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Need Help Regarding Extraordinary Assumption

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Glenn Thornton

Thread Starter
Freshman Member
Joined
Jan 24, 2007
Professional Status
Appraiser Trainee
State
California
I'm doing an appraisal (refinance) on Monday and the subject's property (SFR) has a garage that they are converting into a finished area w/bath, bed, and kitchen; at present it is partially completed. I would like to include this somehow in the report, since it will be a benefit once it is completed. Since this is un-marked territory for me, would like to get some advise on how to proceed.

I e-mailed my supervisor but because of the Holiday he may not get back to me in a timely manner. So I'm inquiring for some help before I got to the site.

Thank you for any suggestions you may have,

Glenn
 

Tony V

Elite Member
Joined
Mar 29, 2005
Professional Status
Certified Residential Appraiser
State
New York
I'm doing an appraisal (refinance) on Monday and the subject's property (SFR) has a garage that they are converting into a finished area w/bath, bed, and kitchen; at present it is partially completed. I would like to include this somehow in the report, since it will be a benefit once it is completed. Since this is un-marked territory for me, would like to get some advise on how to proceed.

I e-mailed my supervisor but because of the Holiday he may not get back to me in a timely manner. So I'm inquiring for some help before I got to the site.

Thank you for any suggestions you may have,

Glenn

Is the apprasisal being done subject to completion or as is...if as-is then it does not matter what you would like to do...you have to do it as it is at the time of Property Observation...also do they have permits for this conversion???
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
I'm doing an appraisal (refinance) on Monday and the subject's property (SFR) has a garage that they are converting into a finished area w/bath, bed, and kitchen; at present it is partially completed. I would like to include this somehow in the report, since it will be a benefit once it is completed. Since this is un-marked territory for me, would like to get some advise on how to proceed.

I e-mailed my supervisor but because of the Holiday he may not get back to me in a timely manner. So I'm inquiring for some help before I got to the site.

Thank you for any suggestions you may have,

Glenn
Hi Glenn,

Welcome to the forum.

I have you checked zoning and planning to verify what zoning will allow and if they have permits? From your description, it appears that they are building either a granny flat or a duplex. Is the garage attached or detached? Will it be separate living quaters with its own entry and no entry from the original main dwelling? Will this garage conversion have its own power, gas and water meters? Will this have its own address, mail box?

Since this work is in progress and is not completed (finished), you may have to do this appraisal "subject to completion per plans and specifications."

I would do this "subject to", and you will need to research for comparable properties; similar zoning, granny flat/duplex with out a garage.
 

ZZGAMAZZ

Senior Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
It's also necessary to determine whether the JA requires a garage. I presume that permits for the conversion wouldn't be issued unless a replacement garage was included in the plans--IF covered parking is required.
 

CCAAMO

Senior Member
Joined
Sep 17, 2007
Professional Status
Certified General Appraiser
State
California
Glenn,
there have been a lot of threads on this topic over the past several months.

This is not something you want to guess at so the first thing you need to do is verify if the garage convertion is permissable based on the current zoning and if there are permits. If the City says it is permissable but there are not permits, then you could value it based on what the city says is permissable, say as a guest house, and make the appraisal subject to permits.

If the City says they are not permitted to convert the garage to a guest house, then you can not value it as one.

Many cities do not allow kitchens in the guest homes, but there are some that do so it is important to verify all these things with the City or County.
 

Robert Dunkle

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Oklahoma
I e-mailed my supervisor but because of the Holiday he may not get back to me in a timely manner. So I'm inquiring for some help before I got to the site.

This deserves some direct communication with your supervisor. To heck with e-mails, call him on the phone and get some supervision from your supervisor. That is what they are supposed to be doing!!!

I understand wanting to get other opinions, but this is not something you should be doing on your own.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
The completion of the garage conversion construction would be "Subject to" a Hypothetical Condition that the construction is complete. If you are unable to confirm if the conversion is legal, then the report would also be "Subject to" an Extraordinary Assumption, that the conversion is legal etc.
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
If they don't have permits for this conversion (and depending on in what zoning jurisdiction its located) not only may it be of no value, but it might also be a liability. If so, you'd need to estimate the cost to cure, which in this case is limited to returning it to service as a garage.

Lots of people do things they're not supposed to. As I say, depending on the city of county where this is, their building department might force them to tear it out if they get wind of it. Many appraisers are real careful to not inform the building departments of these conversions when they inquire about permits.

Step 1: Inquire what the specific zoning classification is (as is required on the Fannie forms) and what it allows.

Step 2: If the zoning allows for 2nd units and if enclosed parking is not required, you can ask to see what permits the city/county has on file for this property. You don't have to tell them exactly what you're looking for.

Step 3a: If there is mention of an application for permits or permits themselves, note the number of the application or permit and make your appraisal subject to completion of the conversion per plans and specs.

Step 3b: If there is no mention of permits or an application for permits then disclose that in your report. Don't say there aren't permits; instead, say that the city coldn't locate a permit or application on file.

Some cities don't get too excited about this sort of thing unless/until there's a complaint. Others will actively look for unpermitted construction and make property owners demolish those improvements. Cities are starting to use satellite photos to match improvements with permits. You don't want to get caught in the middle of something like that.
 
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