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Outbuilding with living quarters

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apedavid

Thread Starter
Freshman Member
Joined
Jan 3, 2008
Professional Status
General Public
State
Michigan
On a receint apraisal of our property a 1000+ sq ft renovated barn with a bedroom, kitchen, bathroom and storage was ignored. Fully finished with heat and air.

The appraiser was walked through the building, took pictures, deminsions but when it came to the actual aprasial
it was left off.

Does this make any sense ?
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Retired Appraiser
State
California
It makes perfect sense.

The appraiser was an idiot and unethically helped a broker pull a fast one on the actual lender.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
On a receint apraisal of our property a 1000+ sq ft renovated barn with a bedroom, kitchen, bathroom and storage was ignored. Fully finished with heat and air.

The appraiser was walked through the building, took pictures, deminsions but when it came to the actual aprasial
it was left off.

Does this make any sense ?
(my bold)

It doesn't make good sense.
Are you stating that no mention whatsoever was made in the appraisal report of this amenity (did you receive a copy of the entire report)?

May I assume that the purpose of your appraisal was for a mortgage transaction (refinance or purchase)?

Thanks!
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
On a receint apraisal of our property a 1000+ sq ft renovated barn with a bedroom, kitchen, bathroom and storage was ignored. Fully finished with heat and air.

The appraiser was walked through the building, took pictures, deminsions but when it came to the actual aprasial
it was left off.

Does this make any sense ?

Dear Ape,

You're going to have to tell us why your property was being appraised. Who the appraisers client was, probably not you but a mortgage broker or bank. If this converted barn (it is not "renovated", if it was you'd have a really nice condition barn, not a house.) is in addition to another house on the land and if this conversion was done legally or on the sly without permits.

And tell us what makes you think you got a copy of the entire appraisal report and not just three pages out of twenty. Have you asked the appraisers client why the barn is left off? What did they say, and what makes you think they are not lying to you? Because we find on the forum that quite a few mortgage brokers just LOVE to lie to borrower / homeowners and blame things on the appraisers without telling you they instructed the appraiser to not include an item the mortgage broker wanted to cover up to the ulimate lender. Unfortunately, some appraisers cave in to such instructions.

Webbed.
 

apedavid

Thread Starter
Freshman Member
Joined
Jan 3, 2008
Professional Status
General Public
State
Michigan
Thank you for the response to this.

You're going to have to tell us why your property was being appraised.

For a refinance

Who the appraisers client was, probably not you but a mortgage broker or bank.

mortgage broker

If this converted barn (it is not "renovated", if it was you'd have a really nice condition barn, not a house.) is in addition to another house on the land and if this conversion was done legally or on the sly without permits.

The barn was remodeled into a store with a bathroom, workshop, showroom, and storage area. This was all done with permits. When we closed the store, we converted into a a bedroom, kitchen, bathroom.

And tell us what makes you think you got a copy of the entire appraisal report and not just three pages out of twenty.

I got 21 pages. I can see where they took sq footages and multiplied out for my house and garage, but when it came to the barn it lists outbuilding $5000.


Have you asked the appraisers client why the barn is left off? What did they say, and what makes you think they are not lying to you?

This has been drug out for 3 months now. I just finally got a copy of the apraisal out of them last week. Prior to this they would send the wrong one. (it has been appraised before).

During this 3 months we had another garage built at a cost of 28,000.
We were assured this would increase the value. The appraiser came out took pictures, was given receipts, and according to the broker $1000 was added to the appraisal.

I am repeatedly told that values are down in Michigan and that the value cannot exceed receint sales in the area.

From my perspective one would use the comparables and then add the differences in our property to the value. Am I wrong ?

Because we find on the forum that quite a few mortgage brokers just LOVE to lie to borrower / homeowners and blame things on the appraisers without telling you they instructed the appraiser to not include an item the mortgage broker wanted to cover up to the ulimate lender. Unfortunately, some appraisers cave in to such instructions.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
On a receint apraisal of our property a 1000+ sq ft renovated barn with a bedroom, kitchen, bathroom and storage was ignored. Fully finished with heat and air.

