Guest House And GLA

[slush1422]

Hello,

First, I'm not a home owner complaining because I didn't get the appraisal value I was hoping for. I have questions, about how guest homes are valued and guest home comps. Here's my story:

We recently purchased a home that is ~2100sf with a permitted ~700sf attached guest house (Full kitchen, 2BR and 1BA). In order to access the guest house, you need to enter the garage from the main house, and then enter the guest house from the garage. Or just enter the guest house from a separate entrance. The appraisal we got when we purchased the home included the guest house as GLA and used comps in the ~2800 range which I've now learned probably wasn't correct.

We got an appraisal for a refinance this week and this appraiser did not include the guest house as GLA, which seems correct.

My question is regarding comps. Because my guest house was permitted it is included as square footage in the tax roll. So we show 2800sf in public records and MLS.

In comps, the appraiser only included homes that were 2100sf without a guest home with the exception of one. This one the MLS description noted that although public records only showed 2100sf, the property also had a 300SF guest house. In other words, it is likely an unpermitted guest house.

I gave the appraiser a home that sold three doors down from me where the description shows it has a guest house and the public record square footage is 2800sf. He did not use it and did not mention why.

Some questions.

Since permitted guest homes will add square footage to the public records, and MLS shouldn't the appraiser be looking for higher square footage in effort to find homes with a guest home?

If not he is likely only finding unpermitted guest homes, would those carry the same value?

Does the size/condition of the guest home enter into it at all? Mine was built in 2005 and is 2x the size of the one he referenced but he applied the same value to them both.

Lastly it seems very strange that he did not include the closest recent sale to me AND it includes a guest home. My guess is he wasn't even looking in that range?

Hope all this is making sense.

You guys have a tough job and I respect what you do.

Thanks for any help you can provide.

 

[slush1422]

To add one more Item, there was this statement:

"Subject last sold 11/21/2014 for $574,000. This was a short sale and appears to have sold below market value. Since subject was purchased the owner has completed interior painted, replaced floor coverings, replaced doors and updated the half bath which have contributed to an increase in value."

So, I bought it below value, AND made improvements, yet it only appraised at $580K?

 

[Randolph Kinney]

I can't say on the value because I don't know your neighborhood. Question: How much does a 2100 sf home without a guest house (granny flat) sell for?

The granny flat from your description does not function as GLA since you either enter it from the outside or by going through the garage.

 

[slush1422]

I would guesstimate around $590K based on some of the comps he used and my own.

 

[RSW]

Hello,

First, I'm not a home owner complaining because I didn't get the appraisal value I was hoping for. I have questions, about how guest homes are valued and guest home comps. Here's my story:

We recently purchased a home that is ~2100sf with a permitted ~700sf attached guest house (Full kitchen, 2BR and 1BA). In order to access the guest house, you need to enter the garage from the main house, and then enter the guest house from the garage. Or just enter the guest house from a separate entrance. The appraisal we got when we purchased the home included the guest house as GLA and used comps in the ~2800 range which I've now learned probably wasn't correct.

We got an appraisal for a refinance this week and this appraiser did not include the guest house as GLA, which seems correct.

My question is regarding comps. Because my guest house was permitted it is included as square footage in the tax roll. So we show 2800sf in public records and MLS.

In comps, the appraiser only included homes that were 2100sf without a guest home with the exception of one. This one the MLS description noted that although public records only showed 2100sf, the property also had a 300SF guest house. In other words, it is likely an unpermitted guest house.

I gave the appraiser a home that sold three doors down from me where the description shows it has a guest house and the public record square footage is 2800sf. He did not use it and did not mention why.

Some questions.

Since permitted guest homes will add square footage to the public records, and MLS shouldn't the appraiser be looking for higher square footage in effort to find homes with a guest home?

If not he is likely only finding unpermitted guest homes, would those carry the same value?

Does the size/condition of the guest home enter into it at all? Mine was built in 2005 and is 2x the size of the one he referenced but he applied the same value to them both.

Lastly it seems very strange that he did not include the closest recent sale to me AND it includes a guest home. My guess is he wasn't even looking in that range?

Hope all this is making sense.

You guys have a tough job and I respect what you do.

Thanks for any help you can provide.

