House with addition/no permits

[Bemis Pownall]

I did one were there was very little insulation, no drywall,no floor covering, no finished anything, microwave kitchen.
And they were living in it. Took them 2 years to get that far.
"A" borrower no less.
Permits?? I doubt it county would never let them live in it and with all the elecrical laying around was a safety hazard for sure. If there are permits the inspector should be in jail..Need a CO to live in a home.
PLANS AND SPECS!!!!

 

[xmrdfghap]

<span style='color:brown'>Dee Dee, I would tend to appraise it as is rather than include speculation (and unless you verify that no permits were issued for the addition, then the owners claim should be treated as speculation) as a basis for adjustment.

Why would a guy lie about it? Maybe he wanted to "brag" about how clever he was, and if I can think of one reason, some one really smart could think of several.

I would include a comment about the addition being a different apparent/effective age than the balance of the home, or that it "appeared" to be a recent improvement. I would treat it much like I would termites, LBP, and environmental problems...........a disclosure dealing with the problem and recommending a proessional inspection. I also do a similar disclosure when I encounter a discrepancy between CHR footage as opposed to what I measured.

In short, I would note it, but not adjust for it.</span>

 

[Tim The Enchanter]

Interesting to see how people handle this issue different ways. Sounds like our county records are better than some, although I never thought they were very current or accurate. :lol:

The way I've usually handled an addition that did not appear in the public records, i.e. it's zzz SF bigger or extra baths or rooms or whatever, is
No Permit = No Value.

I put it on the sketch, tell them all about it, hopefully it "appears to have been built in a workmanlike manner, conforming to the original structure". Then it gets NO value, may as well not exist.

If they tell me it's permitted but can't provide copies, it's "if zzz addition should prove to be unpermitted, appraiser reserves the right to modify the estimate of market value". And I never go to building and safety. Give me the copies, or get the cya language. 8)

Did one recently with no value to the maybe 400 SF enclosed patio, 200SF den addition, extra 2 car garage in back, and second unit / guest house of about 800 SF. All newer than the house. Agent told me he thought was permitted as "storage", but the sale price was perfectly reasonable even with no value to all that, and they've not called back with any questions.

Knock on wood.

 

[Oregon Doug]

Dee Dee - Do a quick read of SR 1-1(b) - then disclose it, no matter who says not to!

The various taxing bodies may aproach this differently in various communities but you can just bet that if you FAIL to disclose it, you are gonna have a problem.

I've had a long chat about this with our county assessor and I suggest that you (and the rest of you too) do the same with the assessor in your county.

The law in my county is that the tax assessor MAY re-assess the property back a maximum of 5 years for any uncollected RE taxes due on any non-permitted addition, including penalties and interest on the unpaid balance for the entire five year period AND require the owner too obtain (and pay for) a building permit. The building inspector WILL require the work to be inspected and completed to CURRENT building code. It is REQUIRED that any covered work (plumbing, electrical...) be exposed for inspection (i.e. tear out all that expensive painted sheetrock).

The current owner is held liable for all these costs - regardless of when he purchased the property or if he did/didn't do the work. You can see what this means to the guy that purchased the house just yesterday!

Every county needs money so the assessor typically will persue these collections issues and since it's in most county regulations/laws/codes -he'll win hands down. Of course you know who Mr Angry home owner is gonna go after. (1) the seller - who by now lives in some little island off the coast somewhere. (2) the Realtor - who don't know nutt'n and tells everybody that the appraiser did it and/or (3) the lender - deep pockets - who is gonna blame the appraiser for failing to disclose it. You know that someone in the pack is gonna file a complaint against you with your state board just to build their own case.

In the end, everybody is going to go after the appraiser.

Just disclose it up front and save yourself a lot of grief!

Oregon Doug

 

[Jo Ann Meyer Stratton]

My current two counties have building permits that are concerned with set backs or number of living units on a site. There are not building inspectors or building codes required to be followed. Unless the construction is completed by a licensed contractor who should follow the states version of Uniform Building Code or run the chance of losing their license. But there is no inspection to verify that the code was followed unless a complaint is filed with the state. The county assessor does get copies of the building permits (if one was applied for) and then makes changes or notes on their property record card. I get copies of the property record card with the sketch, so then I have info of when each section of the home was constructed. Then I make a decision based on what is observable to whether to include it in the livable area, show as an enclosed garage or enclosed patio or storage area. My sketch is very detailed with each area deliniated regardless of how I have treated it. I also explain in my addendum the construction quality, materials and workmanship of each area. A big factor in my determination of how it is handled is how will the market consider it. Will they consider it as a 1400 square foot house with a family room or fourth bedroom or will they consider it a 1200 square foot house with three bedrooms, no covered parking and a storage area, etc. But the main thing is that I disclose and describe very throughly the construction of the subject. By the way, I have an assessor's property record card with a sketch for each of my comparables also, so if there has been any physical changes in the past 35 years to the subject or a comparable, I have a record. Don't have any information on building permits since we don't have building inspectors. So disclosure, explanition and what ever is typical of your subject market should determine how the problem is handled.

