A common issue in residential appraising is construction which has not been issued an appropriate building permit by the jurisdictional authority. Here’s how to handle this sometimes difficult situation.

Examples of this issue include: additions and detached guesthouses; and garages that have been modified for use as a living area. One needs only to peruse online forums, participate in continuing education discussions or have informal conversations with other appraisers on the subject to realize that there are many different perceptions about how to handle this issue properly and sometimes, even whether or not it is an issue that needs to be addressed at all!

Responses to this issue vary and it’s safe to say that there is no “correct” way to handle it. However, how one proceeds can have possible repercussions from both a compliance and liability standpoint, particularly when utilizing the typical Fannie Mae form reporting formats.