Duplex On A URAR 1004

[Damon Young]

A broker we have done a lot of business with, who is generally a pretty square guy, wants me to do a Residential appraisal on a two-story home that has been converted into a duplex. It could not be easily reconverted to a single family... you would need to make a hole in the first floor ceiling and add stairs. Also there is a cottage in the back yard that he rents out. The property is classified as a duplex by the county.

He wants the appraisal written up as a single family, I assume for underwriting purposes, but I can't see it. The cost to convert, I think would be too excessive. IT is producing good income and would be a no-brainer for an income producing multi-family, but the broker says he cannot write up the loan as a multi-family.

I guess I am going to have to turn this down unless someone on this board can convince me otherwise.

Thanks,
Damon

 

[Wally Jones]

No matter how much lipstick you put on that pig and call it a swine...................it's still a p-i-g.

Run, run like the wind.

 

[Frederick R. Ruffell]

From FNMA Selling Guide.

Section 203.01 – Manually Underwritten Mortgages


We have five different appraisal forms that can be used for manually underwritten mortgages, depending on either the type of property being appraised or the type of mortgage that is secured by the property. The appraiser must use our latest version of one of the following forms and include any other data-either as an attachment or addendum to the appraisal report form-needed to adequately support the opinion of market value:

• Uniform Residential Appraisal Report (Form 1004), for one-family properties and units in planned unit developments (including those that have an illegal second unit or accessory apartment that we will consider as acceptable security) that secure either first or second mortgages. Form 1004 may also be used for two-family properties, if each of the units is occupied by one of the co-borrowers as his or her principal residence or if the value of the legal second unit is relatively insignificant in relation to the total value of the property (as might be the case for a basement unit or a unit over a garage). In addition, appraisals for units in condominium projects that consist solely of detached dwellings may be documented on Form 1004, if the appraiser includes an adequate description of the project and information about the owners' association fees and the quality of the project maintenance;

• Small Residential Income Property Appraisal Report (Form 1025), for two- to four-family properties (including those that are located in PUD projects);

AND

Section 404.01 - Zoning

.........We will purchase or securitize a mortgage secured by a one family property that includes an illegal additional unit or accessory apartment (which may be referred to as a mother-in-law, mother daughter, or granny unit) as long as the illegal use conforms to the subject neighborhood and to the market. The property must be appraised in conformity with its legal use, that of a one-family property (and the borrower must qualify for the mortgage without considering any rental income from the illegal unit). The appraiser must report that the improvements represent an illegal use and demonstrate that the improvements are typical for the market through an analysis of at least three comparable properties that have the same illegal use. The lender must also make sure that the existence of the illegal additional unit will not jeopardize any future hazard insurance claim that might need to be filed for the property. We will not purchase or securitize a mortgage secured by a two- to fourfamily property that includes an illegal accessory apartment.




Sooooo while it may be possible to put certain "2 unit" properties on the URAR 1004, I think your case is different. It sounds like the LO is "trying to pound a square peg into a round hole and you are the hammer" (unknown forum member quoted)

 

[Tony in Ohio]

Turn it down, it sounds unethical.

Unless its zoned for single family and single family is really the highest and best use. Then you have to include the cost to convert back to legal use, plus the buyers incentive to take the risk and do the work. In that case my advice would be....

Turn it down, it's too messy

 

[David Mullen]

Sounds like he is asking you to help deceive the lender. When the deal goes south, he won't know who you are.

I wouldn't do this one on any form for this individual nor would I want any more of his work if this is how he does business.

 

[Patrick Egger]

Two story "duplex" ... with rental cottage out back = 3 units by my count ... you're no longer in URAR and single family land "toto" ...

 

[Mountain Man]

First off, the loan broker is trying to pound a square loan into a round hole. Won't work.......so he asks for an "appraiser favor". <_<

Fine, I can put it on a URAR, but with the addendums I haffta type, the fee will be 10 times my 2-4 family form fee. :mrgreen: B) You as the LO won't like it, the UW won't like it, I would have rather done it on the 2-4 family or a narrative, but if you pay enough, I can type addendums all day.

 

[hal380]

Hi Damon;

If it waddles like a duck and quacks like a duck then I would call it a duck. If you called it a parrot would it be a parrot? Very loosely paraphrasing USPAP you have to clearly identify the interest(s) being valued, clearly describe the property being valued and communicate in a clear not misleading way.

Right now your client seems to have a problem which he is trying very hard to make your problem. If you want to go around with a big "Bull's Eye" taped to your chest go ahead, but I wouldn't.

Regards

Hal

Let us know what you eventually decide to do.

 

[Larry Lyke]

Damon ~

Your pig with lipstick will look real pretty if you just put a frilly little skirt on her fat behind!

You can use the 1004 -- the LO is probably planning on doing a nonconforming. Put the rental property on an addendum all by itself and wait until the UW calls for an Operating Statement or whatever other addenda they think they want. And charge accordingly as you go along.

Then you'll know exactly how they are using the information and be able to complete the report to their satisfaction and know that what you are providing is what they want -- not necessarily what they need -- and not producing waste product for their pipeline.

Lots of times the LOs simply do not know or care less what the physical property is like. You can't read their minds. And they just think you're being obstructionist when you appear argumentative, or whatever.

Appraisers get along a lot better with LOs when you treat them as salespeople and don't elevate your expectations unless they demonstrate such. If you feed them pablum, the turds will be soft and small.

 

[Damon Young]

Thanks for all your replies/ I do not hold contempt for this Broker, as I get the feeling many of you do or would. He asked if I could do it, I told him I doubted it, but would check resources (including here).

So today I called him and said I would not be willing to do the appraisal on a 1004, but would require the small income property form and he would need ot pay $600 if he wanted me to do it. He did not like the answer, but he respected my decision and did not push. I wish all the LOs behaved as well as this guy.

Anyway, he is going to call around and try to find someone else who will do the appraisal on a 1004, if he can't, I imagine he will call me back and order the income property appraisal from me.

And I also got an order for a 2055 from him later in the day for a different property.