Cost To Cure Adjustment

Robert   -   Yes, Agents like doing things like that.  They like to classify a room or area as what ever thay feel will make it sell faster or for more.  I have seen homes where an access door to an addition would be necessary for qualification purposes where the only access was thru another "bedroom".  And I'm sure we all know the rules for that type of situation.  Also, if the addition is listed as a third bedroom by the Agent, and not permitted, the original condition would be a two bedroom and requires a whole different set of comps. 

John   -   Yes, you can give value to the addition that was not permitted and not recorded as part of the GLA.  The value given would be minimal (not the same as the rest of the structure) and the addition considered as storage, but it should only be included as an amenity to the subject  IF  there are comparables with similar additions "amenities" that were not permitted and recorded to use.  If you use a comp with additions recorded in their GLA, you will have a sqft adjustment to the comp and that comp may not actually be a valid comp.  You could also determine the value by using matched pairs analysis.  But like I said, if you include it, you are stating it meets local building codes and can be held liable.  I do not include non permitted additions in the GLA.  I do acknowledge the addition in the report with pics, and put the liability for cost to cure adjustment amount on the lender or contractor.

Jeremy   -   Thank you for your comments  -  unfortunately for some reason your comments were here but then disappeared.   I have noticed several comments from others, on other posts, along with some of my comments on other posts, disappearing after being submitted.

John   -    I know what you mean.  Some additions are truly hard to figure out because of the construction and materials used.  I have seen some that completely re-structured the original floor plan where it was very difficult to determine what was there, what was added, what was permitted, and what was not.  I also had one appraisal a couple of years ago that was done so perfect in matching walls, roof, grade, and materials, that I didn't know there were additions (unpermitted) until after I completed my sketch, and my calculation was over 500 square feet more than county records.  After going back to verify my measurements, (house was vacant - owner passed away), the Trust Officer handling the Estate (house was an asset of an irrevocable trust) provided me with the contact information of a beneficiary, who informed me of what was added to the original structure.

Chip   -   Explaining is always "interesting"  -  I usually wait to make sure their "pit bulls" or other large dogs are well secured before doing so,  if you know what I mean.   And Yes, by including the non-permitted addition in the GLA, you ARE actually certifying it as being equal to the rest, which it may or may not be, and CAN  be held liable, as with non-disclosures.  Since I am not a building inspector, home inspector, or anything other than an appraiser, I won't do that.

Dan  -  Apparently your comment fell prey to whoever or whatever is deleting them.  That has happened several times.

I originally posted this in Jan of this year in the Forum, which you cannot access anymore.   At that time I had an underwriter contact me regarding my comments in a report on Cost to Cure.  Prior to that, a couple of Broker Offices (that eventually impoded) were wanting adjustments made in reports for it.  I had addressed it in the report (as usual when there was an unpermitted addition) but made no adjustment.  The burden for determining the adjustment amount was shifted to the Brokers by them hiring a contractor (which I am not) to estimate costs.      Using replacement cost didn't seem sufficient for the removal and reconstruction of a partial area.

Denise  -  Thanks for the response.  A lot of the time the current owner does not know if the additions (when they purchased the property) were permitted and recorded.  If, when they purchased the property, the appraiser at that time did their job right, it would have been determined if it was or not.  In my area, when a property owner has additions done, and hire a contractor, the contractor usually gets the building permits and files them.  Not always if they are working on the side.  The addition is also inspected by the building inspector and is added into the total square footage recorded in county records (for tax assessment). 

A lot of Realtors/Agents will include the additions (even if it wasn't permitted) in their listings.  By doing so, they screw up everyone (other R/E people, appraisers, LO's, brokers/lenders, reviewers, underwriters, investors, ALL the online sites that provide home values, even themselves at a future date) who searches for comps (sold or active) in that particular area.