Help. Looks, Smells And Feels Like...

[OllieGarchy]

Hello,

I just finished inspecting a home that looks, smells and feels like an elderly care facility, complete with staff and elderly patients. Oh. And also signs that spell out "XXXXXX Manor".

I asked, point-blank, the owner who met me there if this was an elderly care facility or nursing home or care or commercial facility of any sort. She said no. When I pointed out all the red flags, she said that the "patients" there were family and relatives and that she is just taking care of them.

Now I've been in homes like this before where the owners were illegally using them as elderly care facilities. But in these cases, the owners admitted it.

(By the way, the zoning on the subject is R1. And I couldn't find any information on "XXXXXX Manor".)

I spoke with the lender and they said, of course, that if I stated that the property is being used as an elderly care facility, they couldn't do the loan. But that's not a big deal to me. The big deal to me is, what if I'm wrong? What if this person really is taking care of her extended family?

If I state that the use is as an elderly care facility, and I'm wrong, I just wrote up a misleading appraisal.

If I state that the use is an SFR, and I'm wrong, I just wrote up a misleading appraisal.

I was thinking about having the owner sign a letter stating that the home has never been used as anything other than an SFR, and then stating in the addendum that, though it appears to be an elderly care facility, per owner, it's actually an SFR where the owner is taking care of her extended family.

Any help would be most appreciated.

 

[Randy Beigh]

Tom

Why not just disclose what you saw and what the homeowner said. Nothing more, nothing less. Make no judgments.

If the condition, including odors wil affect the value or marketability, deal with that.

Maybe some states are lax on this, but Washington is quite strict. if they are running a business, a whole pot full of permits need to be gotten. If they are doing it under the table, it will still show up on their income tax, so the lender will know they are doing this, no matter what you say. In other words, I wouldn't worry about it.

 

[Judy Whitehead (Florida)]

You don't give your location, (which does help) but here in Florida there are special laws that permit someone to run an assisted living facility with ordinary residential zoning - both elderly and handicapped persons. There is a limit - in this county I don't know whether it is 5 or 6 people, but there is no necessity to have a commercial zoning or anything.

I have done many appraisals on these facilities and the people have never had a problem getting their loans. I simply state what is happening in the home and that it is permitted and that no consideration was given to the income generated. Of course you cannot operate a full fledged nursing facility, but an Adult Congregate Living Facility is permitted. You might check in your municipality, or county, to see if that is permitted under the zoning category for your subject and ask them to FAX you a copy for your files. My mother-in-law and my own mother stayed in one before their deaths and it was a really nice alternative to a full fledged nursing home - a private, clean home with 24/7 care. Oh, these private facilities all have staff - there is no way you could care for 5-6 elderly or handicapped adults by yourself.

 

[Pat Butler]

The issue is what box do you check for zoning compliance? If you made this appraisal subject to, then you could check box 4 at the end of the appraisal, BUT, box 4 supposedly only deals with repair inspections and not zoning issues.

I probably sound like a broken record, but this issue of Fannie not allowing us to make assumptions has created a situation where some appraisals just can't be completed.

The only way I see to complete this one is by having the governing municiplaty inspect the subject property for compliance and provide you with their report.

 

[Caterina Platt]

Tom,

There is quite a bit of case law regarding this type of set up. Homeowners Associations and such fought the existance of many of these type of dwellings which were also called 'group homes'. Elderly care, half way houses, foster care facilities, The Association for Retarded Citizens (ARCA) also utilizes similar residential dwellings as homes. The trial courts found that much of this boiled down to the definition of a 'family', and determined that the occupants did not have to be blood or legally related to be considered a family. In the end, most cases ended up that the HOA's lost, and the existance of these homes were indeed allowed in residential areas.

Check the zoning regulations and allowances in your area, and there's a good chance this activity will still be classified as residential use.

I just completed a refi appraisal for a large home being utilized as a foster care facility. Make adjustments for improvements that would have to be altered for typical market acceptance, if any. Clearly state in your addendum what you saw, and what the owner/borrower represented.

 

[hastalavista]

Tom-

The subject is zoned R1, and is a Single-Family Residence; has it been significantly modified to accommodate the residents? That’s the significant appraisal issue (as I see it).

You need to accurately describe the subject as you saw it- factually and specifically.
You need to determine if any changes to the improvement have been made that are atypical to the typical SFR residence and then determine what the market reaction (if any) would be to those changes.

If I have 7 of my elderly relatives living in my house, and I’ve hired a caregiver to assist, but have made no modifications to the house, my house is still a house, and that’s what you are appraising.

In your situation, it is different; the subject has posted documentation/signage that the property being used for assisted living care. You need to document that. But, the house is still a house (unless the modifications are so great that it no longer has its SFR utility).

Describe what you’ve seen, analyze the modifications (if any), make adjustments for the modifications (if any), and conclude your value.
Kudos to you for including in your post that it is not your problem if the assisted living aspect kills the deal.

 

[Judy Whitehead (Florida)]

Oh - yes - functionality - I did do an appraisal on one home where they had "added bedrooms"- built an addition whereby you had to walk through one "bedroom" to get to the other one. So I simply charged curable functional depreciation to return that area to a "normal" SFR living area and functional floor plan. As I said before, you have to determine if what is going on is "legally permissable" and have the backup in your files. It is perfectly legal here as long as you abide by the zoning rules and have permission from HUD. In other words, it is a licensed facility but still a SFR with use as an ACLF.