The real estate agent marketed the property as three bedrooms, Tax Records said it was three, but then the appraiser said it was only two. What the heck? Let me share with you a situation I encountered recently where an appraiser (me) ended up removing one of the “bedrooms” from the room count because of a functional issue. Let’s look more closely below. I’d love to hear your take in the comments.
The layout of the house according to the agent:
It’s not normal to have a layout like this, right? Imagine getting up to go to the bathroom at night and walking through someone’s room to get there. The middle room really wouldn’t have much privacy either, right? I can also picture a kid in the middle bedroom setting up a taxation system and charging his brother for passage from the rear room.
The layout of the house according to the appraiser (me):
I pulled three-bedroom comps before seeing the property, but I was surprised to discover it wasn’t really a 3-bedroom home because of a functional issue. I know this seems like a subjective call to axe a bedroom, but the functional issue definitely limits the use of the middle room, so it was not considered a bedroom. It’s too bad there was not more foresight when the addition on the rear of the house was done so the floor plan would be more functional. As a side note, I could have labeled the rear room as a den instead of the middle room, but since the rear room was larger in size, I thought it would more likely be used as a bedroom by the market.
Key Takeaways:
- Describe correctly: It’s important to describe properties correctly for the sake of clarity and even potential liability. This is true for both agents and appraisers.
- A Bedroom with functional obsolescence: I imagine some real estate professionals would call this a 3-bedroom home with functional obsolescence because one has to travel through a “bedroom” to get to a different bedroom. In my mind this was not a functional three-bedroom home, so I chose to describe it as a 2-bedroom home, but I would understand if someone wanted to describe it differently.
- The market’s response: The question becomes how to value something like this. Should we compare it to 2-bedroom or 3-bedroom homes? Well, it’s not really a regular 3-bedroom home, but it’s not really a traditional 2-bedroom home either because it has the extra space (den). Ideally, we should find a 2-bedroom property with a separate area like a den, office, or something else that is similar. If we’re lucky we might find a few sales with functional obsolescence (fat chance). Lastly, if the subject property has sold a few times in recent years, we might go back in time and see how the market valued the home. What did it compare to at the time of its previous sales?
- Tax Records isn’t the definitive authority: Just because Tax Records says it does not mean it’s accurate. In this case the home was functionally two bedrooms despite Tax Records saying it was three. As much as we want to trust Tax Records, sometimes we have to look at what is actually there and then try to understand why there is a difference between public records and reality. For reference, here are 10 reasons why public records and the appraiser’s square footage are often not the same.
I hope this was helpful. I’d love to hear your take in the comments.
Radio Interview: By the way, I did a radio interview last week on 105.5FM in Sacramento. Realtor Jay Stoops had me on his show. You can listen to our 20-minute conversation below (or here).
Questions: Is this a 2-bedroom home or a 3-bedroom home in your mind? Any other insight or stories to share? Did I miss anything?
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Great post Ryan. The person in the rear bedroom cannot be the latest one to go to bed or the earliest riser. Either way, the person in the middle room better not be the light sleeper. This home is perfect for the family where one person has narcolepsy and one person has insomnia. Another idea is that the rear bedroom could become a nursery, that is pretty much the same thing.
Good point on sleeping habits. I know some have purchased homes like this only to find out these things the hard way. Thanks Gary.
Excellent article. I had a similar situation a couple years ago and consulted with a real estate attorney regarding how to define a bedroom. The legal opinion was not to go by tax records or architectural features – it was by permits. I was told that agents should always advertise according to the latest permitted configuration, but disclose any changes that have altered that configuration. Our situation was a den that was being called (inaccurately) a 4th bedroom because it had a door, window and closet. It was permitted as a den because the city had limited the number of bedrooms allowed in a subdivision because of utility infrastructure limitations.
Thanks John. What an interesting situation to limit the number of bedrooms. I’ve not heard of that before. It almost sounds like semantics in some senses though as it sounds like it was a bedroom in all regards besides the permit. If it looks like a duck, walks like a duck, quacks like a duck….. Thanks for the interesting scenario.
