Garage Conversion not permitted

[sputnam]

Dear Client,

You requested the current as is market value of the subject property. That is what I have provided. If you know want something else, I can provide that for a fee. You will need to send me a new appraisal request specifying what you want.

 

[Tom D]

you have pictures of 5 bedrooms & 3 baths with a drawing. what are they going to question? anywhere you like, you just comment that the garage was converted to living area. neither fannie, or FHA, care about that permit. now the underwriter might want comps with those extra items to see if they add value, or is that an over improvement. the lack of a garage & the extra GLA rooms might cancel each other out in terms of value & marketability. i live in a big city where a lot of stuff is done without permits, and i don't have hours to go look at a city folder. i would have to close my business if i had to show permits. now i know that some of you permit perfectionists will argue. it a business decision & has never been an issue in all the years i have been appraising.

 

[ucbruin]

Possibly an insurance liability issue....
Homeowners insurance policies may deny a claim if work to a home is not permitted....

 

[ucbruin]

"Per the borrower, they did not obtain permits from the city for it."

"Address whether or not if the garage has been legally converted to living area and if the additional bedroom/bathroom are legally permitted and if they are, provide permit # and what the permit was approved for..."
"If there are no permits, the lender will not accept the appraisal as written, as such no contributory value can be given."

In the original report, did you include a blurb stating what the borrower told you....

 

[Bobby Bucks]

Possibly an insurance liability issue....
Homeowners insurance policies may deny a claim if work to a home is not permitted....

Very true, also I would not wish to run the risk of involving my own insurance ( E & O), not to mention licensing boards and attorneys looking for anyone involved with a license and E & O policy. I know someone who painted himself into a corner with what he believed to be a "duplex" which wasn't truly a duplex, it did not end well for him when the various gestapos completed their tasks.

 

[J Grant]

Possibly an insurance liability issue....
Homeowners insurance policies may deny a claim if work to a home is not permitted....

Very true, also I would not wish to run the risk of involving my own insurance ( E & O), not to mention licensing boards and attorneys looking for anyone involved with a license and E & O policy. I know someone who painted himself into a corner with "duplex" which wasn't truly a duplex, it did not end well for him when the gestapos ended their tasks.

If you disclosed in the appraisal the garage conversion had no permit/none found, how would the appraiser be responsible for the homeowner insurance policy ? Fannie and Freddie accept properties with areas or buildings or conversions with no building permit.
A decision by an insurance company to insure or not insure these areas has nothing to do with the appraisal. Does an insurance policy even see an appraisal when they UW a policy? (I doubt it) They work off cost tables and have their own internal guidelines what they insure or don't cover and if an owner lies to them or the insurance company does not due their own diligence wrt to permits it that matters, how is that linked to an appraiser?

What does it have to do with an appraiser who said a duplex was not a duplex...

Nobody is saying to hide the information. Full disclosure, no permit found in online/other effort, owner said no permit was pulled etc. My county and many counties I believe has an easy online search for permits .It only goes back a couple of decades but it is very good.

 

[Tim Hicks (Texas)]

Some cities in Texas will do post construction permits (Burleson is one that will do it for sure). See if that is an option.

 

[Mark K]

It looks like they need a report that is subject-to the removal of the garage build-out and converted back to a garage. I don't see a big issue here.

What do you think it would cost to demo the garage interior? $5K, $10K? Then add back in the garage for its contributory value. Make the report subject-to.

or...

You can base it on the HC that the above has been completed. Let the lender know that it HAS to be one or the other, Subject-to or based on a HC. See which one they want.

As-is = as-is, based solely on the market reaction, not based on their underwriting guidelines and it looks like that's not acceptable to them.