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No building permits

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mavidunn

Thread Starter
Freshman Member
Joined
Aug 3, 2007
Professional Status
Appraiser Trainee
State
Ohio
We are appraising in a property in a county that requires a permit for a detached garage, an above ground pool, and the deck which is around the pool. The auditor has no permits recorded for any of these structures. The selling agent is looking into it. If we find that the permits were never secured, how is this to be handled in the appraisal?
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
We are appraising in a property in a county that requires a permit for a detached garage, an above ground pool, and the deck which is around the pool. The auditor has no permits recorded for any of these structures. The selling agent is looking into it. If we find that the permits were never secured, how is this to be handled in the appraisal?

A lender requires an appraisal report for two reasons:
A. It wants to know the significant characteristics about a property it is considering making a loan on, and
B. It wants to know the appraiser's opinion of market value.

So, in your case, if the permits do not exist, you should
A. Disclose that information fully to your client.
B. Analyze how the lack of permits impact value- make sure you explain your analysis and rationale in detail within your report.

The lender will now have to make some decisions; the first of which is if the property qualifies under its minimum property qualification standards. Some lenders will not lend on properties with non-permitted structures/improvements. The second is if they want to make the loan, given the non-permitted status of some of the improvements, they may want to change the condition (terms) of the loan.

If the appraiser fails to disclose what exists then the lender may make a lending decision based on a false impression of the property (everything was represented as being hunky-dory!).
If the appraiser fails to consider the impact on market value of the non-permitted condition of the subject, then the value opinion (IMO) would not be credible.

If it were me and I discovered these issues, I'd call my client and discuss it with them. They may want to cancel the order and I would charge them something less than the full appraisal report.

Others may offer differing advice. Good luck!
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Wednesday:

Accurate description of the Improvements demands including exactly what existed as of the Effective Date of Appraisal.

Zoning Compliance Comments:

The SOW for this Assignment includes USPAP & FANNIE MAE (if applicable) requirements to cite Uses or Improvements which are Non-Compliant with Municipal Ordinances, may represent Health and/or Safety issues, and negatively impact Highest and Best Use of the Site (which includes Legally Permissible).


During the Appraisers' Due Diligence process, review of Municipal Records for the Subject, confirmed by Municipal Personnel in the _______ Building & Zoning Department, indicated no mandatorily required Supplemental Building Permits nor Certificate of Ooccupancy for the following improvements:

_______
_______
_______

Therefore, the Final Value Opinion is necessarily subject to obtaining a Certificate of Occupancy for the improvements which existed on-site as of the Effective Date of Appraisal.

Thursday: Client receives appraisal report, notifies Selling Agent, who notifies owner "deal will fly upon receipt of C.O."

Thursday afternoon: Owner meets B.I. requests compliance inspection.

Tues. B.I. inspects, slaps wrist of Owner, wags finger in face, says " You know better than that....... fine $50. - pick up the C.O. round 3pm today.

UNDERWRITER APPROVES LOAN.

or ........" deck does not meet code, comply or remove."

owner complies requests re-inspection then see above ORRRRRR

owner removes deck, notifies Selling Agent and Loan Officer, Re-Inspection order issued to Appraiser.


Friday: Upon receipt of Zoning Compliance inspection report with photos from Appraiser, Closing Scheduled. Underwriter attaches Satisfactory Compliance inspect to file. Takes weekend off.

owner wins, buyers wins, listing and selling agents win, Loan Officer wins, Underwriter wins, Lender wins, Appraiser wins.
 
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