Missing Bedroom?

[Walter Kirk]

I am curious, since both appraisals were done for Wells through their AMC how does the first appraisal treat the room?
I also wonder how the appraisal of the similar house treated the room in that house. At very least Wells should take responsibility for the appraisals ordered through its AMC.

 

[Denita Neuenhaus]

I'm a Realtor and not an appraiser. My solution to your dilemma would be to refinance into a conventional mortgage without PMI with another lender - not a big box bank, but a non-bank type lender. The new lender will order a new appraisal. The appraisal is likely to come in with a different valuation. In my experience the appraisals with the big box lenders, like Wells Fargo, come in lower a huge percentage of the time. I am in S Florida too and I see non-permitted conversions (porch, garage and additions!) more than just occasionally. I end up having to renegotiate purchase contracts on a regular basis as a result. (I tend to believe that is because the big box banks use AMC's and it is to their benefit financially to have a lower valuation of the collateral. JMO)

The other thing you can do is find out what you need to do to get a permit on the garage conversion. The building department can tell you what you need to do as a general answer without telling them your address to give you specifics. If you decide this is the direction you want to pursue, then you can begin the appropriate paperwork with your actual address to correct the non-permitted garage conversion.

The 3rd solution is to pay down your mortgage to the 80% or less of the original value of your home when you purchased it. Then apply for the PMI removal or wait until it is 78% of the original valuation and then it has to be removed.

 

[Terrel L. Shields]

, he could only legally count it as a garage

Are you sure it wasn't permitted? Have you gone to the jurisdiction who is responsible for such things and verified the permit status?

That is the first issue. Check for the age of the conversion and even if permits were required. Then if so, I would ask the Agent to cough, cough big, if not...Since you said 2 years ago, check the statutes of limitations but it is not too late to threaten the Realtor of misleading or omitting something that was obvious... and original appraiser of a misleading appraisal.

OTOH I personally despise garage conversions and would fire any agent that tried to show me a house with one, because they would know three things. I want no stairs of more than 2 steps to get in the house, no second floor, and no manufactured home...and, of course, garage conversions or porch conversions are simply a no-no.

 

[Tom D]

you need a permit to put drywall and carpet in a garage? the purists say yes, i don't think it would be hard to get a permit, although they could be nasty about how the electric was put into walls if they want to be. that would be the only issue i see. of course the inspector can be a real nasty purist, then you have a redo. i have built & rehabd so don't holler at my thoughts. do you have any connections with city hall?

 

[Vanesa]

I am curious, since both appraisals were done for Wells through their AMC how does the first appraisal treat the room?
I also wonder how the appraisal of the similar house treated the room in that house. At very least Wells should take responsibility for the appraisals ordered through its AMC.

Hi Walter!

I went back to triple check and it looks like the first appraiser simply counted our converted garage as another bedroom. The comps used were of 3 bedroom homes with no mention of converted garages. I wouldn't really know if they also had converted garages without investigating a bit.

 

[Vanesa]

Hmmm.....

It does sound like you are in a pickle. It is doubtful that the bank/appraiser will reconsider his/her value (regardless if they should or not) and you are left with the choice of going through the permit process retroactively or paying for PMI which might not be necessary if the appraisal considered whatever contributory value the garage conversion has in the market rather than just as a garage.

The "prudent" thing to do is to investigate the jurisdiction's process in obtaining a retroactive permit. That is a local issue so unless an appraiser is familiar with your specific market, there's not much more to add on that point (but I will anyway below!).

My general experience is this: If garage conversions are permissible and one can get a permit, the jurisdiction is usually amenable to retro-permitting the conversion. You can find out what the requirements are without giving away your address; compare what they are vs. what you have and decide where to go from there.
I also work in markets where the requirements are to provide an alternative covered parking structure if the primary garage is converted. In those markets, if one converts without permits and does not provide for the additional covered parking, the city will require the garage to revert back to its original configuration.
You can see how the value of a non-permitted conversion would be different in the two different scenarios:
In the one where it isn't a big deal, the value (in the market) may be similar to GLA.
In the one where it is a big deal, the value could be negative: build the second structure (if there is room on the site) and get the conversion permitted, or lose the living area the conversion offers and pay for converting it back to the original garage.

Hopefully, you'll have an option that allows you to keep the converted area with a minimal fuss and get your home valued to remove the PMI!

Best of luck to you!

Thank you for your advice Denis! It was very nice of you and much appreciated.

With regards to the PMI, that is small potatoes compared with bringing everything up to code. We are planning on getting everything above board in the next few months. Luckily, there are no stipulations that you have to have a covered parking structure in our neighborhood. Fingers crossed that everything goes smoothly from here!

Thanks again!

 

[Tim Hicks (Texas)]

Some towns will do a post construction permit. Check into that. It was obviously a garage conversion, nobody has asked if either appraiser compared it to garage conversion home sales. Non-purist appraisers will never admit there can be a stigma for garage conversion homes as some prospective buyers will not purchase them, now lenders will disallow the area if not permitted and sometimes the workmanship is suspect (electrical, insulation, etc). The simplest answer for appraisers is to only compare to garage conversion home sales. If there is a permit issue, make the appraisal subject to obtaining a permit with an "as is" value for the lender without a permit and an "as repaired' value with an obtained permit.

 

[Elliott]

Denita makes a good point. I've done one PMI removal in the last year. Most borrowers just refi with a new lender who has a reputation for loan production. There's some old saw that goes, "Old appraisals tend to influence new appraisals."

 

[Vanesa]

I'm a Realtor and not an appraiser. My solution to your dilemma would be to refinance into a conventional mortgage without PMI with another lender - not a big box bank, but a non-bank type lender. The new lender will order a new appraisal. The appraisal is likely to come in with a different valuation. In my experience the appraisals with the big box lenders, like Wells Fargo, come in lower a huge percentage of the time. I am in S Florida too and I see non-permitted conversions (porch, garage and additions!) more than just occasionally. I end up having to renegotiate purchase contracts on a regular basis as a result. (I tend to believe that is because the big box banks use AMC's and it is to their benefit financially to have a lower valuation of the collateral. JMO)

The other thing you can do is find out what you need to do to get a permit on the garage conversion. The building department can tell you what you need to do as a general answer without telling them your address to give you specifics. If you decide this is the direction you want to pursue, then you can begin the appropriate paperwork with your actual address to correct the non-permitted garage conversion.

The 3rd solution is to pay down your mortgage to the 80% or less of the original value of your home when you purchased it. Then apply for the PMI removal or wait until it is 78% of the original valuation and then it has to be removed.

Thanks Denita!

We are going to look into a credit union. I know of one close to our home. We had wanted to go that route originally, but decided against it since we were moving from out of state and had to purchase the home from there. I agree with your assessment of the AMC's and was never comfortable with that to begin with. Very clear conflict of interest!

 

[Denita Neuenhaus]

Credit unions are great for auto loans, second mortgages and credit cards, but not as great for first mortgages or purchases. Most of the time they broker the deal rather than do their own underwriting unless they are huge like USAA or NavyFed.

Check into Guaranteed Rate too - they are the type of lender I was referring to in my post above (non- bank lender that originates, underwrites and funds mortgages). They don't use AMC's (at least here in S FL). You get experienced appraisers that usually provide a good report. It doesn't always reflect sales price, but it does reflect the market because that is all the appraiser is supposed to do.

There are other non-bank lenders too that are excellent. Make sure you get an experienced and knowledgeable loan officer and you will see a world of difference in your mortgage experience.