Still the best appraisal blogger out there. Good topic, great illustration.
Thanks so much Alison. You are too kind. I appreciate the kind words regarding illustration too as I know you have an extremely keen eye for visual presentations. Hope you are doing well.
Great explanation for this issue Ryan. I’ve see this in some of the homes I have appraised as well. Being aware of how these types of issues are seen by appraisers would go a long way for owners that want to make additions to their homes and it will help them get maximum return on their investment.
Thanks Tom. Well said. This addition probably could have been fine-tuned a bit so access was not so limiting. It can make a difference with the value where an addition is attached on a house. I suppose the moral of the story before doing a remodel is to consult a real estate agent and an appraiser to run through ideas of what to do and what not to do. That is money well spent. Owners ought to enjoy their properties and not do everything for resale value because it’s not just about what the market would pay for something. Yet keeping an eye on the expectations and tastes of the market can be financially rewarding too.
This is exactly the issue that made me start taking appraisals more seriously beyond “the number.” About 6 years ago, I had a “3-bedroom” home not appraise because you had to pass through one “bedroom” to get to the staircase to the attic, which had been beautifully converted to a master suite. However, the attic conversion was not done with permits, nor to code, so it was not a “bedroom” either. This was, per the appraiser and anyone with common sense, a 1-bedroom house. We couldn’t negotiate out of the bad appraisal, and my clients were crushed. Ever since, I’ve read appraisals from front to back to better educate myself (and read your blog!), and have rarely had appraisal issues since…except for one that was $500 off and all parties agreed it was a shoddy report. Thanks for bringing up this issue!
Good for you to think critically and read through appraisals Corey. Sounds like that “1 bedroom” was a very funky property. I appreciate hearing the examples. By the way, the first comment on this thread was from an appraiser in your market in Portland (Gary Kristensen). Maybe you guys will connect one of these days. He’s a good appraiser to know for the local market. Thanks again. I appreciate this conversation.
Ryan, we purchased a home which has been calling all the public records a three bedroom two bath home. When we had the home inspected for use as a rental we were told that one of the bedrooms was not a legal bedroom because it did not have a window to the exterior. We now feel the value of the home has been diminished due to this finding. Who is responsible for this misleading information which we use to purchase the property? (Seller, county, seller agent, buyer agent, inspector,)
Hi Tom. Thanks for reaching out. Unfortunately I cannot answer as what you are asking is really a legal question and that’s not my space. With that said I’d be curious to look to see how this property was advertised on MLS, what the appraisal said (if there was one), and of course consider your own responsibility here as a buyer who needs to practice due diligence. Respectfully, Ryan.
I agree with you Ryan, this is a 2-bedroom home.
I had a flip like this once and I redesigned the layout by adding a hallway to access each bedroom so I could sell it as a true 3-bedroom!
What was that agent thinking??
Great post, thanks!!
Thanks so much Bev. Way to go on making your flip a functional three-bedroom. Having a less functional layout sure can impact the marketability and/or value. Good for you.
In the City of New York, for a room to legally be considered a bedroom there has to be a window (in case of fire).
Interesting Niki. An escape sounds good to me. A window or a door will suffice in my area (and most areas from what I understand based on International Residential Code). I would imagine apartments and condos are required to have a stair exit and/or maybe fire escape on the outside too? I don’t know the nitty gritty obviously. Thanks.
In order to call this a 3-bedroom house without functional obsolescence, I would consider the “cost to cure.” 1. Is it feasible to create a small hallway in order to eliminate egress through the middle bedroom? 2. If yes, and the middle bedroom is still of a reasonable size due to the reduced size from the hallway being created, then I would factor in the cost to cure. With the cost to cure in mind, this would have to be discounted in the sales comparison analysis when comparing to other 3-bedroom comparable sales.
Thanks Keith. I appreciate your perspective and methodology here. In my mind I do not think it is feasible to create a hallway. There are different ways to skin a cat though (so to speak). Thanks again.
In a home layout like this I would draw interior walls (not to scale) to demonstrate and support that this is not a typical residential layout and why the appraiser called it a 2 bedroom.
