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Unpermitted structures and appraisers

Hi there, 
I currently have a 512 sq ft home built in 1926. When purchasing the home there was a detached garage with plumbing and electric already installed on the way to being converted into a detached bedroom. This garage conversion is unpermitted, but since it was already nearly completed I've completed it. I am trying to refinance with regular loans because it was originally bought with private funding. I'm approved for the loan but still need to go through the appraisal.
Here are my questions:
1. Will the appraiser report unpermitted structures to the city?
2. Is there any way the detached bedroom could be counted as square footage toward the house?
3. If the appraiser says they can't count the detached bedroom, could the loan proceed using just the 512sqft house? Or will the bank not accept any unpermitted structure? Could we say the detached bedroom is just a shed. 

So I have what I have and I know it's unpermitted. There's weird property lines anyhow with the house being built in the 1920's, but the detached bedroom is definitely not within zoning. So what is my best bet considering what I have? Any suggestions would be greatly appreciated! Thanks!
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December 19 2012 - Tucson
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Answers (6)

Call Appraisal Tek they are a local appraisal company and know all the zoning and permitting requirements.   602-751-1471.  

They will provide you with the best answers to your questions.

Good Luck,

Chad
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February 18 2013
1. Will the appraiser report unpermitted structures to the city?

Appraisers dont report anything to a city or county, we only work for lenders, and we do report what we see to them. Lenders pay us to be the eyes and ears of the lender.

2. Is there any way the detached bedroom could be counted as square footage toward the house?

Not likely. You also have a problem of your small square footage, some lenders only lend on homes of 800 sq ft or more. Homes of your square footage are more or less considered functionally obsolescent and lenders may look at your home as mostly land, ie a land loan. And land loans are more expensive than a typically sized home loan.

3. If the appraiser says they can't count the detached bedroom, could the loan proceed using just the 512sqft house? Or will the bank not accept any unpermitted structure? Could we say the detached bedroom is just a shed.

Yes. Understand the lender only wants to lend on what can be insured. Lender guidelines say all square footage needs to be PERMITTED by the local agency (city or county) and insurable. If its NOT permitted, we dont kknow who built it or if its to code, or if it is going to burn down the second the lender takes it back when the loan is defaulted on.

The lender wont lend on your home because of the detached bedroom.

Be pro-active and get ALL permits of your home and make copies of them for the appraiser now. The appraiser will give them to the lender. Your biggest problem is probably the size of the house and its age. You have a unique property will very few comps, probably, but Im not the Tucson expert.

I would ask a local Realtor to pull comps of SIMILAR sized homes within a few mile radius to get a handle on the value of your home. Or contact a local appraiser for suggestions = here is a link...
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February 13 2013
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February 13 2013
You have a bit of a pickle!

1. The appraiser might report the structures to the city, so you have to be prepared for that. If he does there will likely be fines involved.

2. There is no way the detached bedroom can be counted as square footage without a permit, though it is possible to do this retroactively. For now it is simply "bonus space". 

3. Since the bedroom cannot be counted as square footage it might indeed be an issue when it comes to financing. It depends on the financing and it depends on the specifics of your situation.

I would talk directly to the city about the specifics. If you are interested in getting a permit it would likely be in your best interest to do so though keep in mind the "bonus space" must be up to current code in order to have one. You will also likely need to ask for a variance since you stated that the property's zoning does not support the addition. There are many specific details to this situation and only a professional in that area can answer them in regards to your situation. Your best bet is to make the structure legal! Not only does it increase the square footage of the home but will likely increase your property value respectively. 

Hopefully this helps.
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February 13 2013
Interesting questions, for which I don't have an answer but merely some thoughts. As to the appraiser including the garage/bedroom, I would guess it could be included if it's heated. And I don't know if the appraiser would check to see that the conversion is permitted -- I would tend to doubt it. Normally, when a project had been done without a permit, I would advise that you obtain a retro-active permit, which would involve a city or county inspector to approve the addition or conversion. This will save headaches when you go to sell the home. In this case, however, since you state that the conversion would not meet zoning, you may be asked to undo the conversion. I think what I would do is consult a real estate attorney. I can recommend a good one if you choose to go this route. Good luck, and please post a follow up here. I would be very interested in how this one plays out.
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December 19 2012
You should contact an appraiser directly. 
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December 19 2012
 
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