Illegal ADU on an FHA order

[JoshDavis]

Not sure why it made me upload it 3 times, but there it is

 

[Terrel L. Shields]

Not sure why it made me upload it 3 times, but there it is

The site is rather fickle about attachments and limit you to 1000kb but often a smaller file 'cut and paste' will trigger the site. You will find this site has some real issues with loading threads. Head Surfer hasn't found a solution yet.

Again, I'd talk to your DEU before proceeding.

 

[JoshDavis]

The site is rather fickle about attachments and limit you to 1000kb but often a smaller file 'cut and paste' will trigger the site. You will find this site has some real issues with loading threads. Head Surfer hasn't found a solution yet.

Again, I'd talk to your DEU before proceeding.

Yea. I sent another message back to my client asking for actual guidance since I'm not even sure if it meets FHA guidelines.

 

[Dublin ohio]

Don't forget about that pesky HBU

 

[Tiffany Gibbons]

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.

I can't see your attachments so I'm guessing there is no separate meter. I never said don't give the space value, but compare with other sales with workshops attached to garages, etc. Surely the town has not banned all outbuildings? Freestanding appliances are personal property. Some cabinets, a sink and built in dishwashers are found in rec spaces or garden potting sheds. I see lots of garages with bathrooms and a "study" here in town. It might be easier to find "matched pairs" sales to derive an adjustment or a comparable for a basic building. The other stuff is just extras, especially if it is not rented and there is no history of rental.

 

[sputnam]

Sounds like a two family property to me.

 

[norapp]

I had a similar situation. I called the town zoning officer and he said it is not allowed. Turned in my report subject to owners contacting the town to see what could be done. Not my problem and out of my hands. Don't get yourself involved in these matters. State what is on the property. Done.

 

[Tom D]

FHA is a funny animal with a big stick to beat you. did you ask the zoning person what they would do with a situation where they had this. might be surprised at their answer, or it might be the answer, or defense, you need. it surely has some value. but ignoring it is ok, if FHA say you can. but then, did the value just go down. lucky innocent you to give the bad news. might make a nice airbnb. oh, the headaches you now have. how about an over improved shed.

 

[J Grant]

I believe FHA will loan on an "illegal" ADU if it is market accepted and the appraiser uses 2 more "illegal" ADUs as comps. But check on it,-. I know Fannie and Freddie, at this point, will loan on it. Check with your lender client; perhaps they can tell you how to proceed if FHA allows it..

If the ADU as illegal is not allowed to be on the grid as such, as others said, it still contributes value since it exists and some use can be made of it. Take out the stove, and it is now an office or inlaw suite.

 

[Tom4value]

I believe FHA will loan on an "illegal" ADU if it is market accepted and the appraiser uses 2 more "illegal" ADUs as comps. But check on it,-. I know Fannie and Freddie, at this point, will loan on it. Check with your lender client; perhaps they can tell you how to proceed if FHA allows it..

If the ADU as illegal is not allowed to be on the grid as such, as others said, it still contributes value since it exists and some use can be made of it. Take out the stove, and it is now an office or inlaw suite.

I found this so I can see how you may say that. However, there is a difference between "unpermitted" or "does not meet zoning requirements" and "illegal", as in, ILLEGAL TO HAVE IT. According to the OP, ADUs are NOT ALLOWED, period. Point #3 (admittedly poorly) explains this difference. You will not find 2 comps with illegal ADUs if you are not supposed to have them. Also, I don't know of any insurance company that will honor a claim on an illegal issue.

FHA Appraisal and Illegal ADUs

When it comes to FHA appraisals and Accessory Dwelling Units (ADUs), there are some important considerations:

1. Legal ADUs:
   • If a property has a legal ADU, the appraiser typically needs only one sales comparable (often referred to as “comps”) to determine the property’s value.
   • In cases where necessary, the appraiser can even use an older sales comp.
   • Legal ADUs are those that comply with local zoning regulations and have the necessary permits1.
2. Illegal ADUs:
   • When dealing with a property that has an illegal ADU, the appraiser requires two sales comparables.
   • Illegal ADUs are those that do not meet zoning requirements or lack proper permits.
   • These additional comps help assess the property’s value accurately1.
3. FHA’s Stance on Illegal ADUs:
   • The Federal Housing Administration (FHA) does not allow illegal accessory units under any circumstances2.
   • If an appraiser identifies an ADU that is not allowed under zoning regulations, the property may still be eligible under specific conditions.
   • Lenders must confirm that the existence of the ADU will not jeopardize any future property insurance claims3.