FHA Friday: What does FHA say about a Converted Garage?
Originally posted at Riverfront Appraisals
So we’re starting a new blog series called ‘FHA Friday’. We’re doing so much FHA appraisal work right now, we thought it might be helpful to discuss some of the FHA-related appraisal issues we find. If you have an FHA, USDA, or even VA appraisal related question, feel free to let us know!
Today, we’re going to briefly discuss the garage conversion / room addition. In the photo above, the home looks like a typical single-family residence with a one-car attached garage, right? Wrong. What’s behind that garage door is actually a family room. The owners converted the garage into living area, but left the garage door in place.
The photo below is what’s behind the garage door (I’m standing at the same wall the garage door is on).
So does FHA care that the garage was converted?
Absolutely! Here are the FHA guidelines for converted garages. The Appraiser must treat room additions and garage conversions as part of the GLA of the dwelling, provided that the addition or conversion space:
- is accessible from the interior of the main dwelling in a functional manner
- has a permanent and sufficient heat source
- was built in keeping with the design, appeal, and quality of construction of the main dwelling
From the 4000.1 HUD Handbook
Room additions and garage conversions that do not meet the criteria listed above are to be addressed as a separate line item in the sales grid, not in the GLA. The appraiser must address the impact of inferior quality garage conversions and room additions on marketability as well as Contributory Value, if any. The appraiser must analyze and report differences in functional utility when selecting comparable properties of similar total GLA that do not include converted living space. If the Appraiser chooses to include converted living spaces as GLA, the Appraiser must include an explanation detailing the composition of the GLA reported for the comparable sales, functional utility of the subject and comparable properties, and market reaction. Alternatively, the Appraiser may consider and analyze converted living spaces on a separate line within the sales comparison grid including the functional utility line in order to demonstrate market reaction.
Interestingly, FHA does not require the room addition / conversion to be permitted. However, you should keep in mind that many lenders will either (1) not lend on the home if it has unpermitted living space; or (2) will require a comparable sale with similar unpermitted area (almost impossible to find).
So if you’re selling your home, or if you are representing a seller, it’s best to get any un-permitted areas permitted before the home hits the market, to save potential headaches and delays down the road.
We’ve just scratched the surface on this issue, so if you have any questions related to this issue, let us know!
Have a great weekend!
Born into the appraisal business, Ryan Bays was around the industry from his very first breath. His father owned the finest real estate appraisal business in Southern Illinois and had Ryan working with him on jobs as soon as he could hold the other end of the measuring tape. Holding various positions within his dad’s company as he grew up, Ryan took some time off to sell real estate while at the University of Alabama, but eventually made his way back into the business after college. In 2005, Ryan began his formal training to become a real estate appraiser. After receiving his certification, he and his family moved to Owensboro, Kentucky in 2008 and began a new chapter in their lives. Ryan officially started Riverfront Appraisals in the summer of that year. He formed Riverfront Appraisals in 2008 and received his SRA designation (the highest designation given to residential appraisers) in 2014, followed by his AI-RRS designation in 2015