Must appraisal GLA be based on city records GLA?

[Dan Tosh]

By the way paired sales indicates that homes with improved basements have been selling on average between $20 to $40 per sf more than those with none reported. This would be the contribution for this area as we have found in our discovery and research. I have delivered a "summary appraisal report" not a self contained report and my workfile is not a part of this report. The homeowner has a right to a copy of the report, however, the client is the lender and the homeowner has no right to my workfile so giving out this kind of information is incorrect.

 

[23Degrees]

By the way paired sales indicates that homes with improved basements have been selling on average between $20 to $40 per sf more than those with none reported. This would be the contribution for this area as we have found in our discovery and research. I have delivered a "summary appraisal report" not a self contained report and my workfile is not a part of this report. The homeowner has a right to a copy of the report, however, the client is the lender and the homeowner has no right to my workfile so giving out this kind of information is incorrect.

For clarification please: In a situation where there is contention around a specific point, the market value of unpermitted finished basement in this instance, we can claim "work file privilege" if we see fit rather than provide the data that supports this calculation in an addendum of some sort?

Anyone else agree with that? What if this was an across the board adjustment "based on paired sales"? Hopefully this was not the case but generally speaking would any one still agree then?

Taking a statement about displaying a segment of data from the work file to satisfy a point of contention and turning it into a straw man about carte blanche access to the work file by the borrower is not helpful. Of course the homeowner has no right to the work file but has a right, through the lender, to contest the point - and be shut down from day one with the data that is or should be in the work file if the issue was not already moot due to the inclusion of at least one comparable that had a similar unpermitted feature.

 

[gavin]

Taking a step back and looking at what is being contended by Don, this does not seem to pass the proverbial "sniff test" (in my opinion as a home buyer/seller, purchased 4 times).

If the bottom level were permitted, the most relevant comp based on size, location, beds & baths, would be (from my post above):
E. 531 Kansas, sold 12 April, 2/3, 2350 ft^2, $1,500,000, $638/ft^2

Starting from that, then modify the numbers based on property details, differences in size, etc., and for the sake of argument we end up with the property worth ~$1,300,000 in the marketplace (or around there, I'm being generous in subtracting $200,000).

But since it is not permitted, the property is only worth $758,000 in the marketplace.

I don't see any how any amount of "mulitple regression analysis" could lead to that conclusion.
In a market where every relevant sale shows a floor of ~$500/sq-ft, and the price range for properties is generally $800,000 - $1,500,000, an entire floor of consisting of 2+ bedrooms and 1 bath, of visual quality and finish consistent with typical homes, commands significantly more than $29,000.
To think otherwise is just 'losing the forest for the trees.'

 

[KD247]

... I don't see any how any amount of "mulitple regression analysis" could lead to that conclusion. ...

I don't see how multiple regression even pertains to this type of appraisal.

For high value, complex properties, I rely on two techniques. First, the empathetic perspective where the analyst puts themselves in the shoes of a knowledgeable buyer and compares the subject property with other alternatives. (And, as with a knowledgeable buyer, research should include extensive interviews with agents, other buyers, and sellers.)

Second, an evidence-based approach, where one compares the subject property to sales of properties which most closely bracket the subject's important value determinants. In this case, the analysis should include several sales with similar unpermitted living area. Labeling the subject's characteristics (e.g. deciding whether a finished area is GLA) becomes less important if the subject is compared with other properties with exactly the same characteristic. If the market participants do not commonly recognize value factors like dollars per square foot (most markets don't), they should not be heavily relied upon in the report.

If the property is truly unique, it is likely that the appraiser will be put in the position where they must choose a single value point from a wide range of possible values. There should be some rationale for choosing that point other than simply deciding on the highest or lowest possible points within the range. The report should clearly explain the appraiser's methodology and reasoning. If the lender requires the opinion of value to be inconsistent with the reality of the market (for example, requiring that the appraiser to treat unpermitted living area as if it had no value), these requirements and their ramifications should be fully detailed in the report.

 

[Mike Kennedy]

"During a recent appraisal for refi, the appraiser stated in the report that he had to base the GLA on city records." Absolutely incorrect.

"So the question: what is the stipulation or requirement that appraisal GLA be based on city records?" There is none.

