Garage conversion without permits

[Bill Tompkins]

I think I'm going to decline this assignment but curios what others would do. A 3BR/2BA has been converted to a 4BR/3BA via a garage conversion. I checked with the Building Dept. and no permits were granted. Should the property be appraised as a 3/2 with garage?

 

[Scott R Marshall]

First, how far back do the building permit records go and when was the conversion done. I say this because at least in my state, permits only go back so far and if there is the potential that the conversion pre-dates the amount of time the records are kept, there is no way for me to adequately determine whether it was permitted or not.

If it clearly is not permitted, then I would only proceed with completing the report "subject to" repair/alteration under an HC or appraise it "as-is". This nonsense of "figure out a cost to cure to convert it back to a garage" may not only be beyond the appraisers competency level, it may actually be contrary to how the market reacts to unpermitted conversions/additions. If the market considers it to have contributory value, then that is how I'm going to appraise it, with disclosure as to how the market currently reacts to unpermitted additions and/or conversions. If a typical buyer or seller would find it unreasonable to convert it back and/or remove it, why should the appraiser? If this is not appropriate per the clients guidelines, then at that point I would decline the order for no other reason that it is an unacceptable assignment condition, in my opinion.

Of course, if your market is different and the local municipality actively penalizes "illegal" additions or conversions, if homes can't be sold if they're in place and/or buyers and sellers would find it reasonable to remove/convert back to what is "legal", then I guess you could appraise it the 3/2 way, but I still would probably only appraise it "subject to" unless I was given bid(s) of what it would cost to remove/convert.

 

[NorthTexValuation]

Estimated cost to cure ("re-convert" back to a garage) can sometimes be very easy, especially if the garage door and/or railings are still in place or the conversion is of less than average quality.

What is the quality of the conversion? Similar to the rest of the house or did they just throw up some sheetrock and put carpet on the slab?

Also, you need to examine the subject market area and see how common garage conversions are.

For instance, there are neighborhoods I know of that have 900-1100 sf houses built in the 40s and 50s with one car attached garages and at least 75% of them have been converted to a family room or game room. And most of these conversions are of good quality similar to the rest of the house.

 

[Mike Kennedy]

I think I'm going to decline this assignment but curios what others would do. A 3BR/2BA has been converted to a 4BR/3BA via a garage conversion. I checked with the Building Dept. and no permits were granted. Should the property be appraised as a 3/2 with garage?

Location and governing local Municipality?

 

[PhiloFarnsworth]

I would check the order carefully as to how they want you to proceed. Typically, if the addition/alteration is truly outside of local compliance, the client wants you to not count the illegal area(s) in GLA. However, there may be significant contributory value that may be added elsewhere. "Cost to cure" can be tricky as, depending sometimes on the personal whim of the local authorities can range anywhere from paying off a fee to pulling down some drywall to completely removing the changes. It seems that the banks are now putting a lot emphasis on whether all alterations have been made legally. Because of this change, minor un-permitted work that previously did not affect marketability may now significantly affect the ability to finance a sale. Add a trend of local authorities requiring more expensive and exacting requirements (sometimes only to enhance revenue) and a vicious circle ensues.

 

[Mike Kennedy]

I would check the order carefully as to how they want you to proceed. Typically, if the addition/alteration is truly outside of local compliance, the client wants you to not count the illegal area(s) in GLA. However, there may be significant contributory value that may be added elsewhere. "Cost to cure" can be tricky as, depending sometimes on the personal whim of the local authorities can range anywhere from paying off a fee to pulling down some drywall to completely removing the changes. It seems that the banks are now putting a lot emphasis on whether all alterations have been made legally. Because of this change, minor un-permitted work that previously did not affect marketability may now significantly affect the ability to finance a sale. Add a trend of local authorities requiring more expensive and exacting requirements (sometimes only to enhance revenue) and a vicious circle ensues.

Example re OP
2004 Lancaster Township
http://www.twp.lancaster.pa.us/planning-zoning/building-code

1997 Section 103 - last sentence and Section 104
http://www.twp.lancaster.pa.us/planningZoning/articles/art1.htm

2004 Pennsylvania Construction Code Act
See Scope
http://www.pacode.com/secure/data/034/chapter403/s403.1.html

 

[TrioAppraisals Group]

Hypothetical senario for you all.

I have a client that has a steadfast rule that if a home has a garage conversion or any unpermitted addition they will not complete the loan. If while scheduling the inspection you became aware of a conversion/unpermitted addition present at the subject property would you advise the homeowner that the lender does not deal with homes having said feature to try and save them the money on an appraisal that will be worthless or would you complete the assignment to collect a fee knowing full well that the lender won't proceed b/c of the addition/conversion?

 

[J Grant]

I would tell the HO that you need to verify something with the lender before setting the appointment, or confirming the appointment.. I would then call the lender, tell them you found out in conversation that HO has a garage conversion or non permitted addition, and ask them how they want you want to proceed.

The HO is the lender's customer, not yours, I think it is inapporpriate to to cut off the two...because maybe the lender will do the loan if the HO converts garage back , and maybe a HO is willing to do so. I would let the lender know, however, in case they want to cancel with the HO.

 

[eld2310]

I agree that notifying the client and asking them how they would like to proceed is the best way to go. When communicating with the client I try to convey to them how "garagy" the conversion is...would it be less expensive to convert it back to a garage (i.e., amateur work, no new walls or plumbing, garage door still affixed behind the drywall, etc.), or is the work professionally done and would require significantly more cost and time to change it back than to just go through the permit process? Also, have they built a separate garage or carport, or is the market accepting of homes without covered parking?

There's not really a one-size-fits-all answer, IMO.

.

 

[Lobo Fan]

This is something the loan officer should clear before ordering the appraisal.