Under the new FHA guidlines what do the lenders require on Garage/Conversions?

Asked by Tanner, Fresno, CA Sat Aug 27, 2011

I have a garage that has been re-finished and permitted. The door is still functional and will open, but for cosmetic purposes we removed the springs and put paneling on it. (The paneling does not cover or go over the sides of the door openings.) When the appraiser came out we told him it was not a conversion only a refinish, also there are not electrical outlets there. He listed it as a conversion and gave me a $2,000. deduction in the value. He stated it as storage only. When he was questioned about it, he said it had outlets on it, which it does not and that FHA lenders require an appraiser to put a dollar amount for what it would cost to restore it back to a garage. (Is that true?) He said this could go up to $6,000. or even $8,000. He also said that even if I could show him the garage door would open he still could not go back and adjust the appraisal. It would have to be done on a new one. (Is that true).

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Justin Ruzicka’s answer
Justin Ruzic…, Agent, Greenville, SC
Sat Aug 27, 2011
It doesn't sound like a functional room to me either. But more importantly don't you love how the Government is making it difficult for you to sell your house? It is so frustrating that FHA (a GSE) of great old America is creating all these road blocks in one of the largest private sector industries out there...UGH.

best of luck
0 votes
John Arendsen, Agent, Leucadia, CA
Sat Aug 27, 2011
Oops! Forgot to give you my email: onthelevel@cox.net
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John Arendsen, Agent, Leucadia, CA
Sat Aug 27, 2011
I tend to chime in with Jack's very excellent comment. I, as a general contractor and RE broker cannot fathom how this garage would function as a viable room addition the way you described it. If the door opeinings have not been sealed and there's no HVAC or electrical it sounds more like a spruced up garage improvement rather than a conversion.

I would have to see some pix of the conversion and a copy of the permit to really be able to qualify my opinion. Please feel free to email me some photos and a copy of the permit and I'll be happy to give you an educated opinion from what I'm able to interpret at no cost.

As far as having to convert it back to a garage to meet FHA requirements? I can't see is costing that much money unless there are walls and a ceiling involved. But again I'd have to see some photos.
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Jack Gillis, Agent, Dallas, TX
Sat Aug 27, 2011
FHA has an appeal process for objections to appraisal, You would need to check with your lender about the process. In addition, a new appraisal would not be valid until 6-months after the last FHA appraisal (FHA rule).

What was permitted on this so-called "conversion?" It sounds like all you did is panel the garage walls and disable the garage door, which, in most jurisdictions, would not require a permit. However, if all you did was disable the garage door and place panel on the walls, in my opinion, this is not a "functional" room and would not qualify as additional living space. There are no electrical outlets, no heat/AC, only the concrete garage floor, etc. I think the appraiser would "win" this one.

Jack Gillis, M.B.A., J.D. │ Realtor®
Jack Gillis Realty Advisors
United Real Estate, Broker
5430 LBJ Freeway | Suite 280
Dallas, TX 75240
Cell: 214.718.4910
Email: Jack@JackGillisRealty.com
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