In my service area, where there are older homes, it has been common for a property owners to construct an addition to the basic home. Such as a room addition on the back, or converting a garage/carport into an additional bedroom/den/family room/etc. It's also common for some previous or current property owners not to obtain a building permit for some additions.
When a permit is issued, the addition is inspected for building code compliance, the additional square footage is included in County Records, therefore, the addition is included in the GLA (Gross Livable Area) and no adjustment in the grid is necessary. However, if no permit was issued, the square foot measurement of the addition should not be inclueded in the GLA of the Appraisal Report.
Realtors/Agents will include these types of additions in their listings as a selling point, or amenity of the property, to entice buyers. Some will also include the square footage of the addition(s) with the recorded (original) square footage amount in their listings. By doing this, any search of comparables can be inaccurate due to the incorrect square footage stated in the active, pending, or sold listing.
By including the square footage of the addition in the GLA, the appraiser is certifing the addition coplies with and meets local building codes and is structurall safe and sound, and can be held liable if anything should occur to indicate or prove otherwise (such as a fire, roof problems, foundation problems, etc).A comment should be made in the appraisal report noting the type and quality of construction of the addition, and pictures of the inside and outside should also be included in the report. This is when a "Cost to Cure" adjustment may be necessary.
Cost to Cure is an adjustment to the value of the subject property for the dollar amount it would cost to restore the property to its original construction state. Such in the case of a "Fixer Upper" or a property with "Additions".
If the addition does not involve original structure changes, such as roof, outside walls, weight bearing supports, etc., an adjustment could be made for the estimated cost to remove the addition by a common person, up to $1,000. If the addition involves structure changes, I would not make an adjustment in the report. If the client or underwriter/reviewer requests or questions it, then I would have the client hire a licensed contractor (since I am not an expert in this field) to provide an estimate of cost to them, and when I receive the estimate from them I would revise the report to include an adjustment.
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