I believe you are correct in your thinking. The appraiser should have expanded the search to homes with larger GLA in order to attempt to locate sales with a guest house. The appraiser should have at least considered the sale you gave him. He may have researched It and found that it was not what it appeared to be. I don't know. It could be that the appraiser does not have the experience necessary to appraise a property with a guest house. Why don't you give the sale you found with a guest house to the lender and have them send it to the appraiser and ask why it was not used in the appraisal report. He would have to respond to the lender one way or the other.

 

[hastalavista]

Similar, comparable homes to yours at 2,100sf without guest houses sell for $590k.
Your house (without the guest house) is 2,100sf.
Your house was valued at $580k with its guest house.

Is that what happened, or do I misunderstand the breakdown?

Your guest house isn't GLA which you acknowledge as being correct (and I agree with that as well).
Your guest house is permitted; your question (a very reasonable one) is, "should my house with the permitted guest house be worth more than those homes without the permitted guest house?"

That answer is "it depends" and sometimes if there is a value difference, it isn't that significant.
There are some areas in San Francisco (for example) where finished units with and without permits sell for nearly the same price: so close that it wouldn't make sense to adjust for it in the grid. But if it is the subject that has the permits, one might want to consider that in the final value reconciliation and conclude a value a little higher than one might otherwise.
In other areas, permits are very important; again, in San Francisco, there is certain zoning that does not allow for 2nd units... period. And if the city finds out, they'll have the 2nd unit altered (rip out the kitchen, perhaps rip out the bath) so it cannot function as a unit. In that case, a guest unit that has a permit (and therefore is consistent with the zoning) likely has a lot more value than a guest unit that isn't permitted in a zone that wouldn't allow it to begin with.

If you have access to the sale data of the homes with guest units but without being permitted, and you can find out what real estate agents sold them, I'd recommend you call them and ask them what they think. They probably have a good idea if a permit makes a difference or not. If they say "yes", that will make your request to your lender to ask the appraiser about the situation more persuasive. If they say, "no", that's probably strong evidence that permits don't make a difference.

You shouldn't "have to" do this kind of research; the appraiser is presumed to have done this kind of research. But you may not get the question answered to your satisfaction unless you initiate the action.

Good luck!

 

[Randolph Kinney]

I would guesstimate around $590K based on some of the comps he used and my own.

Guest houses generally are marginally contributory in value and my experience is less than 10% of the total value. It depends your market and the comps. For sure the appraiser needs to select "comparable" properties to bracket both the GLA of the main house and if they exist, the guest house.

 

[slush1422]

Dennis - I did slightly mistype earlier. Appraiser valued my home at $585K.

Other than that, you are right.
Similar sqft homes without guest houses $590
Ours with guest house $585k

Now there would be condition adjustments I recognize too. We've done a ton of work on our place and still some more to go. Its the value of the guest house (or lack thereof) that has me most troubled.

Randolph - I am OK with that, if he valued the guest house at just 5% of total value I wouldn't even be typing to you guys. He valued the guest house at $15K, and my pool/spa at $10K

The home we sold in April also had a guest house (unpermitted converted garage). It was a 1BR/1BA 486SQFT and valued at $20k and had an older pool only (no spa) valued at $15K

No good matches for recent guest house sales, but found two that are listed at close to 3000sqft (~2200sqft homes with 700-1000sqft guest house) that are listed for $895K. They are a little further away from me (same city within a couple of miles max), and are stunning homes. I'm not saying mine would be worth that but wondering if there is any way I can use active listings to support my claim that guest houses carry value, since there aren't any recent ones?

The sad part of all this is, I dont need a huge increase in value. I need $15k.

I recognize homes with guest houses are not easy. The home we sold in April had a guest house and originally appraised for $433K, we helped the buyers rebut the appraisal (it was very poorly done through an AMC). Lenders convinced the AMC to order a new one and it came out at $475K.

Next steps is to do some more research and talk to my lender tomorrow.

Thank you all for your advice so far.

 

[Randolph Kinney]

You can submit homes to the lender for the appraiser to reconsider value. Make sure you have both with and without guest houses. The ones you describe as $895k mostly likely are not valid comps.

 

[Tim The Enchanter]

First, I'm not a home owner complaining because I didn't get the appraisal value I was hoping for.

The sad part of all this is, I dont need a huge increase in value. I need $15k.

Oops.

Anyway, it sounds like you know what to do to try and solve your issue, so good luck.