I just completed a relocation appraisal where the previous owner finished the bonus room area over the garage and installed a deck. Very nice additions to the property. Yes, I said additions. They weren’t on the original building permits and are considered additions to the property. The living area I measured was more than 400 square feet larger than the assessor’s records (property data card) and the deck was not listed either. Guess what? No permits so not legal “as is”. Now, the property owner has to file for two new building permits, open up the wall in the family room (former unfinished bonus room) and dig down and around the deck footings so, the building inspector can inspect the additions for conformity to current building code. In this case, he needed the wall open to inspect the insulation in the family room. Oh, did I mention the cost of each building permit is twice their original cost.
Many lenders have access to the assessor property data card through multiple sites, including public record services or even Zillow. What that means is they compare the living area in the refinance or purchase appraisal with the public record. If there is a great difference they call the appraiser to clarify. It is the appraiser’s responsibility to let the lender/client know if the property is legal “as is”. Without the proper permits it is not legal, and therefore cannot meet the criteria of Highest and Best Use. As for basements, if it is common and typical, the mortgage financing industry in general are not imposing strict guidelines at this time. However, finished basement cannot be considered living space without the proper permits and exterior egress. In a nut shell, the return on your investment is very, very low.
The other and very important issue you absolutely need to consider is property insurance. Without obtaining the proper permits the property is not legal and the insurance companies can deny your claim. That would cost a lot more than the increase in property and school taxes people so desperately try to avoid. So, now the big question, “Is it worth it?” Do you already have changes to your property that were done without the proper permits? Maybe by the previous own? Call and check with the assessor or look-up your property on Zillow. Or did the building inspector tell you that you didn’t need one. Please get that in writing.
Margaret M. Dennis, SRA
Dennis Appraisals, LLC