Real Property Appraisals/Appraiser permit request
My current situation is that my wife and I are refinancing our 30yr fixed to a new one, and planning to take out money to remodel our kitchen. Credit and money is all OK, but a problem arose with the appraisal. The value is fine.
The house was built in 1959. We bought the house in 1996. In 1972 an addition was put on (an in law suite) that included a 2 burner stove. The appraiser determined that this was 'illegal,' and the lender expects me to tear it out before proceeding with the loan. By what means this determination is made is not clear. Since the lender is the client, I have no direct contact with the appraiser.
1. Is the appraiser within their authority to declare something illegal?
2. Am I really responsible to produce a permit for something that was done 24 years before I bought my house?
The killer is that this stove has barely (like twice) been used since we moved in. However we are refinancing to remodel the (main) kitchen and having two burners to cook on during that time would be great.
appreciate your suggestions about this.
First, you should be aware that, as the Borrower, you are entitled to a copy of the appraisal - this is by Federal Law. The lender may have some kind of a policy that says that you get a copy of the appraisal when the loan closes. However, I would go ahead and ask for, no - make that, demand a copy of the appraisal NOW. With a copy, you can read how the appraiser determined the "illegality" of this addition/kitchen. This is such an important issue, the reason should have been stated in the report and the lender should have told you what the appraiser said. With a copy of the report, you can read the appraisers comments first-hand.
The means by which the appraiser "should" have determined that this addition and kitchen were "illegal" is by going to your City/Community building department and viewing the permits. The results of this review of the building file should have been presented in the report. Unfortunately, the onus is now on you to determine what is legal and not legal. I would suggest the following:
1.) You will have to go to your City/Community building department and ask to review the permit file for your property. At this point, just tell then you want to know what is in the file.
2.) If you do find permits for the addition, GET COPIES OF THE PERMITS, this should cost you up to a $1 per page. Go to a copy place and make additional copies for your lender and for the appraiser. At this point, you know that the addition is permitted. Look to see if the kitchen in the addition was permitted also. If permits for both are present, you are good-to-go and can wave the permit copies under the nose of your lender and appraiser.
3.) Let's say that there are no permits for the addition, or there are permits for the addition, but not specifically for the kitchen in the addition. Now you have to make a decision. First if the kitchen does not have permits, you need to ask if a kitchen is allowed within this "permitted" addition. You need to understand that you will now open a "Pandora's Box" with the City/Community alerting them to a possible code violation.
4.) Your city/community now will tell you if, or under what conditions a kitchen is allowed. If a kitchen is not allowed, you will have to remove it. This would seem to be easy, just carry it out. However, if it is a gas appliance, and the lender is particularly picky, you may have to take out the gas line.
5.) If there are no permits for either the addition or kitchen, you have a major problem. Again, alerting the city/community creates issues for you with regard to possible code violations. The good thing is that this addition/kitchen was added years before your ownership and cities are "usually" lenient in "permitting-after-the-fact.
If you find no permits for either, I would burst into tears and tell the building department this was done years ago and would they please be kind to you. I'm kidding - Just trying to insert a little levity into your situation.
The city will then come out to inspect the addition/kitchen to see if permits can be created. Unfortunately, you will have another major problem if the addition was completed and doesn't meet current building code requirements. Two get permits, you will have to cure the code violations.
The derivation for these requirements came from the recession in the late 1980s. Lenders took back properties that lacked permits for major areas, and because they had deep pockets, had to cure the violations. Now, when a lender sells a foreclosure, they disavow any knowledge of the permit status of any improvements. Another issue is that some fire insurance companies will not cover an addition that was not permitted if a fire occurs and the addition is damaged and/or destroyed.
Finally, some cities, like Azusa, CA have a City Ordinance that states that if an addition does not have permits, it has to be torn down, no permitting-after-the-fact.
For all of the above reasons, it is a good idea to get permits for any improvement you make to your property. I hope that you can get these issues easily solved. Best of luck to you.
John C. Carlson
CA Certified General Real Estate Appraiser
Victorville and Diamond Bar, CA