Conventional Loans & Unpermitted Structures
Real Estate Question about conventional loans & unpermitted structures- I have a home with an unpermitted structure (An 1800sq Ft. Guest House) the property was originally bought years back with no guest home, and I am presently attempting to refinance with a conventional loan. I am wondering what the appraiser will do with the unpermitted guest house. There are numerous, unpermitted structures in my area. How should I handle this with the appraiser?
A Perfect Topic! “Appraiser are devoted to the lender, they are the so called “eyes and ears” of the lender. I am not an appraiser, but let me step in and play one for a minute. When it comes to structures that are unpermitted, the theory here is straightforward that if a structure is unpermitted, it cannot be protected through insurance, hence, not counted. Something that's not permitted cannot be insured since its unknown what building standards were applied or if was built to current codes.
The lender must be protected in case there’s a problem and the lender needs to take the property back. If an appraiser gives the un-permitted structures(s) value, then there’s a problem and the bank gets the property, they bank/lender would lose out on any value given to the un-permitted structures. It's funny how things work sometimes; "the guidelines" The guidelines for most lenders are the appraisers, too and since all appraisers work for the lender, they work extremely close together?
To answer the question frankly, just be candid on what is permitted and what isn't, telling what you know is the best policy to take. If there are permits, please obtain copies of them, then that way you can hand the appraiser a copy which will be included in the appraisal.
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