How do you define "Occupant"? (Long post)

[BobbyB]

Full disclosure - I am a mortgage lender and I'm looking for some expert appraisal advice. Sorry for the long first post but I wanted to give as much detail as possible.

Recently received an appraisal on a transaction my team is financing. The house is/was a rental and it just so happens that the tenant at the time of inspection is also the purchaser. When the report came back the investor conditioned for an update as the "occupant" in the subject section was marked as "owner". Several request were made to the appraiser to get this updated to "tenant" occupied as everything I could find from FHA was that occupant is defined as "mark the box signifying the occupancy status at the time of the appraisal", but for a week the appraiser has steadfastly stated that in his 30 years of doing appraisals and even working in litigation that the occupancy is a "forward looking" field and describes how the property is "going to be used". I consulted with several of my trusted local appraisers and all concur that with my believe that I am correct and the appraiser is wrong, but I still would like to know if there is a formal definition of the occupant field within the world of appraisal regulations/training.

His stance is that if you mark "tenant" on the report then "by law the appraiser is required to provide a rent schedule". I have never heard of this and when I stated this to him (I've only been doing this for 17 years vs his stated 30) and he stated that every appraiser in our area must be doing it wrong based on USPAP standards.

Below are some of the responses from the appraiser.

after request #1, first response
"Is the tenant purchasing the property? yes. So is the purchaser going to be a tenant in his own property or is this a primary residency? Does this answer your own inquiry? It is owner-occupied, the correct box is checked. Don't mean to be snied but revisions are sometimes ridiculous."

Response #2:
"Please define "owner-occupied", then correct yourself or whoever is asking for a revision. The fiancing is not a tenant unless the purchaser is planning on renting the property. I was told by the buyer he was not renting the property, why would you want me to lie?"

Response #3:
"I understand you want the occupancy changed to "tenant" however, the intended use of the report is to arrive at a credible opinion of value based on assumptions and limiting conditions and or hypothetical conditions. The buyer of the property is going to be the occupant. For the past 28 years of appraising real estate, the assumption is made that the purchaser in the contract will be occupying the property unless otherwise noted in the order. Coincidentally, the purchaser is also the current tenant, but is not buying the property as an investment. As most purchases, the issue of the home being "occupied", "tenant", or "vacant" is bases on assumptions in the order and contract agreement. Unless the property is being flipped or the buyer is purchasing the property as an investment or rental, the property is always marked as "owner occupied" this assumption is USPAP compliant and the changes are not needed. If however, your require these changes, please be advised that yesterday, my property was hit by lightning and it zapped my computer. The file is on the computer that was damaged and while I am trying to salvage the data off the computer, the recovery of the file may take some time. As the appraiser, I can only apologize as this is an act of God and out of my control. I would advise you to reconsider the requested revision as the recovery is not going to happen within the next few days and the issue is semantec to the appraiser's interpretation and USPAP definition. I believe the report is fully compliant and meets these requirements to produce a credible result, but again, if you want to wait, that is your choice. "In all cases, the use of an assumption or a hypothetical condition must result in a credible opinion or conclusion, given the intended use." The above is the definition for producing a credible report based on USPAP."

After response #3, I responded with a copy of the .xml report so that he could easily make the change once he purchased a new computer, but the last response was the appraiser was re-typing the entire report and it will take time.

I really don't think this is an unreasonable revision request, so looking forward to hearing from other appraisers their opinion of how "occupant" is defined. Thanks in advance!

 

[Meandering]

https://singlefamily.fanniemae.com/media/16551/display

 

[jay trotta]

Full disclosure - I am a mortgage lender and I'm looking for some expert appraisal advice. Sorry for the long first post but I wanted to give as much detail as possible.

