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Non permitted additions

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William jackson

Sophomore Member
Joined
Jan 14, 2003
Professional Status
Licensed Appraiser
State
California
I occasionally appraise a property that has a non permitted addition. If the addition flows well with the floor plan and is constructed with similar materials and workmanship as the rest of the home, what kind of value should I give it ? No value , full value, partial value ? And how should I comment on this in the report.
Thanks, William
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
William,
How do you know it is not permitted?
As with anything in appraisal work it is what the market tells you it's value is.
If the market values this amenity then give it that value. If the market does not give it any value then you give it no value. If there is a cost associated with it (i.e. municipality enforces tear out or code compliance) then a negative value would be warranted. :wink:
 

Wally Jones

Senior Member
Joined
Jan 23, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Check this thread for a recent discussion of the issue:

http://appraisersforum.com/forums/viewtopi...der=ASC&start=0
 

Patti Jury

Senior Member
Joined
Mar 23, 2002
Professional Status
Licensed Appraiser
State
Colorado
Hey William,

Here is my two cents...

I recently completed an appraisal on a tri-level home.
During the course of my inspection I found a dining room addition and an upper (Large) master bath addition. It (additional square footage) did not appear to be recorded in the Public Records information or on the MLS Reporting. The master bath had a Huge oval/heavy tub.. soft flooring around the seperate shower and I just did not get a real good feeling about being in there. As I inspected the exterior I noticed that landscape border was used to support the upper master bath. You know that rounded green wood border trim for flower beds/sidewalk border ...
The underside was insulated but not finished.. the supports had large cracks...etc...

To make a long story short... We in El Paso County have the ability to check permits on-line for up to the past 12 years. PPRBD.com...
No permit was ever issued for this property.
I discussed the situation with the lender... disclosed on the report..but did not condition...Basically I just reported it.
The Lender called Regional and they inspected. The Owner made required repairs and the permit has since been issued.
In my case I think there was an obvious safety issue due to lack of supports. Just report...disclose and let the lender deal with the situation.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
If there is an addition, discuss it. If there appears to be an encroachment, comment on it. If a garage has been enclosed, say so. Then let the lender decide what they want to do.

Don't go making decisions that are not yours to make.

Roger Strahan, SRA
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
I think some of the respondents are missing Williams question. he asked "what kind of value should I give it ? No value , full value, partial value ". My understanding is William is not asking how to report it but how to value it. Most of us know (I am including William) that for mortgage origination we must comment on access, heating, quality of construction for these types of areas in addittion to making the report subject to the documentation of permits by the owner. I think William is asking a VALUE question not a REPORTING question.
 

Patti Jury

Senior Member
Joined
Mar 23, 2002
Professional Status
Licensed Appraiser
State
Colorado
Good Point Frederick,

I gave mine ..no value. Like I said I had an obvious safety concern/problem. I did not include it in square footage but noted it on the sketch as noncalculated area.

In general I give nonpermitted areas some weight if completed in a workman like manner. But I also note the area was completed without permit...at least within the past 12 years.

Then I let the underwriter take the ball and run with it.

Normally unless there is obvious over-improvement.. there is little to no value noted in the market for the improvements.
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
An interesting twist to this depends on what definition of market value you are using. If your definition says that the subject property is appraised at its highest and best use, then remember that one of the cannons of HBU is that the use be legal. Same sort of technicality on any appraisal form that requires you to indicate the HBU.

I was involved in a divorce case that had an illegal 4 unit building that was only zoned for a 3-unit. Buyers in this market might pay more for this unit because of the possibility of additional rental income, but our instructions from the judge instructed us to appraise the subject property at its HBU. Other appraiser treated this as a 4-unit which was an illegal use and was about $100K higher on value. Judge ultimately accepted my value as the basis for resolution.
 

Karl

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Arizona
OK so it is unpermitted U include it in value & from what I read so far just ignore that it is not permitted. Well OK then the County inspectors come along after someone new buys the home & the County says remove the unpermitted portion or more likely they'd say pay the fines & permit fees & we'll inspect it in 10 15 days. Think someone will come knocking on your door.? Myself I show the additions in sketch under uncalculated areas then DISCLOSE that this is built like a "Brick S**T House or Amature night at Home Depot. ETC ETC however no permits were filed. IN THIS APPRAISERS OPINION (Love that phrase) this should be corrected through the Assesors, Zoning , & or Building & Permits department. The underwriter of the loan has the right to inform the prespective buyer of the home as to the problem & the buyer can sign a waiver that he is aware of the situation & go from there.
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Karl,
You need to re-read the posts. No one has said "just ignore that it is not permitted". I contend that you must value this as the market would value it. If that means that the market recognizes that the building department will enforce tearout or code compliance then the addition should have a negitive value assuming that the cost of code compliance exceeds the value gained, in the case of tear out the amenity no longer exists an a negitive value will occur. If on the other hand tear out and code compliance is not enforced (i.e. san francisco) and the market will pay a premimum for such addittions then a positive value should be reflected in your analysis. Do you include it in your GLA? Each case is different. If there is access directly from the main living area, it is heated via the main system, is of like kind and quality, etc.. will all help in your decision. I always make my reports subject to the owner providing documentation of permits. Then if it is not permitted it is the Underwriters call.
 
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