4 Or 5 Units?

[gregb]

City or county permits available? H&BU? Might your client want one to inspect all the improvements, if so, you put it on your client as the reason for a complete inspection. Are there three levels to the improvements, attic and/or basement?

 

[DanBuck]

I think you are getting jerked around. I would be charging extra for the extra inspection and you should already have the borrowers financial information for the property which would tell how many units. If it is five units the fee should go up, it costs more to hire a commercial job than a residential job.

Also borrower furnished 4 leases and units only.

 

[DanBuck]

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[George Hatch]

In my region I've seen 5 unit properties converted to 4 because of the impact of financing made the latter so much more marketable.

Regardless of what the property might have been in the past, you're valuing the property as it exists today. That 5th electric meter might go to a common laundry or utility room or for the lights onsite or the basement BDSM rec room or whatnot.

You are definitely right to want to look before you leap on this one. The last thing you need is a lender coming back on you because you took the borrower's word there are only 4 when it turns out there are 5.

 

[DanBuck]

In my region I've seen 5 unit properties converted to 4 because of the impact of financing made the latter so much more marketable.

Regardless of what the property might have been in the past, you're valuing the property as it exists today. That 5th electric meter might go to a common laundry or utility room or for the lights onsite or the basement BDSM rec room or whatnot.

You are definitely right to want to look before you leap on this one. The last thing you need is a lender coming back on you because you took the borrower's word there are only 4 when it turns out there are 5.

Well if his intent was to convert it to a 4 without township knowing, that itself would appear to be an issue... Meaning to me its not a 4 or a 5- its an illegal building!-cause it wasnt regisitered or done properly. And I should tell the bank this...!

 

[Tom4value]

Any time a borrower/realtor says I can’t inspect the entire property the sirens go off. There most definitely is an incentive to “call it” a four family over a five. Not only is the interest rate different, the loan is different. Chances are, the lender can’t even do a 5 family loan.

H&BU determination is job 1. You already know that legally the town is calling it a 5. If they are hiding the 5th unit or they illegally converted it from a 5 to a 4 and you call it a 4, the lender is stuck with an unsalable loan and you are flipping burgers at McDonalds. I would not hide behind an EA that it is a 4 because you already have doubt with the town calling it a 5.

 

[DanBuck]

Any time a borrower/realtor says I can’t inspect the entire property the sirens go off. There most definitely is an incentive to “call it” a four family over a five. Not only is the interest rate different, the loan is different. Chances are, the lender can’t even do a 5 family loan.

H&BU determination is job 1. You already know that legally the town is calling it a 5. If they are hiding the 5th unit or they illegally converted it from a 5 to a 4 and you call it a 4, the lender is stuck with an unsalable loan and you are flipping burgers at McDonalds. I would not hide behind an EA that it is a 4 because you already have doubt with the town calling it a 5.

He didn't say that i cant-he just conveniently said he couldn't get through to that tenant, I said I gotta come back for another inspection said hed get back to me but itd be a pain..So Im not 100% sure

 

[gregb]

The only way to resolve the difference between what the owner states and what the township records state is to fully inspect. Good luck.

As one bank's appraisal review department relayed to me, the bank is not going to be a party to mortgage fraud even if the owner is defrauding the tax or other authorities in terms of number of rental units, expenses and income.

 

[DanBuck]

The only way to resolve the difference between what the owner states and what the township records state is to fully inspect. Good luck.

As one bank's appraisal review department relayed to me, the bank is not going to be a party to mortgage fraud even if the owner is defrauding the tax or other authorities in terms of number of rental units, expenses and income.

The funny part is hes paying thousands extra- the higher tax rate of a 5 unit. Perhaps he's doing it till he got his mortgage, then will tax appeal..

 

[Tom4value]

He didn't say that i cant-he just conveniently said he couldn't get through to that tenant, I said I gotta come back for another inspection said hed get back to me but itd be a pain..So Im not 100% sure

Tenants can be a pain so he very well may be telling the truth. I would still stick to my guns and not proceed with the assignment until you inspect the entire property.