Illegal ADU on an FHA order

[Tom4value]

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.

Yes, but don't forget, we have to analyze the affect on marketability and market value. Part of the analysis is knowing what needs to be done to make it comply. Just stating what is there is just observation, not analysis.

Also, as you state, "subject to owners contacting the town to see what could be done." How can you make it "subject to" if you don't know what it is subject to? You talked to the zoning officer. Ask the question. Put it in the report. This also protects you if the owner comes back and says, "ZO says it is fine". Explaination in the report enhances your credibility.

 

[Tiffany Gibbons]

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.

That is awesome. OP should send the lender this before doing anything.

 

[J Grant]

That is awesome. OP should send the lender this before doing anything.

Great ! It says FHA does not lend on the value of an illegal ADU. Problem loved. disclose it is not legal wrt zoning and therefore not included in the - the LENDER has to confirm existence of the ADU will not jeopardize any future property insurance claims ( not our job to do that )

as others said, if it is not permitted but legal, that is a different story

 

[norapp]

Yes, but don't forget, we have to analyze the affect on marketability and market value. Part of the analysis is knowing what needs to be done to make it comply. Just stating what is there is just observation, not analysis.

Also, as you state, "subject to owners contacting the town to see what could be done." How can you make it "subject to" if you don't know what it is subject to? You talked to the zoning officer. Ask the question. Put it in the report. This also protects you if the owner comes back and says, "ZO says it is fine". Explaination in the report enhances your credibility.

Of course I wrote a more detailed explanation. I asked the zoning officer if there was any way around this and he said no. It is not allowed, and it has to go, or they need to apply for a variance and the town needs to inspect. Either way he was going to go out there to see what was there. He said no way can they overlook it. Very strict with zoning in this area.

 

[Dublin ohio]

Of course I wrote a more detailed explanation. I asked the zoning officer if there was any way around this and he said no. It is not allowed, and it has to go, or they need to apply for a variance and the town needs to inspect. Either way he was going to go out there to see what was there. He said no way can they overlook it. Very strict with zoning in this area.

You actually gave zoning the location of the property. Wow.

 

[NC Appraising]

Email the below, and someone from HUD will reach out or even call you. Put in the subject line "appraisal question".
answers@HUD.gov

I then copy and paste what HUD said in the report, the date of the response, etc. This covers me from the DEU and if the report ever gets reviewed by HUD. I have never had a DEU to overwrite what HUD said.

When you hear back from HUD, post it hear.

 

[Tom4value]

Of course I wrote a more detailed explanation. I asked the zoning officer if there was any way around this and he said no. It is not allowed, and it has to go, or they need to apply for a variance and the town needs to inspect. Either way he was going to go out there to see what was there. He said no way can they overlook it. Very strict with zoning in this area.

I got the impression from your last sentence that you didn’t. If you did, great job.

Sounds like you asked several different ways to see if you would get a different answer. That is the key to being thorough! Good job!

 

[Tiffany Gibbons]

I got the impression from your last sentence that you didn’t. If you did, great job.

Sounds like you asked several different ways to see if you would get a different answer. That is the key to being thorough! Good job!

Well, you posted the answer in post 20. It's the lender's responsibility, no matter how much they don't want it to be. If they email HUD will they get a different answer? Dang, VA is so much easier to deal with. What the heck would an unlicensed Property scanner or whatever do to help the desktop appraiser that the GSE's so desperately want FHA and VA to get in line with? I'm sure it's fun with an "international" party as the seller.

 

[NC Appraising]

Well, you posted the answer in post 20. It's the lender's responsibility, no matter how much they don't want it to be. If they email HUD will they get a different answer?

I think what Tom posted was from several different lenders and not directly from FHA 4001. If I am incorrect, sorry Tom, please confirm. I could not find anything in 4001 D on the OP question. That is why I said to contact HUD on this grey issue. Better safe than sorry. Lenders can go above and beyond as to what FHA requires.

Here is from a different lender...

https://www.huduser.gov/portal/publications/adu.pdf

 

[Tom D]

Of course I wrote a more detailed explanation. I asked the zoning officer if there was any way around this and he said no. It is not allowed, and it has to go, or they need to apply for a variance and the town needs to inspect. Either way he was going to go out there to see what was there. He said no way can they overlook it. Very strict with zoning in this area.

did you ask the client if you could discuss their confidential appraisal with zoning people. that's like an attorney discussing private info with the other side. couldn't have done it without the address.
USPAP say only if subpoenaed by a legal entity. were you. i the owner, and i'm asking the lender why you give out this private info, cause it was not public. and now you created a problem, when there wasn't any.