No Permit Pulled for GLA Addition

[cathy0405]

How do I account for a finished addition which conforms to the rest of the house (family room) however never had a building permit pulled? Should this be included in the overall GLA since it conforms?

 

[Crunch Hardtack]

Depends on how much time you want to put into this. In some areas, if you put on an unpermitted addition the local officials do nothing about it. If that's the case, just call for an inspection to see if the addition was completed in a workmanlike manner. If you are in a locality that will require the owner to tear down the addition because he didn't pull a permit, then you obviously have some other issues.

You may just want to note the fact that no permit was pulled for the addition or you may want to do an "as is" and "subject to" valuation if necessary.

 

[Metamorphic]

What I would do, if I knew it wasn't permitted, would be to exclude it from GLA, and then value it in accordance with how you think the market would perceive it, with an appropriate note about what you did. If you think the market doesn't care about the permit, then just credit the property for a bonus room with a value based on the same rate as you did the rest of the GLA. If you think the market cares about permits, make some downward adjustment in the way you value the unpermited room.

 

[Sid Pachter]

Most lenders will not accept a proeprty with an addition that did not go through the building permit process. You need to consult your client. If code in the subject area requires the use of permits for an addtition and you contacted the local building permit office and confirmed no permits were issued then I would compelte the appraisal report by not inclduing the addition. I would disclose the presence of the addition in an addendum, note it on the sketch and take extensive photos and describe it. Also I would disclose whom you spoke with in the permit office.

 

[CANative]

Most lenders will not accept a proeprty with an addition that did not go through the building permit process. You need to consult your client. If code in the subject area requires the use of permits for an addtition and you contacted the local building permit office and confirmed no permits were issued then I would compelte the appraisal report by not inclduing the addition. I would disclose the presence of the addition in an addendum, note it on the sketch and take extensive photos and describe it. Also I would disclose whom you spoke with in the permit office.

So if the property is located in a market where buyers will pay the same for a 1500 sf home with a "built-with-permit" 200 sf family room as they will for a 1300 sf home with a "not-built-with-permit" 200 sf family room we should just take pictures of it, describe it in an addendum, note it in a sketch and but otherwise not include it? Despite the fact that it has market value because of the actions of buyers in the market, we should state it has no value?

Wouldn't this require the use of a hypothetical condition (either that the room is not there or that the market doesn't pay for unpermitted additions)? Would the value opinion still be market value as defined in the pre-printed appraisal forms lenders require us to use?

And if we simply "give it no value" is that approach too simplistic? What if it has an adverse effect to value and marketability.

 

[Webbed Feet]

SOW unknown? Then the answer is lousy!

How do I account for a finished addition which conforms to the rest of the house (family room) however never had a building permit pulled? Should this be included in the overall GLA since it conforms?

Ms. Cathy,

Welcome to the forum.

Any answer back to you is only going to be as good as the understanding of your client type, intended users, and SOW is when the answer is offered. So in short, all you may have are some really terrible or very good answers. So far, reading this thread can't allow anyone to tell which is which because we know nothing about any of that. Because you did not tell us.

For example. Answers telling you to "take it out of the GLA," have just told you to use a hypothetical condition if the market would consider that space to be GLA. That is not going to result in something very wise if your assignment involves a 03/2005 Fannie form preprinted SOW and your engagement requires use of CB1.

Because nobody else bothered to find out about any engagement parameters, who the intended user(s) are, and what the SOW is, they are handing you a bunch of wild *** guesses about what you should do.

Webbed.

P.S. Mr. Boyd ...... Right on!

 

[Terrel L. Shields]

Haven't we had this discussion about Umpteen times? Oh well, again we go.

If it exists and adds value it is not invisible.
Extraordinary Assumption - assume that it can be made legal by the owner
Hypothetical Condition - assume that is already has been made legal by the owner
As is - Whatever the market says an illegally constructed addition will add.

As of the date of inspection, it is illegal. Rather than spend one more minute on it, at that point I get back with the lender and ask which of the 3 options above they want to pursue or do they want to delay it until the permits are applied for and obtained.

I don't believe in "staged" appraisals but there simply are situations where you need more input from the lender.

 

[Howard Klahr]

Despite the fact that it has market value because of the actions of buyers in the market, we should state it has no value?

In your example one would need to confirm with the "buyers" in the market that they in fact acted with full knowledge and disclosure. This is like an improvement encroaching on a setback line. The government authority has the right to have the improvement moved, modified or demolished to cure the encrochment. Just because some transactions may have occured does not dismiss the potential damages/impairment in value.

Nevertheless, as noted by others, the answer to the OP lies in information provided by the governing authority on how they handle these situations. Just be sure that there is no permit and one was required of this is what you include in your report.

 

[CANative]

This is like an improvement encroaching on a setback line

No it's not, or at least we don't know it at this point. And that is my point. There seems to be a disconnect on the forum about legal uses, illegal uses, permitted uses, etc.

A structure which encroaches on a setback line is an illegal use of the land. The issue of permits is not relevant because you can't get a permit for an illegal use.

If the structure was built within the legal building envelope but the builder/owner didn't bother with getting the required permits but follows all of the other required codes, then the use is legal even though the act of the builder/owner was not.

In your example one would need to confirm with the "buyers" in the market that they in fact acted with full knowledge and disclosure.

My "market" has only two counties but is a vast geographical region with numerous submarkets. I consider it a furtile learning ground because it represents a microcosm of the country. There are cities with stringent building code enforcement, there are remote areas with almost no enforcement or building inspectors willing to go out and look at a property unless there is a series of complaints. Zoning is complex around here.

In one community it may be perfectly legal and common to convert a garage to additional living area. But the code also states that enclosed and covered parking is also required. So if some converts the garage but does not build a new garage then the current use is not legal. The authorities could require reconverting the space or building a new garage. What if there is no room left on the lot for a new garage?

My point is that there is no generic answer to these types of questions and merely "giving no value" or removing the area from the building sketch is non-sense.

 

[Howard Klahr]

A structure which encroaches on a setback line is an illegal use of the land.

An encroachment is not an illegal use but is just an encroachment. Encroachments are cured by the granting of a variance or modification/demolition to eliminate the encroachment. If the use was illegal it would not be permitted to remain.

The construction of improvements, modifications and/or additions without a permit does not create an illegal use either. Permitted use is a separate section of the code. It does not make it any more proper just because one government authority currently has a more lax enforcement policy than another.

In one community it may be perfectly legal and common to convert a garage to additional living area. But the code also states that enclosed and covered parking is also required. So if some converts the garage but does not build a new garage then the current use is not legal.

The use is not the issue here, the unpermitted conversion results in a non-conforming structure.

The authorities could require reconverting the space or building a new garage. What if there is no room left on the lot for a new garage?

Then the space that was converted without a permit must be returned to the original purpose, a garage.

My point is that there is no generic answer to these types of questions

Here we are in agreement. In my market area, I cover three counties with respect to residential assignments. These three counties encompass over 100 cities, villages, towns or other type of independent municipal government. Each has its own policy with regard to dealing with these types of exceptions. Furthermore, these policies have a tendency to change somewhat depending on the current administration. Consequently, no simple answer - each situation is unique and must be thoroughly investigated.