Unpermitted Additions “Zombie” Assignment Condition
This is a “zombie” assignment condition that seems to never die.
Let’s agree that unpermitted means something was constructed without a required written permit. There are plenty of jurisdictions that don’t issue permits because the permit process doesn’t exist.
The assignment condition goes something like this:
The appraiser is not to include any GLA from any unpermitted additions unless they use comparables that have similar unpermitted additions.
Here’s what Fannie Mae stated in their September 2014 FAQs:
If the subject property features an unpermitted addition, can the square footage of the unpermitted addition be included in the total gross living area reported on the appraisal report?
If the appraiser has identified an addition(s) that does not have the required permit, the appraiser must comment on the quality and appearance of the work and assess the impact, if any, on the market value of the subject.
Fannie’s position is that the appraiser must support the market impact of any unpermitted additions. But there is no flat out instruction to not include the GLA.
That’s fair and reasonable.
Note that Fannie also distinguishes the required permit.
Too many AMCs are making the blanket requirement that appraisers are forbidden from including GLA without permit documentation.
An appraiser must not allow assignment conditions to limit the scope of work to such a degree that the assignment results are not credible in the context of the intended use.
If relevant information is not available because of assignment conditions that limit research opportunities (such as conditions that place limitations on inspection or information gathering), an appraiser must withdraw from the assignment unless the appraiser can:
- modify the assignment conditions to expand the scope of work to include gathering the information; or:
- use an extraordinary assumption about such information, if credible assignment results can still be developed.
Appraisers have three options and three options, only.
- Modify the SOW to allow for more time to go permit digging.
- Use an extraordinary assumption about the existence of a permit.
- Walk away.
There is no fourth option of completing an “as is” assignment by magically making the 500 square foot add-on suddenly disappear.
AMCs are cautioned from insisting upon such assignments and appraisers are cautioned from taking such assignments.
By Brian Weaver, Coordinator Editor of IllinoisAppraiser, Appraisal Management Company Coordinator for the Illinois Department of Financial and Professional Regulation (IDFPR) – Illinois Appraiser Newsletters – Volume 8, Issue 2