Converted Living Areas

Realtors and homeowners often ask us what an appraiser considers when determining if a converted living area will be included in the report living area calculation. These are some of the guidelines and factors that are commonly in use.

The area typically must be determined by the appraiser to be legally permitted, due to highest and best use requirements. There are extensive discussions as to the definitions of "legal" and "permitted" in this context (see links at the end of this article). Local zoning and building codes have a major impact as to this determination, thus we do not make blanket statements as to what is considered legal for the purposes of our discussion.

Common Considerations

To be considered as typical living area, the space should have like/kind materials and feel congruent in finishes compared to the rest of the home. Factors that might be considered include construction materials, floor level consistency, wall finishes, temperature control (AC and/or heat), ceiling height, roof configuration, electrical & workmanship.

Construction materials are things like CBS walls vs wood vs fiberglass. Interior walls should not have exterior wall finishes like siding or rough stucco. The temperature should be climate controlled in a similar way as the rest of the home (a $150 wall unit AC unit does not magically turn a 400 sf space from a rough finish enclosed porch into congruent living area).

Any electrical, plumbing or construction workmanship should be in compliance with local code. If a home is a good quality CBS build and there is a low quality fiberglass enclosed porch, the area is not of comparable quality or market appeal. An appraiser will likely consider many factors and It is usually not a single thing that makes the difference.

Non-permitted areas (as in not having a physical permit obtained from the building department) might be considered living area in Conventional and FHA appraisal reports, as long as the area meets certain criteria.

It is also possible that the area may be considered to have value, but not as "living area" in the GLA grid line of the report. For example if you have good comparable sales that have similar enclosed porch areas, it might not matter if that area is considered GLA or not, as long as you can show that the space has a recognized market reaction (value).

How Should I Prepare For the Appraiser Visit?

You probably are not going to impact the appraiser's reasoning or assessment of a conversion area, but you can make your case for consideration of value by finding similar relevant sales and researching their conversion areas. Conformity to sub market norms is one of the most critical considerations. The appraiser will typically prefer to have 2-3 comparable sales with a similar condition if possible. I have spent countless hours reviewing public record sketches to find similar conversion areas that are not reflected as GLA in my County's record, but which are advertised in MLS showing conversion area as GLA. If you can't find similar sales, your conversion may not be conforming to sub market norms.

A pre-listing appraisal can be the most effective way to discover how your conversion area will impact the home's value while gaining an independent impartial opinion of the most likely price the home would sell for in today's market. Experienced Appraisers Inc has hundreds of appraisers within our network that provide quality work throughout Florida.

The photos and notes below are not absolute, they are just examples from one of our Florida sub markets for the purposes of discussion. The presence or lack of one of these factors may not be disqualifying, but these are the types of things that might be considered.

Discussion & Further Information

The appraiser is typically valuing the home based on the Highest and Best Use. By definition this means that it must be legally permitted. Appraisers are not home inspectors or contractors, but they do have minimum inspection reporting requirements that must be met.

Part B of the Fannie Mae Selling Guide is an excellent reference source regarding Highest and Best Use.

Guidelines and requirements are spread out over multiple documents, even within the context of Fannie Mae by themselves. The links below are discussions for those of you that want to take a deeper dive into the legal vs non-permitted use aspect. If you get through these threads, you will have a better understanding of how confusing and diverse the potential relevant guidelines can be for appraisers in a specific situation. The garage conversion discussion is for a home in California, but the bulk of the discussion still applies including USPAP and Fannie Mae guidelines/documentation.

Appraiser Forum Discussion (conversion area & relevant Fannie Mae documentation)

Appraiser Forum Discussion #2 (illegal garage conversion)

We hope you have enjoyed this article. Our appraisers can be relied upon as an unbiased source of information. We are highly qualified and have decades of experience with local homes, townhomes and condominiums within Palm Beach County. Please consider texting or calling us today at 561-301-3750.