Occupancy Marked?

[Couch Potato]

The page one occupancy box is always marked as of the effective date. No wiggle room. If it is occupied by the current owner of record, that's what you report.

The bank does not need you to violate that requirement just so it will match up whith something else.

The FBI reports occupancy fraud among the top four fraud items.

Exactly. In a purchase transaction the occupancy on the appraisal is irrelevant to the transaction. It is ridiculous to expect the box on the appraisal to match the future occupancy under new ownership. I believe when such requests are made, it is merely a case of an underwriter trying to use the same checklist for purchase transactions that they use for refinance transactions. It is an illogical and just plain stupid request that should be ignored IMHO.

 

[Carnivore]

Exactly. In a purchase transaction the occupancy on the appraisal is irrelevant to the transaction. It is ridiculous to expect the box on the appraisal to match the future occupancy under new ownership. I believe when such requests are made, it is merely a case of an underwriter trying to use the same checklist for purchase transactions that they use for refinance transactions. It is an illogical and just plain stupid request that should be ignored IMHO.

Effective date occupancy does not garantee a leasehold is not in force or pending.

So when you ask for the contract to purchase from the lender what was there response?

http://commerce.appraisalfoundation.org/html/USPAP2008/USPAP_folder/standards/Standards_Rule_1_5.htm

Did you ask anyone if the property is leased?

http://commerce.appraisalfoundation.org/html/USPAP2008/USPAP_folder/standards/Standards_Rule_1_4.htm


The point of my post is that we should only be doing one thing about occupany.

Occupied - Yes / No

or if you prefer check one of two boxes

occupied X or Vacant X

Let the lender tell us that it will be occupied by the new owner or the refinancing borrower in the form of an affidavit!! PERIOD

 

[Couch Potato]

The point of my post is that we should only be doing one thing about occupany.

Occupied - Yes / No

or if you prefer check one of two boxes

occupied X or Vacant X

Let the lender tell us that it will be occupied by the new owner or the refinancing borrower in the form of an affidavit!! PERIOD

I would prefer it merely have occupied or vacant too, but it doesn't. There is no need for anything from the lender, they hire us to report what we observe when we inspect the property. If that doesn't match what they want to hear, that is not our problem.

 

[Mike Boyd]

How is that so? The investor wants to know if the home is primary, tenant occupied or vacant. Each has a certain amount of risk, more or less, to loan money on.

So, do you think the lender is concerned about the history of the property or how the new borrower will use it? Common sense, folks!

 

[Couch Potato]

So, do you think the lender is concerned about the history of the property or how the new borrower will use it? Common sense, folks!

If the lender is smart, they want to know both. Prior use says something about the market for that use and the likely condition of the property. But like you say, use common sense, which dictates the use at the time of inspection since nothing else is even possible for the appraiser to confirm.

 

[Marcia Langley]

The occupancy box on page one has nothing to do with whether the lender underwrites the loan based on future occupancy status.

That box is for the factual reporting as of the effective date.

Banks are obligated to satisfy themselves of what the future occupancy will be. There is no need to satisfy the appraiser on that point.

Banks need to know both. What the occupancy is as of the effective date and what the plans are for the future. They get that information from the owners, buyers, and sellers and underwrite the loan accordingly.

What banks need the appraiser to do is be their eyes and ears and verify the occupancy as of the effective date. That's the only question they are asking. They don't need the appraisers' eyes and ears to review future occupancy validity.

Appraisers put themselves at risk by using that check box to report future events. Many mortgage fraud cases reported by the FBI are about this very thing. Fraudulent claims by the borrower (or forged documents by the originator) as to their intended future use/occupancy of the property.

If an appraiser misuses the check box, it increases the chance that he will be perceived as complicit in the fraud, whether he reviewed an affidavit or not.

the GSE/FHA guidelines want the occupancy as of the effective date.

 

[TJSum]

Totally agree with Marcia. It is what it is as of the effective date, not some future event.

Suppose the buyer needed rental income in order to qualify for this purchase. He provides a totally bogus lease for the home after purchase, and the lender wants you to check off the "tenant" box based on this future lease. Then a year or so after the purchase it goes into foreclosure because it never had a true tenant and the borrower could not afford the payments. By checking the tenant box the appraiser has just exposed themselves to numerous problems and become an unwilling part of the fraud. Not only do we have to protect ourselves from willingly taking part in fraud, but unwillingly as well (when we can).

 

[KD247]

I don't think that there is a correct answer on this topic. Checking vacant for a vacation house or new construction could be misleading, just as it would be misleading to say that a duplex under purchase contract by an investor is a single-unit owner-occupied property just because one family currently occupies the whole property.

I've changed my thinking on this matter at least five times in my appraisal career and have decided that there really isn't a single good methodology for determining occupancy in every case. The biggest stumbling blocks for me are: 1) occupancy has no direct effect on value, and 2) in cases where occupancy is not obvious, I am not willing, qualified, or able to determine current occupancy.

And I'm certain that, as a group, we are giving this topic way more thought than the guys who put the boxes on the form ever did.

 

[Bama Bayou]

The occupancy box is like the census tract box. It has nothing to do with the appraisal of the property. It is for the covenience of the lender. I'm an appraiser not a detective.

For a little perspective and history lesson, the first section of the URAR was intended to be filled out by the lender and forwarded to the appraiser.

 

[KD247]

Oh Bama, you've got my vote! Well said.