 

[Joe Birrell (NY)]

I'm not the buildings department and the limiting conditions indicate that the property is appraised on the basis of it being under responsible ownership, I take that to mean additions, etc. are legal. If it's discovered
during underwriting that the extension is illegal, there are two choices available to the property owner: make it legal (file permits, get approvals, etc), and/or remove it. If it has to be removed (say the extension), then
there's a minus adjustment to the prior value estimate. If it is a situation that is so obvious (say poor workmanship), then it gets mentioned in the report. It is what it is. I don't bother to ask property owners about permits, because they all lie. Good underwriters (if there is such a thing)
should spot building violations already on record againist the property.

 

[Farm Gal]

Soooo many of these discussions come back to KNOW THE RULES of/in THY MARKET

It is interesting how much of those rules a seasoned appraiser absorbs over the years, while a newbie blithely runs in ignorance, and thinks "well THIS ain't so hard!!!" :roll:

I think that some of these items should be compiled and added to a required list of knowlege to appraise in your area! Which we should use ot educate the public/lenders/ users of reports as to what all a cometent appriaser has to know/do!

 

[Dee Dee]

How about this as a standard disclaimer:

"Appraisal is based on the assumption that all additions and improvements that are not indicated in public records have been legally permitted and assumed to meet all county building and safety code standards. Failure to meet these standards could adversely affect the value of the property, therefore it is advised that compliance with these codes be verified."

Forumites, please help me fine tune this! Any input would be appreciated.

 

[BarbaraNJ]

Dee Dee--
Your disclaimer is very good. The only suggestion I have is to change "could affect value" to "may affect value" . I would enlist the advice of an attorney for wording if you have someone you can consult for advice without having to incur any costs.


*****************NEXT********************

ARE ANY OF YOU ARE BUILDING INSPECTORS AS WELL AS APPRAISERS ??? I AM !!!!


I have been appraising for about 20 years, and roughly five years ago took the three years of courses and four two hour exams to receive NJ State Licenses as an ICS Building Inspector, Building Subcode Official and Construction Official.

Because of the combination of licenses that I have (licensed real estate sales also) I have consulted the State Board with regard to conflicts many times. They have led me to believe that I may be the only (active) Certified Appraiser with the Building Licenses also.

While I do perform Code Enforcement for a local municipality, appraising is my "full time" job and the means of paying my bills.

This is my BEST ADVICE:
An appraiser is not a home inspector, building inspector, underwriter, lawyer or tax accountant. You cannot make a definitive statement about building construction any more than you can give a legal opinion, tax opinion, advice on mortgage applications, working condition of appliances or utilities, etc. without getting in a bunch of trouble. Do you have any idea how many water heaters I see that are installed incorrectly so I am positive that they must have never pulled a permit because they would have never passed an inspection?? On an appraisal, I only need to see that they have one in (apparently) working condition, not certify that it works or was installed according to Code or with a permit.


1. You CAN (and should) report on any thing that is visible (foundation cracks, peeling roof shingles, interior evidence of leaks, etc.
2. You CAN (and should) report if ANY part of the home appears sub standard (in construction quality)when compared with the REST of the house, or appears to need work (paint, spackle, plastering, etc.)
3. You CAN (and should) report anything that a homeowner says to you that, in your OPINION AS AN APPRAISER May affect value.

I spent three years in school (NJ home inspectors currently take a course that lasts no more than 30 days) and STILL don't know everything about construction and don't feel comfortable making statements about construction in an appraisal report.

Stick to the following: Items required by the FNMA report, items visible and homeowner provided information. On the flip side of getting in trouble for non-disclosure------if you disclose something that a homeowner tells you, its' your word against theirs. If your disclosure "kills" the deal, you could STILL GET SUED by the homeowner or realtor or anyone else who thinks they were financially harmed by your disclosure, esp. when the other party is denying, denying, denying. Even if you are found right, you have likely already spent money for some attorney representation.

SUGGEST flood certification, asbestos inspection, structural inspections, permit research, lead paint investigation, etc. if any of these items apply.
As long as you say that "I told you so" as far as additional investigation, you SHOULD be "covered".

Always happy to answer any building inspection/permit questions I can...

 

[Dee Dee]

Barbara,
Thank you for your grammatical correction, it's definately an improvement.
You have certainly been a busy lady!