The appraiser was walked through the building, took pictures, deminsions but when it came to the actual aprasial it was left off.

Does this make any sense ?
(my bold)

I got 21 pages. I can see where they took sq footages and multiplied out for my house and garage, but when it came to the barn it lists outbuilding $5000.

So, it sounds like the improvement was valued. However, it was valued at $5,000 which I think is your point of contention.

There are two things to consider here (I read that you also have a new garage, cost=$28k, value in appraisal=$1k).
First, the report should have fully described the condition/configuration of the outbuildings (renovated barn that is now a living unit). Failure to do so is a deficiency in my opinion.
As to the valuation, that all depends on how the market would react to this amenity (same thing with the garage). Not knowing your market, I cannot say if the amenity you describe is worth more than $5k in the market or not; I cannot say as an appraiser. As a non-appraiser person with some common sense, however, I'd certainly question it myself (be mindful that cost does not equal value!!).

I am repeatedly told that values are down in Michigan and that the value cannot exceed receint sales in the area.

Well, this could be the case, but not because of some arbitrary stop by the appraiser.
In a declining market, despite the fact that your house may be superior to the others, it could very well be that the market value (current) of your house is less than the selling price (past) of the recent comparables even though your house appears superior.

Also, in a declining market, my experience (as an appraiser) is that positive amenities/influence values are minimized. Think about it; when there are many choices (declining markets usually mean that there are more listings available then buyers), buyers have their choice among many properties and the competition for the buyer is among the sellers (usually acted out in lowering their acceptance price). In such a case, the seller with a superior house may lower their price to equal that of an inferior house in order to win the buyer; if so, it could be argued that the superior condition is worth little (if anything).

Now, what I am not sure of is this: Are you questioning the valuation of the appraisal in general, or did the appraisal come in lower than you anticipated and consequently you were not able to refinance?

If the you are questioning the appraisal process, I think you have most of those questions answered so far. If you want to do something about it, I'd write a letter to your loan broker explaining to her/him what the significant differences were in what the appraisal stated vs. what exists, and I'd include your concern about the value. Since you've said this broker has sent you a previous appraisal, I assume you've done business with this company before. You could say (if you feel this way) that you'd probably be inclined to use another company in the future because of this experience.
If you felt strongly about things, you could also complain to the state. However, I'm not sure what you describe is sufficiently deficient to warrant that step. As a citizen of your state, you have that option.

Now, if you could not refinance due to the valuation, then I think the appropriate action would be to request another appraisal from a different appraiser. Keep in mind that if the market is declining in your area, another appraiser may come in lower than the current appraisal. So, that is a risk you should consider, but if you haven't been able to refinance, then perhaps it is one that is worth the risk.

Finally, it could very well be that your finished barn and new garage has a $6k value in the current market. As extraordinary as that may sound (and it does sound extraordinary) it may be factual. If this is the case, then the only omission in the report was the failure to accurately describe the configuration of the finished barn. And, as Webbed has said, that may be due to the mortgage broker's pressure on the appraiser to intentionally omit it to make the loan go through without a hitch (wrong on both the appraiser and mortgage broker, if that is what happened).

Good luck!
 

Mary Tiernan

Senior Member
Joined
Dec 16, 2003
Professional Status
Retired Appraiser
State
Michigan
Appraisals, by definition, are based on the market (market reaction, market value) and sometimes the market does not perform up to a homeowner's expectations.

The market value of the conversion may not equal the cost to construct and very rarely does the construction cost of an additional garage equal the sale price.

Finding sales with living quarters in the barn is probably not easy - you don't say where in Michigan - however, I do know a lot of folks put a small guest area in the pole barn, barn, large shed, etc. around here -

around here is West Central Michigan, and the area is rich with forestlands and recreational purusits and homeowners like to have a place for their guests. But, maybe it is not typical in your area.

