a place to play pool and drink beer!"

I'd guess this is the most likely type of use. Pool table and beer fridge. I hope there's a half bath in there.

 

[Michigan CG]

Big difference here between 3 or more and 2 or less. BIG.

Not here or other states I have worked in.

 

[Tim The Enchanter]

Oh c'mon, 1200 Sf and 4 bedrooms makes for a spacious floor plan.

 

[ucbruin]

It's good to have the book....
It translates well to many neighborhoods....
In several states....

 

[Terrel L. Shields]

no one I have talked to can ever support that adjustment.

Well, you can...a 4 bed house can rent for more than a 3 bed house especially when you have large families in the market. Pre-2007 rentals drew a measurable amount more in rents for a 4th bed due to an influx of carpenters and workers with larger families. They needed the extra rooms but were not picky about size. I did a lot of regression analyses that clearly demonstrated a value to a 4th bedroom, but as always, the wild card is to make sure you are not double dipping along with SF. When building collapsed that premium begin to deflate but a difference in 3 or 3+ and 2 bedroom homes remained. It was noticeable especially in older lower rent houses. The workers packed up and went somewhere else. But they are back now and we are booming construction wise in NW Ark.