Recently received an appraisal on a transaction my team is financing. The house is/was a rental and it just so happens that the tenant at the time of inspection is also the purchaser. When the report came back the investor conditioned for an update as the "occupant" in the subject section was marked as "owner". Several request were made to the appraiser to get this updated to "tenant" occupied as everything I could find from FHA was that occupant is defined as "mark the box signifying the occupancy status at the time of the appraisal", but for a week the appraiser has steadfastly stated that in his 30 years of doing appraisals and even working in litigation that the occupancy is a "forward looking" field and describes how the property is "going to be used". I consulted with several of my trusted local appraisers and all concur that with my believe that I am correct and the appraiser is wrong, but I still would like to know if there is a formal definition of the occupant field within the world of appraisal regulations/training.

His stance is that if you mark "tenant" on the report then "by law the appraiser is required to provide a rent schedule". I have never heard of this and when I stated this to him (I've only been doing this for 17 years vs his stated 30) and he stated that every appraiser in our area must be doing it wrong based on USPAP standards.

Below are some of the responses from the appraiser.

after request #1, first response
"Is the tenant purchasing the property? yes. So is the purchaser going to be a tenant in his own property or is this a primary residency? Does this answer your own inquiry? It is owner-occupied, the correct box is checked. Don't mean to be snied but revisions are sometimes ridiculous."

Response #2:
"Please define "owner-occupied", then correct yourself or whoever is asking for a revision. The fiancing is not a tenant unless the purchaser is planning on renting the property. I was told by the buyer he was not renting the property, why would you want me to lie?"

Response #3:
"I understand you want the occupancy changed to "tenant" however, the intended use of the report is to arrive at a credible opinion of value based on assumptions and limiting conditions and or hypothetical conditions. The buyer of the property is going to be the occupant. For the past 28 years of appraising real estate, the assumption is made that the purchaser in the contract will be occupying the property unless otherwise noted in the order. Coincidentally, the purchaser is also the current tenant, but is not buying the property as an investment. As most purchases, the issue of the home being "occupied", "tenant", or "vacant" is bases on assumptions in the order and contract agreement. Unless the property is being flipped or the buyer is purchasing the property as an investment or rental, the property is always marked as "owner occupied" this assumption is USPAP compliant and the changes are not needed. If however, your require these changes, please be advised that yesterday, my property was hit by lightning and it zapped my computer. The file is on the computer that was damaged and while I am trying to salvage the data off the computer, the recovery of the file may take some time. As the appraiser, I can only apologize as this is an act of God and out of my control. I would advise you to reconsider the requested revision as the recovery is not going to happen within the next few days and the issue is semantec to the appraiser's interpretation and USPAP definition. I believe the report is fully compliant and meets these requirements to produce a credible result, but again, if you want to wait, that is your choice. "In all cases, the use of an assumption or a hypothetical condition must result in a credible opinion or conclusion, given the intended use." The above is the definition for producing a credible report based on USPAP."

After response #3, I responded with a copy of the .xml report so that he could easily make the change once he purchased a new computer, but the last response was the appraiser was re-typing the entire report and it will take time.

I really don't think this is an unreasonable revision request, so looking forward to hearing from other appraisers their opinion of how "occupant" is defined. Thanks in advance!

I'll bite; my understanding is the "Tenant" is in Contract with the "Seller" - have no idea how the existing "Lease" is written, nor the "Contract to Purchase", so for now will leave that out.
Per FNMA; We are to Review all Sales Contracts for proof of purchse for "arms length" support. As of the contract date it would appear the "Tenant" will become the "Owner", thus moving from a Tenant position to Owner of said property and therefore, "Owner Occupied", IMO, subject to review of both the "Lease & Purchase & Sale Agreement"

 

[KHS445]

While I do not do secondary market appraisals, to me unless there is an extraordinary assumption or a hypothetical condition included in the report that basically covers the fact that the tenant is the proposed purchaser and therefore the property was shown as being owner occupied, one would not check that box. Does your engagement letter discuss extraordinary assumptions or hypothetical conditions and the use thereof? Each appraisal has an effective date and all information in the report should be true, correct and accurate as of that date.