Perhaps the appraiser could not find any sales with similar conversions.

For an inexperienced appraiser, this is handled simply by ignoring the conversion.

For an experienced appraiser, the search for comparable sales is expanded to beyond 1 year, 2 years, even 3 years, and the market is expanded beyond the local area. This does involve a more detailed analysis of the property as the appraiser then has to determine if property values have been stable, declining, or increasing over the past 3 years, and if the location of the sales affected the value of the property. Typically, this type of report will cost more than the standard appraisal fee due to the level of research.

If you are located in an area where this type of conversion is not typical and there are no recent sales with similar conversions, then the appraisal of your house may be a complex assignment and should be performed by an appraiser with experience in this type of property or by a Certified Residential Appraiser.

The appraisal profession does demand that a licensed appraiser not perform an appraisal of a property in which they are inexperienced without taking the appropriate steps to gain education. An appraiser can enjoin the services of a more experienced appraiser to help in the assignment, thereby, gaining the experience, or pass the assignment on to a more qualified appraiser. Any assistance must be fully detailed in the report.

Unfortunately, the appraisers who participate in this forum are from all over the country and their markets react differently to items which affect value so you will not find an easy answer to your question.

The best advice anyone can give you is to suggest that you phone appraisers in your local market and ask if they have experience in appraising a residence with additional living quarters - when you find one with experience hire that appraiser to perform an appraisal of your property and compare the two reports. If there is a large difference in values, you can ask your lender to consider hiring an appraiser with more experience, or ask that the original appraisal be sent out for field review with interior inspection.
 

Webbed Feet

Elite Member
Joined
Feb 11, 2005
Professional Status
Certified Residential Appraiser
State
Canada
<snip> Thank you for the response to this.


Mr. ApeDavid,

Your welcome

The barn was remodeled into a store with a bathroom, workshop, showroom, and storage area. This was all done with permits. When we closed the store, we converted into a a bedroom, kitchen, bathroom.

I still have issues with your above statement. When the remodeling into a store was done, it was with permits. But then additional remodeling into a living unit is another matter entirely! And you leave out if that was also done with permits granted, and finaled with inspections, by the jurisdictional authority if they were required. Though I am beginning to suspect this may not be the issue. However, I can not tell.

I got 21 pages. I can see where they took sq footages and multiplied out for my house and garage, but when it came to the barn it lists outbuilding $5000.


Interesting you keep calling it a barn. But we do know what you are referring to that way! .. ;) ... At issue is does the appraisal describe "how" the appraiser came up with $5,000? Because the appraiser made an adjustment for your barn {Let us call it an ADU (accessory dwelling unit) now}. No addendum comments on that I bet! ... I'll go out on a limb and also bet not one single comparable in the report has a similar comp with similar ADU.

Have you asked the appraisers client why the barn is left off? What did they say, and what makes you think they are not lying to you?

This has been drug out for 3 months now. I just finally got a copy of the apraisal out of them last week. Prior to this they would send the wrong one. (it has been appraised before).


Ok, I getting more convinced than ever this mortgage broker has just written you off as someone they cannot obtain a loan for. So they moved on to greener pastures and don't want to waste any time on you. So you're getting s.h.i.t.t.y customer no service. Right?

During this 3 months we had another garage built at a cost of 28,000.
We were assured this would increase the value. The appraiser came out took pictures, was given receipts, and according to the broker $1000 was added to the appraisal.


There you go trusting this broker again. Got a copy of the report from the appraiser? Nevermind, I suspect this appraiser sucks as much as the broker probably does. There is a thing called Scope of Work (SOW), and effective dates in our trade. The stinking appraiser cannot do that without completing an entirely new real estate appraisal. Because that new garage did not exist at the time of the original appraisal effective date. And I doubt that lame broker paid the appraiser another $200 to $450, or so, for a new appraisal. My guess? The stinking appraiser just looked at the garage and verbally told the broker it would only add $xxxx to the value. All a violation of our standards. Were you charged for another appraisal as a result of that appraisers visit to your property after the garage was built? If you were, demand a copy in writing. If you weren't demand a copy in writing anyway and see what happens. Send your demand certified mail, to get their attention.

