How Do Appraisers Handle Additions With No Permits?

BUILDING PERMIT APPRAISAL

Non-permitted additions or additions added to a home without proper permits can become a headache for the buyer as well as the appraiser.  Will lenders turn it down because there are different factors that make it difficult?  There are non-permitted additions that do receive financing but only if the appraiser is highly qualified and is able to write a positive report as to why.

What Are Non-Permitted Additions?

In most cases, building permits are required, for almost all construction or remodeling projects, to ensure the structure is safe.  Therefore, non-permitted additions are those made to a home without the required permits for the projects.

There are some common exceptions to this requirement including driveways, window replacements, floor coverings, certain roof repairs and replacements or a detached storage shed.  If you are planning to have construction performed on your home, consult with your city building office, review the building codes and determine if a permit is required.

The Quality of the Work Done:

The quality can play a huge role in whether buyers will pay more or less for additions that were performed without a permit.  Does the particular construction have a substantial benefits?  Does it add or detract from the overall atmosphere of the house?  Is it a welcomed addition around the neighborhood or not?  How would they rate the workmanship that has been performed, is it worth a higher value? Buyers might even be interested in what it would cost to get that area permitted.

Where The Appraiser Stands:

A lot depends on the actual addition.  If it’s something pretty minor that was added without a permit, it probably will not have the appraiser jumping up and down and waving flags.  Something pretty minor could be something like a covered patio.

On the other hand, if it’s a significant change in the property, it could deter buyers. If the addition has added a significant change in the size of the home, or too much of a change, this could become a large marketability issue for the next buyer getting a loan for the house.

Getting A Loan Can Be Tough:

There are lenders who will not loan on non-permitted revamps – period!  Appraiser should avoid and not include this area within the square footage of the home.  Some lenders will loan on a non-permitted addition but ask the appraiser to determine the impact value due to the lack of permits. Actually what the lender is looking for is an appraiser to make positive comments regarding the additional upgrade.  An appraiser is not licensed to make statements to that effect, but the lender will still try to get some sort of statement anyway.

Upgraders Beware:

If you are considering doing work on your home without researching and getting the proper permits, you could end up with a loan and appraisal headache. Not having proper permits is a really quick way to kill any future selling deals or create a marketability nightmare for your property.

Keep in mind, if you do work on your home without permits or you know a previous owner did, you must (by law) divulge this information to potential buyers.  This is done on a State Specific Disclosure Statement which asks the seller to report any known legal issues or non-permitted construction done on the property.

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