All Forum Posts by: Brad S.

 Happy to help! Feel free to ask me anything further, and I'll help if I can.  :)

I reread some of my post and wanted to add something: One main reason to make sure to get permits "finaled," is some building departments may make you bring the work up to current code, when you try to get a final inspection. This happens sometimes, when someone did some work on a house and had everything done but a final inspection. They might've thought they were done and "good." But, when they go to sell or pull additional permits years later, this may come up and they may have to redo some of the previous work, to meet current codes. This can cost a substantial amount of unexpected expense.

Typical appraisal practice does not include verifying permits. In my 25+yrs of appraising, I maybe pulled permits for an appraisal assignment once or twice, but I don't remember the specific circumstances, and I used a service that gets copies of them, and I would charge the client. I have read in appraisal message boards, that in some areas, it may be more common to look for permits, but that is a rarity. I have had many homeowners provide me permits, for work that was done. So, if you want to assure that I will count everything I observe during my inspection, it is up to you, (the homeowner) to provide me with permits.

This usually is an issue, when public records (Assessor records) don't match with the actual improvements. Like in your situation, on record it is a 3/2, but in actuality it is a 4/3. This can happen due to the Assessor not updating the records when additions are done, or when an unpermitted (illegal) addition/alteration is done. 

Although, I believe my experience is typical, I am speaking from my personal experience and knowledge in my market areas. All my areas require permits for most alterations, my understanding is that some areas may not require permits. 

Also from my experience/areas, just because public records (Assessor) does not have the correct property data, does not mean that it is not legal. The Assessor is separate from Building/Planning department and they may not fully communicate with one another. I was a deputy assessor at the beginning of my career, so I know how this works firsthand. We would only get a small portion of permit information, and it may be the part the states some interior remodeling was done or something that didn't require an onsite inspection to update our files. So, there might've been more info unseen, which related to an addition, or some other significant alteration to the improvements. Therefore, the Assessor records would not get updated and would not accurately reflect the current state of some properties. This also happened a lot in new tracts, where we would just walk down the street and note which lots had which models, but we might miss certain options on a model, like a 4th bedroom option upstairs or a 3rd bathroom or powder room, or something at the rear of the property we can see from the street, etc. 

But, the reverse is true also. At the Assessor, I was taught to measure and record the property as I see it, during an inspection. Meaning, I would measure the house at 3,000sf, and note it has 4 bedrooms/3 bathrooms, even if it was a legally permitted 2,000sf 3/2. But, that 1,000sf, 1/1 addition may not be legal, but I may not check, if I am just updating the Assessor role. Then, it was up to the homeowner to go to the Assessor and dispute any potential value increase, due to illegal additions.

So bottom line is ALWAYS VERIFY permit info on any property you buy, especially, if you find any discrepancies.

As an Appraiser, if I am unsure if an addition or another part of an improvement (conversion, etc) is permitted (legal), then I may not give it value and explain, leaving it up to the homeowner to prove it is legal, or I may include it and explain, by using an "extraordinary assumption (EA)." By doing that I am basically saying, I assuming something is true, but if it isn't true, then my conclusions could change. In other words, I assume everything is legally permitted, but if I find out it isn't, my final value estimate may change. Then, the Lender (my client), may request permits or something else from the homeowner (borrower). But, what the EA does is covers me.

Now, just because an area does not have permits, doesn't mean it lacks value. But, that said, typically, it would have less value to a buyer than if it was legally permitted. And, as an Appraiser, it is practically impossible for me to accurately discern the market value of an unpermitted addition, which is why I would most likely use an EA and assume it is legal.

So, after all that, I could've just answered your question with: "YES, either verify there are permits for the additional addition/bedroom/baths, etc, or get permits for those areas that need them." But, keep in mind make sure to get the permits FINALED! Just because you pull a permit, doesn't mean those areas are "permitted." They need to be inspected and APPROVED (signed off)! I have had multiple appraisals where certain work was never signed off and therefore, it was still not fully permitted. And make sure to get a C of O (Certificate of Occupancy) if required in your jurisdiction.

SIDE NOTE:
The Lender's Appraiser can talk to you all they want, what they can't do is discuss their opinions, but they discuss facts. So, they can tell you what the final measurements of the house was, etc, but they can't discuss their value conclusions or how they got there. Unless the client (the Lender) expressly gives permission to speak with the appraiser - which doesn't happen. 

AND the Lender can speak with the appraiser directly, they just can't influence them and if they are an originator of the loan, etc, they can't pick the appraiser, etc. Basically, if they will benefit from the loan closing, they can't influence the appraiser or discuss opinions.