I agree with our other esteemed posters here that cost ($28,000) does not always equal value to the market. Often what things cost us to build on land do not return their costs in market value. BUT! A brand new garage, IF your property needed an additional garage to meet market expectations, valued at 1/28 the cost is a bit suspect. My bet? Again the broker is lying, or we have one really crappy real estate appraiser who may not only be crappy, but be violating our trades rules. Maybe both! But most brokers do want to do loans. But then, as far as I may know, you've left out a part of the story that explains things.

I am repeatedly told that values are down in Michigan and that the value cannot exceed receint sales in the area.

I would have to say having a ADU, and a new garage, does not sound like your place would be the most over-improved property in the county. A 24,000 square foot house, when the next largest within 50 miles was only 6,000 square feet, just might break the above rule by a considerable margin. You have other good posts on this. However, I would like to point out to you that the above is not the issue. From the sounds of things, a poorly documented opinion of value by the appraiser is what is at issue here. Unless you just do not understand appraisal reports. But it does not sound that way to me. As most residential appraisers turn out very crappy reports, I am leaning in your favor on this.

From my perspective one would use the comparables and then add the differences in our property to the value. Am I wrong ?

Yeah you are, but no you are not. An appraiser is not supposed to just pull "extra value," for amenities they cannot bracket with similar amenities in the comparable, out of their butts and "add" it in. They are supposed to "extract" the contributory value for such amenities out of the market, make the adjustment, and explain how they pulled that off. For very tough, unusual properties, or very low value items, as a reviewer I might allow for additional leeway over some matter. But your property, an ADU and new garage? Naw! Not that hard! So on the other hand, just because an appraiser is too stupid, or untrained, to know how to do their job, does not excuse them for just assuming some small adjustment and tossing it in.

So here are the possiblities:

A) You have a good appraisal developed and reported correctly within the general standards of the appraisers' peers for a mortgage assignment. You just don't understand how to read it. "Peers" have to be meeting USPAP (See "C" below) however. We can't say failing USPAP is a "standard" of our peers.

B) Appraisal was developed correctly, the reporting sucks. The appraiser needs to expand on the reporting so it can be understood.

C) Development and reporting are both below the standards of the Uniform Standards of Professional Appraisal Practices (USPAP). This appraiser has issues.

Here is what I am down to. What is this worth to you to pursue? Either find a hardass, like me, to review that appraisers work (and you need a hardass located where you are). I'll give you a hint. Ask the appraiser how many board complaints they have filed and how many of those complaints resulted in the appraisal board taking action against those appraisers in some manner. Versus the board dropping the complaint for lack of merit. If you find one that has a 100% batting average you probably got yourself one very knowledgable appraiser!

Or find a new lender and ask for an appraiser with at least five years of experience. Over ten years would be better. I am sure I just ticked off some appraisers with under five years in, but tough beaners. That's life! I do not recommend just obtaining another appraisal and "comparing" the two. That only causes a p.i.s.s.i.n.g match between appraisals and now the lender doesn't know what to do. Who was right, and who wasn't. Besides, the one you obtained cannot be used for the refinance because you would be that appraisers engaging client. This is not allowed in most situations.

Webbed.

P.S. Again you are welcome. And lucky, as I think I have to start charging for my time for handing out advise.
 

apedavid

Thread Starter
Freshman Member
Joined
Jan 3, 2008
Professional Status
General Public
State
Michigan
Basicly what really bugs me is the cost aproach section.
dwelling sq ft x $75 =
garage sq ft x 25 =

then the other 2 buildings are lumped into additional features and amenities = $5000

Why would my old garage be sq ' multiplied and the other 2 not ?
 
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