That’s a good idea John. Another appraiser emailed me something similar. Great minds think alike. For me I chose to take photos from several angles and use a few sentences to describe the issue. This worked our just fine, though drawing walls might have taken it to the next level.
Appraising in a rural area, I deal with septic systems all the time. A key issue that comes up all the time is that the number of bedrooms is determined by the size of the septic system. Realtors consistently state how you can make an additional bedroom in a basement or loft or another room and market it accordingly. Also lenders will call and ask if a closet can be put into another room to make an additional bedroom because the comparables do not match the number of bedrooms of the subject. It is important to understand how a septic is sized. and the local codes. Selling what is actually a 2 bedroom and marketing or appraising it as a 3 or 4 bedroom is misleading and can actually overload the system and cause a major repair. I would also wonder if a system failed who would be liable for misleading the lender or buyer. As an appraiser I am sure we would be included in the blame.
Wonderful point, Linda. Thank you sincerely. I agree it would be very misleading to sell something that has more “bedrooms” without the proper septic system.
Whoever built the addition no doubt pulled permits identifying what was being done as a “bedroom.” I suspect as long as the addition was done to building and safety codes, the jurisdiction would sign off on the work, and not pass judgement on the floor plan lay-out. Not unusual. Hence, everyone has automatically called the house a “3 bedroom” (assuming physically it worked as such also). This is also not unusual. So … the appraiser (ahem: Ryan L.) should go along with the program, here. However … the appraiser has to consider: (1) Quality, (2) Conformity and (3) Functionality of the work/property, as part of his analysis. Assuming nothing else except functionality is awry and an issue. In that case, I would in fact call the residence a “3 Bedroom”, address the fact the 3rd bedroom was an addition with permits issued (cite date & ref. no.) and clearly cite/note the work done was (1) Conforming (to original structure), (2) Similar quality (inferior/superior ?) BUT with a “Functionally Poor, Tandem Bedroom Floor Plan.” Straightforward reporting. The fun part of course is: How accepting is the area/market of this aspect. Tandem bedrooms in fact pose the issues others have cited here, i.e. loss of privacy, invasive, intrusive, inferior utility over-all, etc. Some price levels/markets …. not an issue. Other areas/markets are going to be more demanding and less accepting and accommodating to shortcomings and lesser utility. It’s adjustment time ! How big of a penalty or adjustment? Up to research and the appraisers’ judgement. Time to earn the big bucks.
But to arbitrarily go against the grain as called and recognized by others, as Ryan evidently has done here ….. is in my judgment tenuous at best and asking for needless push back. And problems.
Hi Lou. Thank you for your detailed response. I appreciate your methodology too. Like I said, I don’t have a problem if someone wants to call this a 3-bedroom home as long as they recognize the big glaring functional issue (like I mentioned in point #2 above). I don’t mind cutting against the grain if I need to in terms of saying something different than what Tax Records or MLS states, though I did not “arbitrarily go against the grain” here as you said. Tax Records is not the definitive authority, so just because it is recorded or just because it was signed off does not mean it is legit. This property is clearly not on par with other 3-bedrooms, yet it’s not also a typical 2-bedroom either since it has an extra space. I have slept very well at night by calling this a 2-bedroom. It was good professional judgement in my mind, though I wouldn’t split hairs if someone wanted to call it something different. From an appraisal standpoint the key is we explain very clearly what is there and figure out how to put a value on it.
Hi, could you please enlighten me. I am paying rent for three bedroom, where as I think it should only be two. Small room/closet is a room of the master room, so who ever was to sleep in in has to come through master room to access rest of house. The room in question has a window and main light switch. But has no electrical sockets on walls. Can a room be classed as a bedroom without sockets.?
Hi Sharlene. Thanks for reaching out. It’s hard to speak into this issue without really seeing it, but here are some thoughts:
1) A bedroom needs to have electrical outlets. Code might differ from place to place of course, so I cannot say how many, but it is not acceptable to have a bedroom without outlets. This is just one of the basics of construction. However, if this property was built before code changed, the rules could be different. This is where I would have to defer to your local building department. I might recommend calling them to ask a general question about what is required.
