Must appraisal GLA be based on city records GLA?

[gavin]

Hello,
My house in San Francisco is well over 100 years old, and over its history the house has been remodeled without getting permits. The GLA on city records is 1550 sq-ft, the house measures out in previous appraisals at ~2150 sq-ft (appraisal at purchase 5 years ago; refi 2 years ago). The additional sq-ft came from finishing the "basement" over the years, and at this point for all practical purposes the house is ~2150 sq-ft GLA. The downstairs bedrooms and bathroom are same construction/finish as the original living area (hardwood floors, trim, windows, ceiling height, heat, electrical, etc.).
During a recent appraisal for refi, the appraiser stated in the report that he had to base the GLA on city records. Avg selling price per sq-ft in this area is $550-750, and based on 1550 sq-ft the value came in ~$350,000 lower than what would be expected (& what a real estate agent in the area recommended for listing price). The additional ~600 sq-ft was valued at $50 per sq-ft.
So the question: what is the stipulation or requirement that appraisal GLA be based on city records? I understand the appraisal would need to note that construction was done w/o permit. But this reasoning suggests that an identical house, right next door, but w/ city records stating 2150 sq-ft would be sell for > $350,000 more? (for reference, appraised value $740,000; real estate agent estimate for sale price $1,150,000 - $1,300,000).

Thank you, gavin

 

[Tim Hicks (Texas)]

I would never base an appraisal on city records GLA unless it was a drive-by appraisal. Is that, by chance, the type of appraisal that was done last time? Also, a basement is considered below grade area and is not counted in GLA. Lender and GSE requirements state that the below grade areas be separated from the above grade areas. This does not mean it does not have value, just that it is not counted in the above grade GLA.

 

[Smokey Bear]

In San Francisco, many basements are above grade (yeah, I know, it's an oxymoron) but the garage is usually on the first level, with 'basement' behind it, and you go up stairs to get to the front door. Many of those basements are finished somewhere along the line, and whether permits were required depends on how much finish was actually there, like electric, etc.

Since your house is over 100 years old, I'd be thinking it's some type of Victorian/Edwardian/Queen. Is it a highwater with the basement all above grade? If so, it should all be considered GLA. There should be plenty of similar comps in the area since space is at a premium in SF and many people finish off the downstairs space.If the space isn't permitted and needed permits for plumbing/electric, etc., there should similar comps without permits - SF isn't that fast on inspections, and usually only if something is reported. The appraiser could find similar comps by comparing the MLS GLA to the City's GLA.

If the lender won't do anything about this, you can dump them and find another lender, or have the appraisal reviewed by another appraiser. BTW, where is the appraiser from? The City or somewhere else?

 

[gavin]

Thank you Tim Hicks & Smokey Bear for your responses.
The appraisal was not drive by, the gentleman was out doing measurements & photos.
The house is 3 level, build on a slight slope down from the entrance. The top level is "finished attic" (slanted walls, ~ 12' at center, and not something that I would suggest be GLA). The Main level is above street by some steps, and the lower level is ~3' below grade at the very front, but is quickly above grade. There is a basement under this lower level, access from the back yard, sloping from 6' of space at the rear to ~1' of space at the front (between the ground & the joists of the lower level).
This house has no garage, no cars back then. It is Victorian design.
The appraiser was not from San Francisco, the company is based in Walnut Creek (or similar), ~ 40 miles east.
My feeling is that a house should be appraised to represent what prospective buyers would pay. Although some buyers would be concerned with the lack of permit, most would see this as a 2150 GLA house.
I am prepared to get another lender, but I want to do a bit of research on the topic in case the next appraiser does exactly the same thing.

So there is no requirement that you know of that the appraisal be based on city records of GLA?
Thank you, gavin

 

[Michigan CG]

.......The appraiser was not from San Francisco, the company is based in Walnut Creek (or similar), ~ 40 miles east.....

Call the first lender and tell them to refund your appraisal fee. Is there a reason that they couldn't find a local appraiser. I have never been to San Fran but I hear it is a rather large city with professional sports teams and such.

