An appraiser in California is using the cost approach to value an older home with an unpermitted addition discovered during the visual inspection. The addition was built without a California building permit and does not appear to comply with local building codes. Under California appraisal practice, how should the appraiser handle this?
Correct Answer
B) Include the addition but note it as unpermitted, and consider the cost to legalize or remove it as a form of depreciation that reduces the addition's contributory value
Under California appraisal practice, unpermitted additions are a reality that must be addressed. The appraiser should note the addition's existence and its unpermitted status, then consider how the market values such additions. The cost to bring the addition into compliance (permits, inspections, potential modifications) or to remove it represents a form of depreciation that reduces the addition's contributory value. Many California lenders also require this disclosure.
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A California appraiser is using the cost approach for a property in a designated California Coastal Commission permit area. The property's improvements could not be rebuilt as-is if destroyed because the Coastal Commission would require setbacks and height restrictions under the current California Coastal Act. How does this affect the cost approach?
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An appraiser in California is explaining the cost approach to a client. The client asks when this approach is most reliable. In California appraisal practice, the cost approach is MOST reliable for which type of property?