Illegal ADU on an FHA order

[JoshDavis]

I've searched through all the topics on this but can't find a straight answer or the original questions don't apply to this situation.

I have an FHA order where the subject has an actual illegal ADU. I have confirmed this with the City zoning office. They said that no ADUs are allowed in the City at all. This is a detached ADU with a full kitchen, bedroom, bathroom, living room.

It's also unpermitted by the County and that has also been confirmed with the County and listing agent.

I have also looked for any illegal or unpermitted ADUs in the MLS sales history, the entire history, and there are none in this City.

The client was no help. They just said do what I think is appropriate.

If someone has any guidance on how to handle this with FHA, I'd really appreciate it. I've asked some people and we really can't come to a consensus on how to move forward. Give it no value? Make it subject to the removal of the 2nd kitchen?

Thank you

 

[Terrel L. Shields]

Arrest it if illegal! Pretend it does not exist? Really. That's no solution.

So you are saying that the ADU cannot be grandfathered nor permitted legally under city law? The easy solution is to withdraw but the more difficult solution is to contact the Direct Endorsement Underwriter with the info that not only are there no ADUs in the town, but they are illegal. FHA probably won't fund this and I believe FHA is most proactive for appraisers to contact them first before attempting to complete the appraisal since this is very likely DOA.

Otherwise you will have to go to another town nearby where ADUs are legal and find comps. But I would check with the DEU first to see if FHA will even finance such.

 

[Tiffany Gibbons]

I've searched through all the topics on this but can't find a straight answer or the original questions don't apply to this situation.

I have an FHA order where the subject has an actual illegal ADU. I have confirmed this with the City zoning office. They said that no ADUs are allowed in the City at all. This is a detached ADU with a full kitchen, bedroom, bathroom, living room.

It's also unpermitted by the County and that has also been confirmed with the County and listing agent.

I have also looked for any illegal or unpermitted ADUs in the MLS sales history, the entire history, and there are none in this City.

The client was no help. They just said do what I think is appropriate.

If someone has any guidance on how to handle this with FHA, I'd really appreciate it. I've asked some people and we really can't come to a consensus on how to move forward. Give it no value? Make it subject to the removal of the 2nd kitchen?

Thank you

Is it rented? Is it on a separate meter? What are you considering a "full kitchen"? Post a photo.

 

[Tom D]

what is a detached adu, a former detached garage. is this a sale or refi. if you want to be mean, remove the stove and refrigerator, etc. then it's a finished office or fun space, etc. many people would love this for an office or one of their older kids in college. did you ask them why they originally did this. probable for a family member. in my case a wife's collection show room, a daughter get away from her cave parents space.

 

[Tiffany Gibbons]

what is a detached adu, a former detached garage. is this a sale or refi. if you want to be mean, remove the stove and refrigerator, etc. then it's a finished office or fun space, etc. many people would love this for an office or one of their older kids in college. did you ask them why they originally did this. probable for a family member.

That's why I was asking. FHA used to require a gas stove be disconnected but if it's just an slide in electric range and a refrigerator, that's personal property, just say no value and call the sink a wet bar. Presto! Rec room, Man Cave, She-shed, heated and cooled storage building, etc.

 

[Charles West]

That's why I was asking. FHA used to require a gas stove be disconnected but if it's just an slide in electric range and a refrigerator, that's personal property, just say no value and call the sink a wet bar. Presto! Rec room, Man Cave, She-shed, heated and cooled storage building, etc.

Excellent pivoting.

 

[Tom D]

tiffany be right. things can have different functional utility. don't get stuck in 1 idea. let your inner appraiser flow with universal utilities.

 

[Tom4value]

I've searched through all the topics on this but can't find a straight answer or the original questions don't apply to this situation.

I have an FHA order where the subject has an actual illegal ADU. I have confirmed this with the City zoning office. They said that no ADUs are allowed in the City at all. This is a detached ADU with a full kitchen, bedroom, bathroom, living room.

It's also unpermitted by the County and that has also been confirmed with the County and listing agent.

I have also looked for any illegal or unpermitted ADUs in the MLS sales history, the entire history, and there are none in this City.

The client was no help. They just said do what I think is appropriate.

If someone has any guidance on how to handle this with FHA, I'd really appreciate it. I've asked some people and we really can't come to a consensus on how to move forward. Give it no value? Make it subject to the removal of the 2nd kitchen?

Thank you

Glad you contacted the CZO and got an answer to a critical question, "Is it legal?" Many authority figures act like politicians and give non-answers. Even worse, there are many appraisers who don't ask the questions because they don't want the answers.

You found they are not allowed so no use asking what needs to be done to make it legal. Your next question is what needs to be done (i.e., removed) to make the space legal. You then report that to your client. They will have to ask the owner if they can/will do what needs to be done. If so, you make the appraisal "subject to". If they don't want to, or worse, come back with a bunch of, "how about if I do blah, blah, blah?" questions, back out of the assignment.

Under no condition do you "give it no value" and be done with it.

 

[Terrel L. Shields]

Such creative solutions sounds like a great way to get busted by FHA or the state board. Asking people to disable appliances is a poor way to do business imnsho. It is still a detached building, and the questions will arise. If FHA reviews it, I suspect you will answer to them and not in a pleasant way. OP called it what it is so I would not try to circumvent the rules just to make the deal work. It is an ADU. My uncle's place had one for his MIL. I've seen numerous ones both attached and separate buildings. But I've never seen a town completely ban them. In fact, I am not sure some state laws are not requiring cities to allow ADUs and MH's to be placed in the city.

 

[JoshDavis]

This area was built next to the detached garage behind the main house. I attached the sketch from the listing.

The city does not allow any ADUs per their zoning code. The info I got was directly from a city planner.

I agree that giving it no value is not the right play. I also don't think any of these "creative solutions" are viable.

This is for a sale and the property is vacant. Per the contract the owner/seller is an international and not located in the USA.