They couldn't find an just one appraiser out of 226 active appraisers that have San Francisco addresses? When you paid that huge appraisal fee I am sure you expected to get a competent local appraiser.

https://www.ASC.gov/Pages/SearchResults.aspx

Now you might be asking if there are 226 active appraisers in your town why did some nim-whit come from 40 miles away? It is because he doesn't get that whole appraisal fee, he gets a portion and the AMC keeps the rest. He was the guy who charged the least so the AMC could keep the rest. Yes, you got screwed by the new way of doing business in our business.

 

[Smokey Bear]

Since you're on a hillside, your house should be compared to other hillside homes. What neighborhood are you in? Yes, they should have had a more local appraiser. And no, the appraiser isn't supposed to use the GLA from the city, they are supposed to appraise what's actually there. Also, if there are no permits for the basement (are you sure there aren't any?) they should look at the quality of the work, and what the market would pay for it. Since housing and GLA are both at a premium in SF, I would think that if the work was decent and of the same quality as the rest of the house, there might be NO market reaction to the fact that it's not permitted. Only a local appraiser could tell you if that's true, though.

Yes, I would ask for a refund and insist they hire someone from within the City and County of San Francisco, which is NO comparison to Walnut Creek or hardly anything in the East Bay.

 

[Lobo Fan]

The use of anything other than the appraiser's field measurements is not common. Another scenario, is that the appraiser turned it in showing the larger GLA and some nitwit at the AMC called for a correction to correlate between field measurements and public record. It is possible that at some point the appraiser got tired of fight or did not have confidence in his field measurements and just changed the report in order to get it approved and get paid.

 

[23Degrees]

The fact that public records does not match what is actually there should be something that is explored and probably will be explored by any responsible party that appraises your property in the future. Whether or not it was handled correctly in your case is something that would best be answered by appraisers in the area and, despite what some have said, while not optimal for all parties the fact that his firm is in Walnut Creek does not necessarily disqualify him from performing the assignment.

Since all indications point towards the appraiser proceeding "as is" and "legal" (implications too in the weeds for this discussion and you would have heard otherwise if that was not the case) there is a high priority area to begin questioning the credibility of the report - Does the report provide or reference market evidence that unpermitted finished areas contribute value at ~10% or less that of permitted GLA? If not, this is a serious deficiency considering the value implications and needs to be followed up on. That would be where I would start.

 

[Marty Boone]

The appraiser may or may not have the competency to appraise in your neighborhood. It does not make any difference where the appraiser's company is based. For all anyone on this forum knows, the appraiser might live across the street from the subject property. I would have a big problem with the statement in the report "that he had to base the GLA on city records". If the appraiser was at the property and measured the property he should base the GLA on his measurements.

 

[ZZGAMAZZ]

1) It's possible that the comment about relying on public records for the GLA was phrased inadequately, because as it was implied in Post#8, the distinction between permitted--"city records" perhaps?--and non-permitted is beyond the collective wisdom of the Forum to agree upon.

2) Using non-permitted areas, regardless of the quality of the finish, requires the appraiser to demonstrate "market reaction" to GLA that deviates from public records because of those areas, also typically requiring similar comparables; and that type of data is virtually non-existent in a majority of residential appraisals, because those who post on the richest source of data, MLS, typically aren't sufficiently familiar with concept to describe it publicly--or if they are, they purposely fail to describe the situation because it's a virtual lose-lose in regard to the appraisal/financing factor;

3) I can fly to San Franciso tomorrow and be as competent by the week-end to appraise a relatively typical residential property, as any sophisticated local yokel because data is so readily available these days, at least IMNSHO.

4) The perspective of a CA real estate agent, in regard to market value, is not based on the agent's inherent duty to list a property reasonably; rather it is to satisfy his client;

5) The price-per-square-foot factor is of little practical value if the two properties being compared are disparate in size, because economy of scale confers a larger price-per-square-foot on the smaller of the properties;

Somehow the OP struck a soft chord with the Forum, which appears largely to have overlooked the distinct possibility that the appraisal was grounded in fact . . .