What is "habitable" to an appraiser?

[Erik]

Hello all. I live in North Carolina and am beginning the purchase of a few acres in the mountains that have a couple buildings. One of the buildings is a small (600sf), rustic 1920s house or cabin that was occupied until several years ago but has not been since. The property also has a newer, 900sf building that was used as an office that at some point I will convert into a residence. I am buying it from family and getting a good price, so I'm not concerned about the value of the appraisal.

I had my first discussion with the lender today (my credit union), and they said it is fine if the house needs work but it has to be deemed livable by the appraiser for them to lend us the money. My question is about what appraisers look for when deciding whether a building is "habitable." The small addition that had the bathroom in it was torn off a few years ago (it was poorly built in later years), so I know we will have to put in a bathroom (thankfully my dad is a plumber). There is also a small hole in the eave of the roof, which we will repair. Otherwise the roof is in decent shape, with no leaks. There are propane lines into the rooms and propane heaters, but there is no tank underneath now because no one has been living there. There is a kitchen with a working sink and stove. The foundation is old stone and cinder block piers, but it's solid. Most of the exterior siding is good, but one side has some cedar shake shingles that have cracked or fallen off, and older shingles (asphalt? asbestos?) are visible underneath and in good shape. The ceilings are low (about 7 feet) and we plan to raise them at some point. Overall, I think the house is livable once we add the bathroom and fix the roof.

So as an appraiser, what do require to consider a house habitable? Is it a very "basic" level, or is it more like meeting building codes? Is it OK to have some siding shingles falling off? What about overgrown landscaping that needs to be cut back? Are credit unions different about habitability than a bank?

I want to do the work now that needs to be done to close the loan, but I would like to do more of the fixing up over time. Thanks in advance for your input!

 

[Tim The Enchanter]

So as an appraiser, what do require to consider a house habitable? Is it a very "basic" level, or is it more like meeting building codes? Is it OK to have some siding shingles falling off? What about overgrown landscaping that needs to be cut back? Are credit unions different about habitability than a bank?

Seems like a bit of a judgement call, and ask your lender how they define it. As is it is definitely not habitable.
I'd say minimum you need a sound structure, water tight with a decent roof, working kitchen and bath, permanent heat source.
Working doors windows, etc. Electric, plumbing supply and disposal should be obvious.
Internet?!
I'd guess you would need to meet applicable codes and permit requirements.
Talk to the lender, tell them straight up what you have now, and what you plan.

 

[Meandering]

Your house does not have a bathroom. Does it have an outhouse? Is it near an Amish community?

Most appraisers and banks will stick with the FHA Minimum Property Requirements to determine if the house meets them, it's habitable, if it doesn't, it will depend on safety, security and structural issues, but without being Amish, a bathroom will be required.

 

[Pilgrum]

If you can stay warm, dry, sanitized and make a meal then I think it is habitable.

 

[Terrel L. Shields]

Considering the state of my own housekeeping...never mind my office, my personal bar is set pretty low. Not to mention I was born in a 2 room house without electricity nor running water. Frankly, I have seen homes lived in that I would not, but it would be a judgment I would think.
All of the below were occupied. The one a real shanty but was cool with a window A/C and clean. The second stunk with cat box that hadn't been cleaned and 10 cats and was in shambles- I would never slept there personally. The third was a dairy parlor converted to an apartment on a farm. The dairyman got smart and quit, then got stupid and built chicken houses. His hired help lived here. I know another such parlor that was made into an apartment for a down and out hired hand, ex-con and super gardener... These days it really is tomatoes. And I have seen pole sheds made into a home, barns, metal buildings. One was a converted old poultry barn and one of the worst situations I had to value was a 100 acres where the heirs were a son and daughter. Jr. was a cow thief and his father put up the property as bond for Jr. to pay off the cattle after he was caught. The father died.. A fire had burnt the attic but Jr. lived in it. His sister was a very sweet person. Her husband had been in a bad wreck and was unable to work and was recovering from a brain injury, no insurance except Cherokee tribal health care...he talked very slow. They had poured concrete floor in a 20' x 40' chicken coop, and made the best of it. It was clean, no paint on the walls and a couple of throw rugs on the foundation. So Jr. quit paying the bond off and the place reverted to the cattleman who held the lien and they were all evicted. The sister was cheated by her brother who was just a lazy deadbeat thief. The Realtor who did the deal told me he was nearly sick to his stomach over it.

 

[Pam Wyant]

Terrell, your area is so much like mine... I've seen numerous places very similar to those you posted that were occupied. The worst one was a small 4 room shack literally in a cow pasture (had to open the gate and walk through the field to the house), with a 30 amp breaker box that looked as if it had overheated numerous times, no running water and no bathroom. The owner told me to be careful in the cellar, it was full of water. Yes, indeed it was, buckets of it stored there for the use of the owners. Although I tried to get the report cancelled, the client wanted it finished, but I am quite sure the loan went nowhere...

As to the original question, most lenders, even ones that don't sell the loans, will want a functional bathroom, a functional kitchen, structural soundness including a functional (non-leaking) roof, a permanent non-attended heat source, and reasonably safe/sanitary conditions. Overgrown landscaping shouldn't be a problem.

I can understand you wanting the property for the land, but why would you want to sink so much money (including the future plan of raising the roof to increase the ceiling height from 7') to repair a 600 SF cabin? Seems it might be better to tear it down and build from scratch.

 

[Mountain Man]

Habitable is one thing, conforming and meeting the highest and best use is another. Just because a structure has a house on it doesn't make it "residential" property any more than having a 4 square garden in the back yard makes an urban home a "farm".

 

[BRCJR]

What contributory value do the improvements have per the assessor?
How about the land?

 

[Erik]

What contributory value do the improvements have per the assessor?
How about the land?

Thanks for everyone's comments. Per the current assessment, the parcel is worth $80K, with $42K for the land and and $38K for the structures. Of course that is based on the fact that when it was assessed it had a bathroom, which just to be clear I am going to rebuild before the appraisal. I am getting it for $50K because the owner (my brother-in-law's father) needs to sell fast to pay off debs and would like to keep it in the family.

As for the amount of money involved, it's really just the materials to plumb the bathroom and fix the roof over the porch. My dad is a licensed plumber so can do the labor for free. I agree many people would tear it down and start over, but that would be more expensive and this place is a really cool old mountain house with vintage pine floors, cedar interior walls, etc. It is also in a real "Appalachia" area where, yes, some people do still have outhouses.

Marion said most lenders and appraisers will follow the FHA minumum requirements. Is that true in most people's experience? That's exactly the kind of guidelines I am looking for - something clear(ish) I can follow. I called the lender and they were useless. The woman told me that don't have any requirements for the appraiser and the appraiser can do what he wants. Basically she had no idea and was, I suspect, making things up.

I was under the impression the FHA requirements were more stringent than most lenders use. Would you experts suggest I use the FHA guidelines as I come up with my project list of things to do? Does each lender you work for give you a list of requirements they want to meet, or do you just do what you want as the credit union rep suggested? Does the fact the property assessment is so much more than my purchase price help me? Thanks for the help!

 

[Mike Kennedy]

Habitable in North Carolina ( state law), County, Town, City, Village supplemental Laws apply as well:

http://www.nchh.org/Portals/0/Contents/HH_Codes_NC_7-22-08.pdf

A competent Appraiser must be aware of, and address applicable Municipal Improvement, Use and Occupancy Laws, and Compliance in determining the Highest and Best Use of a Site (whether improved or vacant).

ERIK, where is the property located (governing local Municipality)?