Elderly Care in Residence

[Judy Whitehead (Florida)]

We have an appraisal assignment for an individual, who plans on getting refinanced. Presently, he is our client. The subject is a large SFR on 2.5 acres, agriculture/residential zoning. The zoning permits him to care for up to 5 adults without a change in zoning. The county does require him to have an occupational license.

The question is.....do we mention the "adult care" being done in the home and state that we did not consider the income from this care, nor do we feel it affects the market value estimate? Or do we just treat it as a regular residential appraisal, since it is permitted under current residential zoning. We don't feel that it affects the value one way or the other. The floor plan is functional either as it is being used, or as a single family residence. It may cause a potential problem for the homeowner if they get a lender or underwriter who doesn't understand and has blinders on.

This is kind of like a post I started before with packed boxes sitting around on the floor. When does it become someone else's business what people do in their home?

 

[Jeff Horton]

Good question. A freind of mine ran into a somewhat similar situation. The owner was running a buisiness from the home. What we decided was that once the owner left the buisiness went with them or ceased to exist so there was no effect on value.

Will be anxious to hear other answers.

 

[Bemis Pownall]

We did one years ago, all baths had been changed to 3/4, all floors coverings vinyl(for obvious reasons), kitchen was commercial grade.
We did as single family, mentioned the use and had CTC to convert back to full baths and more acceptable floor coverings.
More than likely they are using this income to qualify so you would be smart to mention what is going on. Finding other sales in the market used the same way would be very difficult. As stated previously this "use" typicaly stops when sold/transfered.

Good Luck

:morning:

 

[Judy Whitehead (Florida)]

In this case, the few upgrades (fireproof curtains, etc.) are not being considered as contributory to value. There is really nothing needed in CTC.

According to the owner, income is not going to be considered as collateral for the loan. The lenders he has talked to really balked at that.

 

[Farm Gal]

Judy:

I generally don't even mention a home business unless it does impact the property.

The magic words resolving a lenders questions about a home business explain: the thing is fine as is, a description of any oddities, and definition of any change (minor or major) which would be required to return the house to 'normal'.

(my own wording fee free to crib or edit to your own purpose)

"No material changes have been made in the structure to accomodate the homeowner's business."
or
"The following changes were made to the residence to accomodate the homeowners busines ___,___,___. The changes are/are not considered inferior/superior to otherwise comparable residences. No change would be neccesary to achieve normal marketing time..../The following would be reccomended to be removed/changed to accomodate normal marketing."

The usual scenario requiring commentary is a home daycare, I guess the LO envisions a row of tiny fully plumbed toilets lined up against a wall or something :roll: .

 

[Bill_FL]

Just a question. How is it insured? Has he hidden this from the insurance company also? One of the elderly burn the thing down, the insurance company says they insured only as SFR and refuse to pay, the borrower files 13 and thebank looks at you and says...you didnt mention that use.

 

[Judy Whitehead (Florida)]

I have not idea how it is insured and really don't believe that is part of the appraisal process in this case. He certainly does need to worry about it himself, though, doesn't he? The lender will probably find out about the home care but I guess it is fairly common, whether it is for children or for adults.

 

[slacker]

The subject is a large SFR on 2.5 acres, agriculture/residential zoning.

<span style='color:blue'>Zoned SFR, end of story. My kids are in an "in home daycare", same thing I would think? I have appraised dozens of homes that operate a daycare service and would never think to mention it. That might even open yourself up to discrimination. The occupation of the homeowner has nothing to do with the value of the property. Occupation ,income level, and ability to pay are what the lenders get to worry about.

What about HABU. If the house went up for sale tomorrow would it be sold as a SFR or an income producing property?

As far as insurance goes, it's the structure that is insured. Contents and business losses would fall under a different policy. My wife's a State Farm Agent.

Like a good neighbor!

On a side note. Make sure you are not paying home owners insurance on an appraised value of your house. Your policy should only cover you for the replacement cost of the structure less the foundation and land value.

Most peole over insure their homes. They see the market value at 400k and are willing to pay for a 400k policy. If a fire or act of God wipes out the home, the insurance company is only going to pay what it costs from the foundation up. Which might only be 200k. Moral of the story, get the 200k policy.</span>

 

[Bill_FL]

Judy,

I posed the question to make all think about it. I would disclose what I saw for the above reason. Liability. I would state, if so i believed, that it did not affect the value.

 

[Anonymous]

Is there a demand for properties which can be used in this way. If there is than your highest and best use will dictate the use of similar comparables or an adjustment. If not don't worry about it.