2) If you have to walk through one bedroom to get to this other “bedroom”, it’s really questionable as a bedroom. At the least it’s really not a traditional set up (duh, I know). I actually wrote a post defining a bedroom, and I’ll link it here. One of the problems here is that if this extra “bedroom” does not have adequate egress to the exterior, then that’s the tell it is not a bedroom to begin with. You did say there is a window, but I’m not sure if the window is large enough. A bedroom basically needs to open up to the exterior through a window of adequate size (or a door), and the hallway. Even with that definition I can see some calling a set-up like this a “bedroom with functional obsolescence” as I mentioned above. Why don’t you read the following post and maybe even scan some comments to glean some insight. Then let’s keep conversation going as needed. https://sacramentoappraisalblog.com/2014/09/09/the-4-requirements-for-a-room-to-be-considered-a-bedroom/
Thank you Ryan! I just shared this too. This topic comes up somewhat often in my area.
Thank you so much Donna. I appreciate it. Yes, this comes up often. I had a couple versions of this conversation this week actually.
I have a room exactly like this. Both my sister and brother have to go through my room to get theirs. Also my room also has a door to get outside and the stairs that go to the attic are also in here. What kind of room is this called and how do I make the most of it?
Hi Tamira. Thanks for the comment. It’s hard to give this room a label without really seeing it. To me it sounds like some sort of transition area where traffic from different places can figure out where to go. So I’m not entirely sure what I would call it. As an appraiser I would not call it a bedroom though for reasons stated in this post. However, I understand when people use areas as such for bedrooms, so if that’s what you want to call it, I get it. I guess if we backed up and asked what a room like this might typically be used as, that might be a clue into what to call it. Library? Reading room? Den? Bonus Room? And of course for some it will be a Bedroom.
I have a study with bifold doors to the living area, 2 closets & a window, next to the living room. Can this be considered a bedroom or would I need to build a wall where the bifold doors are?
Hi Alisa. It’s hard to speak definitively about your situation without seeing it. From experience I can say usually a den or “study” as you call it has doors like this whereas a bedroom does not. I typically call these areas a den or something else because that’s typically what it feels like. I see this in 55+ communities in particular and in many cases it makes no difference in the value. If this is an area where the market really covets a third bedroom than I suppose it could be important on some level for value to install a wall. I suspect some colleagues might think differently than me here and maybe they would count it as a bedroom. In my mind in terms of value I’m always aware that this is not a huge cost-to-cure though to add a wall if it’s needed. Thus for comparison I’m very likely using three bedroom comps more than two bedroom homes.
BEDROOM;
Entrance: A bedroom needs at least two methods of egress, so it should be accessible from the house (commonly through a door), and then have one other exit (window or door).
Ceiling Height: A bedroom ceiling needs to be at least 7ft tall. It’s okay if some portions of the ceiling are below this level, but at least 50% of the ceiling needs to be a minimum of 7ft in height. (R305.1).
Escape: A bedroom must have one other method of egress beyond the entrance point. A door to the exterior works as an exit point, and so does a window. According to the International Residential Code, a bedroom window can be between 24 and 44 inches from the floor, and it needs at least 5.7 square feet for the opening, and it must measure no less than 24 inches high and 20 inches wide (R310.1).
Size: The room should be at least 70 sq. ft., and more specifically the room cannot be smaller than 7 feet in any horizontal direction
Additionally, some markets have homes built very clearly and specifically with 1 or 2 bedrooms ONLY due to septic or sewer load requirements.
I see this a lot with MH built with 2 dens with double door framed openings…. when installed… wink… but if you see it and it has doors, find out whats been permitted…. it may be an illegal 2nd or 3rd or 4th bedroom… based on septic.
Well said. Totally agree.
Thanks Mark. I appreciate it. I have a blog post about that. We’re likely on the same page. https://sacramentoappraisalblog.com/2014/09/09/the-4-requirements-for-a-room-to-be-considered-a-bedroom/