 

[CANative]

CANative, I am very familiar with Hopland, where you are from, since I have a karate school in Ukiah and go past there often. There are no properties in Hopland that would have this issue, however, In San Francisco, where I was considered for the Chief Appraiser position last year, they have very specific requirements for the area that can be counted as living area. There are many properties that have areas added not to code and can cause a health and safety issue. Gavin, you are your own advocate and want what you want. Appraisals are not done by taking the average of all the sales you can. We use "mulitple regression analysis" throw out the outliers, look for standard deviation, as well as the least co-variance. There is plenty of evidence to support our findings and I am finished arguing about this. As I said to you on the phone, if you have "code enforcement" come to your home, inspect it and send me a letter informing me that the area is allowed to be used as GLA (ANSI requirements), then I will re-evaluate it for free. In the mean time the other appraisers that are making uninformed commentary without benefit of a property inspection should stop trying to form an uncredible opinion of value. By the way , I was the 2nd appraiser licensed in the State of California and I do have a very low number!

Dad and my brother were in the same group and I learned from them. And I know SF (residential and commercial) reasonably well from my work as a property tax advocate. And I am also familiar with your karate school down near the end of State St.

If you think you are very familiar with Hopland by passing through the little village along 101 then I'd say you are wrong. Hopland is at least 200 square miles and contains a wide diversity of residential property.

On topic though, I'm not about to get into a valuation issue with you or the OP but it seems to me that if the only issue is that the property owner didn't get the permits before finishing the basement then it's just a matter of market reaction to improvements built without getting permits. If the additions constitute an illegal use then that's one thing, but if they are a legal use and just need to get inspected and have the administrative paperwork completed that is something completely different.

Saying things to non-appraisers like "the City of San Francisco made it very clear that part of the area we measured could not be used as GLA, it was completed without benefit of permits to use as living area" could be misleading if not outright inaccurate. To significantly penalize a property for simply failing to obtain building permits concerns me and I've seen this too often (most recently from a CG from LA doing a residential in the SB mountains where I currently live.) He excluded the entire upper level of the residence and the result was an under valuation.

 

[gregb]

San Francisco, where I was considered for the Chief Appraiser position last year, they have very specific requirements for the area that can be counted as living area.

Please site these "very specific requirements" so verification and validation can be ascertained by a third party reviewer.

 

[Marty Boone]

Post #13 contains the word WE 10 times. Was it HE or WE? Was there any appraisal assistance provided to the appraiser that inspected and signed the report? Your post, "First of all my appraiser, a certified Appraiser, that did this inspection was aware of the size of this building."

The names of individuals providing significant real property appraisal assistance who do not sign a certification must be stated in the certification. It is not required that the description of their assistance be contained in the certification, but disclosure of their assistance is required in accordance with SR 2-2(a), (b), or (c)(vii), as applicable.

 

[Smokey Bear]

Marty, maybe you need to Google Dan Tosh?

However, Dan, the city doesn't tell us what we do as appraisers. We look at market reaction to the subject, not what the city thinks. Do people often buy places with unpermited space in SF? Absolutely, space is at a premium there. Is that space included in the comp sales? You'd have to ask the agent if they saw the appraisal and saw that it was included and how. More work, yes, but if people are paying for it, it needs to be included, unless you use an hypothetical condition that it's not there (which the 1004 doesn't allow). You should know this.

 

[Dan Tosh]

CANative, I don't disagree with you, it was more than just forgetting to get permits. He has permits for something other than living area. gregb, I'm not asking for a standard 3 review of the appraisal so please call the county if you'd like specific information about the building permits. Finally Marty, I am an AQB Certified USPAP Instructor and do know USPAP quite well. I was the supervisor on the assignment and it was one of my senior certified appraisers that did the actual appraisal and inspection. Nobody did the analysis without signing the certification; But thanks for being concerned. The gentleman who owns the property is an attorney who wants the entire area counted. I told him to have the county give me the information after the code enforcement inspection for permitted area. I just taught a course this weekend about enforcement in all 50 states and some of the fines and problems appraisers face. Many of the fines are based upon appraisers counting "unpermitted area". I am not trying to get into a spitting match with anyone here, but if anyone else wants to do the assignment, sign it and take responsibility for the opinion, please do. I wont be mad at you!!