Occupancy Marked?

[Marcia Langley]

KD,

The subject section is all about describing the property as it is on the effective date. Just as one would not indicate "the owner of public record" as being the buyer, one would aslo not report on the occupancy plans of the buyer.

You are right that it is not important to the appraiser who occupies the house, but the assignment we have accepted includes a requirement that we state the occupancy status. Of course we can only report what we observe.

In my comments to the occupancy status I use language like this:

"I spoke with (or met) a person who identified themselves as Mr. X who is the owner of public record. During my visit, conversations, and research for the evelopment of this appraisal I discovered no item of fact that would indicate that the owner of public record does not occupy the subject property. If such indications were observed or discovered by me they would be noted here."

This language does not say that I am promisingfor a fact that I know who the occupant is, only that I discovered nothing to the contrary (unless I did).

Although not having to report on occupancy status at all would be better, that is about as uncomplicated as occupancy status can get.

But if you start using that occupancy check box to indicate future events that you can't put your eyes and ears on, it becomes way more confusing. And opens you up to way more liability.

 

[KD247]

Marcia,

I mostly agree with you, but I still think the common-sense answer is the best choice. For example, on the buyer-occupied purchase of a large estate, checking "tenant-occupied" would not only set off all kinds of fireworks, but would also spur most underwriters to instinctively order a rent survey and an operating income statement.

I'm not one to shy away from my duty just to avoid being chastised by a sales agent, but in this case the furor would have been due to a strong stance over an insignificant issue.

Koert

 

[TJSum]

Yes, but isn't the common sense answer to mark what the property actually is as of the effective date of the appraisal...

Most people involved in the process understand that when there is a purchase, at times the current occupant status will not match the planned occupancy of the new buyer. That is a given for those with common sense.

If the occasional bozo lender comes along and does not grasp the concept, it is their problem, it is not on us to take on added liability due to their stupidity. Not only would we take on added liability, but what about all the other problems it creates. For example, in many areas property taxes are significantly taxed at a higher rate than owner occupied properties, so if you mark the "tenant" box based on some future event, are you also going to estimate the higher taxes that should go along with that or not? What about other potential future events that could take place, are you going to take all of them into account?

Per FHA...
Occupant • Mark the box signifying the occupancy status at the time of the appraisal.
Per Fannie...
The borrower and current property owner must be identified, along with the current occupancy status of the subject property.

 

[KD247]

... Most people involved in the process understand that when there is a purchase, at times the current occupant status will not match the planned occupancy of the new buyer. ...

Starting twenty years ago at the Bank of America, one of the few institutions that had continuous and rigorous education requirements, we were taught that the box should be checked to indicate the type of loan program. Then we were told to check the box to coincide with the current status of the property. Then we were told to check the box according to the buyer's intentions. And on and on and on.

Not only were reasonable people unable to figure out what was intended, unreasonable people couldn't even keep their story straight.

 

[TJSum]

If they are that confused, why not just consult the manuals and go with that. You got to love bureacracy, even large corporation bureacracies. :new_all_coholic:

 

[KD247]

... are you also going to estimate the higher taxes that should go along with that or not? ...

At the old BofA, same story, different field on the form. With the Proposition 13 stabilization of California property taxes, current taxes might be e.g. $2,500 per year, adjusting after a sale to $18,000 per year. I'd have a hard time deciding which choice paints the most accurate picture, filling in the blank with $2,500* or $18,000*. I'd usually end up putting something like Prop 13*, with a full explanation in the addendum.

 

[Marcia Langley]

TJ,

I agree the appraisal should show what the GSE/FHA guideline manuals say, not what a lender needs to put on the loan documents.

Reading other sections of the Fannie Mae manual regarding exceptions to lending guidelines also shows what they expect in reporting. For example the exception to owner occupancy in order for the borrower to qualify for certain loans, a borrower who is supporting a handicapped parent or child can qualify for "owner occupied only" loans even if the owner does not occupy.

It does not say that such situations are owner occupied, it says there will be an exception for them.

The lenders can underwrite the loans appropriately, the appraiser reports according to GSE/FHA guidelines.

 

[Bama Bayou]

I inspect a resort property and the occupants are friends of the owner who are using it for one week for 1K. The owner, who is staying with another friend, meets me at the property during the inspection.

Which box do I check?

I show up for an inspection of a fully furnished beach front condo at 11:00 AM, which is the typical check out deadline here. The renters had a few too many cocktails the night before and are running late. They tell me to go ahead with my inspection, and they leave when I'm halfway through the inspection.

Which box do I check?

I use a lockbox to inspect a condo that is under contract. The unit is fully furnished. The closet is full of clothes but nothing is in the fridge.

Which box do I check?

I live in a market with 10,000 residents, 15,000 condos, and 12,000 houses. All the rentals are fully furnished. Many have owner supplied lockboxes. I often have no idea who is occuping the property. It could be the owners, long term renters, short term renters, relatives of the owners, business contacts, etc. Or it may be vacant from the standpoint that no one is there during the inspection but it has 75K worth of furnishings.

I understand "it is what it is" but sometimes the situation does not fit any of the three choices for occupancy and it calls for a bit of writing.

 

[Marcia Langley]

For example, on the buyer-occupied purchase of a large estate, checking "tenant-occupied" would not only set off all kinds of fireworks, but would also spur most underwriters to instinctively order a rent survey and an operating income statement.

I have appraised everal properties where the new buyer already occupies the house as a tenant. The occupancy status was reported as tenant, the owner of public record was reported from the deed, and in comments I reported that the current tenant and the buyer were the same person.

That is all factual and not confusing and I have never once been asked what I meant by that, or accused of making a mistake, or questioned about it at all.

In my mind, if I reported that the house was owner occupied and the occupant was the buyer, then that is the case where the lender would get confused.

 

[Bama Bayou]

TJ,

I agree the appraisal should show what the GSE/FHA guideline manuals say, not what a lender needs to put on the loan documents.

Reading other sections of the Fannie Mae manual regarding exceptions to lending guidelines also shows what they expect in reporting. For example the exception to owner occupancy in order for the borrower to qualify for certain loans, a borrower who is supporting a handicapped parent or child can qualify for "owner occupied only" loans even if the owner does not occupy.

It does not say that such situations are owner occupied, it says there will be an exception for them.

The lenders can underwrite the loans appropriately, the appraiser reports according to GSE/FHA guidelines.

I live in a resort market. Maybe 2% of the appraisals I do here are GSE/FHA loans.