....ok, my fingers are tired, hopefully this helps someone...

 Actually, this was for a TX rental I have. I was fortunate their current landlord told me about the eviction. I am not sure they were supposed to tell me.

I just had something similar on a vacant rental. They provided their paystubs and bank statements. I reviewed the paystubs and saw that the ytd (year to date) total went down on one of them! That makes no sense! Anyway, they had some explanation, which actually almost made sense. I had my prop manager call their current landlord (listed on the application) to check the reference. They answered some things different than on the application and when my mgr asked why the house ownership (where they are current renting) is in a well-known large corporation name, they hurried off the phone, and weren't available after.

I contacted the publically listed owner, who is a national corp which owns thousands of rental homes, and they emailed me back that my applicants are currently being evicted! I dodged a bullet on the that one! Bottom line, if it doesn't feel right, triple check and verify everything. 

There are many people that won't check things out as deeply, and they will get problem tenants, don't be that Owner!

Well, I have an interesting real life example, pretty close to the original scenario presented by the OP.

Feb 2006
Sold a CA rental for $835k, after it more than doubled in value in about 3 years. 

May 2006
Purchased 5 rentals (3 different TX markets)

Sep 2022 Estimated Values
CA property - $1,650,000
vs
TX properties (all 5) - $2,215,000

Unfortunately, I did not get the full benefit of all the appreciation, as I sold 2 of the better TX properties 8 years ago, due to personal circumstances. But, if I add in those 2 sale prices, to the other 3 TX properties I still have, I am about even with the 1 CA property value today. And I would've probably been better off holding on to the CA property and pull money out to buy the TX properties (or some of them). But, I am not sure how comfortable I would've been with the leverage.

Interesting info to chew on!

I haven't done the cashflow analysis yet, but I think that'd be interesting to see. I may do that and put it all in a new thread, since this one has been around.

FREE PIZZA ??

....kidding

I'm going to try and make it.

See ya all there.

Ok, so more information is needed.

You need to dial down more on the Buyer's (your neighbor) needs and situation, before you decide if it's worth it and how to potentially structure a deal with them. You are trying to satisfy his needs at the same time as yours, but you need more info first.

Do they need a lump sum of cash to move, or do they just want the monthly payment covered?
Or would they rather have some monthly cashflow?
What is their current loan terms (current balance, interest rate, remaining term, payment, etc)?
What sale price are they wanting and what do you think the current market value is?
How much net income are you confidently estimating to be able to bring in as an str?

i'm not sure if I'm missing anything, but that's a good start.

I'm not sure about the dual agency in FL, but I do know some Brokers will not allow their Agents to do a dual agency deal. 

I just sold my 6-plex a few miles North of that area. It was also a C area (I think-I'm not a local). Also, very small 1 bed units. My property needed a lot of work, of which I was not willing to take on and I also wanted to exchange into another deal I am working on. The #'s could've been really good and the Buyer will hopefully do well.

Anyway, I'm sure my prop mgr would love to have another property to replace mine. He is a very nice guy and seemed to look after my property pretty well. And my property needed a lot of looking after. But, of course, I don't know how efficient he was, since it is difficult to assess that being so far away. But, I am happy to share his info with you, if you are interested. But, Caveat Emptor 

One of my best deals was an 1,800sf, 2 bedroom, 2 bath house with a good sized den perfectly situated to easily add a wall, door and closet, converting it to a 3 bedroom. It already had a family room, so that 3rd bedroom wasn't taking away from the living area. I think the fact that it was on record and marketed as a 2 bedroom, limited the interest in the house. If I remember correctly, it cost me around $2k to convert the den to the bedroom and I rented it for more because of it. Technically, it wasn't on record as a 3 bedroom, but it had all the features of it. To be safe, you can check your local codes and see what constitutes a "legal" bedroom for the area. Typically, it is a minimum size and having the proper egress (ways to escape in an emergency-windows/doors), and in some areas, you may need natural light. 

Yes, I get that. I've been doing it so long, I may just be on autopilot when I go through some of the posts. I do kinda ignore some, since there are so many hours in the day and they can become a black hole and a distraction from other things I need to do.

But, in any case, there are still a lot of knowledgeable people, willing to help on here. And it is a good thing that you realize there may be others offering more self-promotion, since that may help you to discern between that and meaningful knowledge for you.

Anyway, I am happy to offer any of my vast "useless" knowledge. I am just a little ways North of you (LA county) and also invest out of state (for 25 years) and do deals locally, as well. Feel free to reach out, if you like.

Seems like you are in a good position to start, since you have so much equity. Congratulations on that!