While I can agree with the appraiser this is inconsequential in relation to the estimated value of the subject, the fact remains that without proper disclosure to the contrary the stated occupancy as of the effective date of the report is not accurate.

I doubt there is an appraiser out there who hasn’t experienced some sort of significant data loss. USPAP requires that we maintain a true copy of all submitted reports, so the appraiser should have been backing up his files. Additionally depending on your submission system and his software provider there should/may be a recoverable copy of the report out there on Which the requested change can be made. this is too small a hill to die on, the appraiser has already spent more time explaining why it is not necessary to make the change, than just doing it.

 

[glenn walker]

The occupant check box for appraisal purposes is who is in the property at the time of the inspection. The buyer whether he is planning on living in the property or if he is buying to rent it does not change the value nor does it change what the occupancy was at the time the appraiser inspected the home. In YOUR example the buyer is the current Tenant who lives in the property and so the appraiser checks the Occupancy box as Tenant BUT the same Tenant who is now the buyer will no longer be a tenant after the close of escrow and after close if another apparsial was completed say for a refinance or sale the new appraiser would then check the Owner Occupied Box.

So in this case the appraiser checks the Tenant Occupied Box on Page one BUT he is not appraising it as a rental house because once it closes escrow its going to be owner occupied. As far as His stance is that if you mark "tenant" occupied on the report then "by law the appraiser is required to provide a rent schedule". That is total BS and I am in over 35 years and we also own an sell properties to our tenants because when the tenant is purchasing the property from his landlord the day it closes escrow its no longer a rental and its Occupant is now owner occupied. Physical Occupancy on day of inspection is what the form asks for when the Lender orders it as a Owner occupied purchase that is forward looking and is an underwriting issue and it does not change the existing Occupancy Box. The same scenario if the property was vacant the appraiser checks the Vacant Box no matter what the new buyers intentions are for occupancy.

 

[Elliott]

Occupant is currently the tenant/borrower who is in the process of purchasing the subject property.

 

[spittman]

The appraiser is wrong. Occupancy is not forward thinking and no a rent schedule is not automatically required. I don't get it. There are three options. If the current owner is not living in the home it is either vacant or tenant occupied. Not sure why the purchaser would say he is not renting the property. Is it because he does not pay rent? Irrelevant. If the owner does not live there then it is not owner occupied. This is not something I would argue about with the lender. Appraiser should make the revision and explain why he made the revision and reference what he was told by parties involved.

 

[Tru Red]

Occupancy for the appraisal report is at the time of the inspection. Simple. A tenant in this case.

Just because it is tenant occupied does NOT force the appraiser to complete a rent schedule.

Based soley on the posters information......the appraiser is Bat S_it Crazy. Normally.......it's the lender.

Also....all of this has no effect on the opinion of value.

What a waste of everyone's time.

 

[BobbyB]

Occupancy for the appraisal report is at the time of the inspection. Simple. A tenant in this case.

Just because it is tenant occupied does NOT force the appraiser to complete a rent schedule.

Based soley on the posters information......the appraiser is Bat S_it Crazy. Normally.......it's the lender.

Also....all of this has no effect on the opinion of value.

What a waste of everyone's time.

Thanks to everyone who took the time to reply and confirm how I viewed the situation. The amount of time wasted on this is insane but since this was caught in a post purchase audit, it must be addressed. As of Friday the appraiser was re-typing the entire report to re-create the file (after I sent them the .xml file), so I am sure it is just a delay tactic to see if the request just goes away.

One more thing the appraiser stated that I forgot to include was that he/she never checks vacant as a house is never vacant because someone is moving into the house so it would never be vacant.

This entire scenario is definitely one for the "cant make this stuff up" file.

 

[Tru Red]

he/she never checks vacant as a house is never vacant because someone is moving into the house so it would never be vacant

SMH. You literally, cannot fix stupid.