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Lender Wants 'second Home' Label

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Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
Just completed an appraisal of a house in a college town that was occupied by the borrower's son and his friends. I checked "Tenant" under occupancy. The lender called up and said that this house is considered a 'second house' for underwriting purposes and is questioning why I checked "Tenant." I told her there is no "second house" box and that determination needs to be made by her company anyway. She then said that the tenants don't pay any rent. I think she is lying but I told her that I've had many tenants who didn't pay rent!

Anyway, I'm not going to make any changes on the form--- "Vacant" and "Owner" are not the correct occupancy. Has anyone ever encountered a similar situation? Irregardless of the occupancy, a second home status is a determination that the lender needs to make in an underwriting capacity and really isn't an appraisal issue. I'm sure that they would like to see "Owner" indicated on the form and try to push this through as a primary residence.
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Have a lot of vacation or part-time homes in my area, and I always check "owner". Vacation or weekend rental income is inconsequential, and is not in line with the highest and best use. Who is going buy a million dollar lake house because of the weekend rent money? All that does is pay the electric bills and maybe some of the taxes.

But for your situation, son in a college town, I say look at the highest and best use. If it truely is likely to sell as a rental, I'd leave it marked as tenant and put more weight on the income approach. If it's likely to re-sell as a college home for a son/daughter, I'd mark owner and disclose the "room mate/tenant arrangements" in the report.
 

Phil Rice

Member
Joined
Apr 22, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Pat, you say that "owner" is not the correct occupancy. I disagree, I think it is the correct occupancy.

Of course, you are entitled to your opinion, but I think that is the point, it is really a matter of opinion. I had this issue come up once, and I decided that I was not going to be a private detective. I just look at the house, and I really don't know who lives there. If someone is lying about paying rent, I want no part of trying to prove or disprove what is really going on.

IMHO, the best course of action is to disclose what you observed, and if you are relying on what someone said, disclose that too.
 

Ghost Rider

Senior Member
Joined
Apr 27, 2003
Professional Status
Banking/Mortgage Industry
State
Connecticut
I do a lot of second home/vacation home appraisals, and also always check the "owner" box......Besides, you said it yourself with the current occupants being the owners son. Thats not a tenant, thats an owner...
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
I do know that the borrower doesn't live there because I was given his home address on the application. In fact, he even lives in a different area code.

As far as the son being an 'owner' because his Dad is, I would definitely disagree. Real estate ownership certainly doesn't work like that in Illinois.
 

David S. Roberson

Senior Member
Gold Supporting Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
It doesn't sound like a second home to me. It sounds like his son lives there rent-free. That's fine with me, but it isn't owner-occupied.
 

Larry Lyke

Senior Member
Joined
Feb 2, 2002
Pat ~

It's "Owner."

A second home gets different tax treatment both by the IRS and by the state's property homestead tax rules by virtue of if a related person lives there, or how else it's rented.

If the UW says it's a second home, just change it and let your workfile reflect that you accommodated the superior knowledge of the UW. Don't forget to smile and say, "Yes, Mam."
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
Mark "owner" and disclose the owners address of public record and the current occupants of the subject as you know them to be in your addendum. I have had a similar situations where i have had owner occupied multi family properties. I mark owner occupied if the owner lives there in addition to any other occupants or tenants.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I would mark it "owner" and then comment that the son of the owner is living there and that it is NOT being used as income property. :idea:
 

TC

Elite Member
Gold Supporting Member
Joined
Jan 31, 2002
Professional Status
Certified Residential Appraiser
State
Pennsylvania
I would mark "tenant". Sounds to me like the father is trying to get a lower interest rate by stating he lives there fulltime. Wish I could do that on my rental properties.

TC
 
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