There is much to be said about people that take themselves too seriously when they really don't know what they're doing. I recently had a wonderful experience with an appraiser in Oregon that blew my mind. Here's the story...
I tend to look at every transaction I do with a client with a very long term outlook. Often, as was the case here, I may suggest multiple transactions to accomplish certain goals. My client, let's call her Diane, had serious credit related issues. This was mid summer 2006. We discussed the various loan options available given her position and concluded that we should take a two part approach. Refinance and pay off all of her debt that she was falling behind on and then start the long and arduous process of credit repair. This is something I've spent many, many hours researching and studying so I'm fairly adept at raising people's scores (if there is something to work with). Anyone interested in discussing or learning about the process is welcome to shoot me an email. There's also a lot of valuable information available at MyFico.
In Diane's case, we both knew it would take some time. There were old collection accounts we had to track down and various accounts that no one had record of... anyway, it was a process. When we did the initial transaction back in July 2006, I used an appraiser in the Clackamas area that was fairly well known. He sent one of his 'apprentices' to do the actual inspection. It's a very straightforward appraisal... the client rents in Sacramento because that's where the work is and stays in Oregon whenever she has time off. It's her home town and that's where she plans on living when she can afford to retire. In the interim, it's the only home she owns and it is fully furnished with her belongings. It is in every aspect a legal 2nd home. The appraisal was done fairly quickly, signed off by the supervisor and everything was peachy. Fast forward ten months and we are ready for step two.
Here's where it gets interesting. I called the original appraiser and he let me know that the apprentice was no longer an apprentice and was now a full fledged Appraiser. He suggested I call him to do the job. For the sake of this blog we'll call him Jimbo. I call Jimbo and let him know what we need... I even sent him a copy of the appraisal he did for me the year before. Quick turn times, fair price, no issues... till I get the appraisal.
He marks the appraisal as Tenant Occupied on the Subject section of the 1004. For those that don't know that means it's an investment property and to a lender it means MUCH MORE RISK. I called Jimbo to ask why he put that and he replied there were multiple reasons.
- He asked the client if she was getting any rent money, client said yes.
- He asked the person that opened the door if they were paying any rent money, they said yes.
- The client (Diane) was in Sacramento when he called her for scheduling.
Some of you may be saying to yourselves, "but Alex, she is renting it out!". What you may not realize is that that is ok. She is allowed to. The reality is a person DOES NOT need to keep a 2nd home vacant for it to qualify as a 2nd home. Per Fannie Mae selling guide:
A second home is a property that is located within a reasonable distance from the borrower's principal residence and which the borrower occupies for some portion of the year. We limit our purchase of mortgages that are secured by second homes to those properties that have one dwelling unit. The property must be suitable for year-round occupancy (and can, in fact, be occupied by someone other than the borrower-as long as the occupancy is not under a timeshare arrangement). The borrower must have exclusive control over the property; therefore, he or she must not enter into any rental agreements that require the property to be rented or give a management firm control over the occupancy of the property. When a property is classified as a second home, rental income may not be used to qualify the borrower.
Yes, yes and yes to all of the above. I tried in vain to explain this to to Jimbo. He said he didn't care if it was her 2nd, 3rd or fiftieth home, it wasn't Owner Occupied. I even reminded him that just 10 months prior he did the same appraisal and marked it Owner Occupied. He went on this long diatribe about how I'm just one of those loan officers looking to make a buck and I don't care who's lying about what. What he failed to understand is that Owner Occupied does not mean the same as Primary Residence. That's when I called the Oregon Appraiser Certification and Licensure Board for a little help. I spoke with one of their compliance analysts, explained the whole thing and guess what? He agreed with me. But, you know what, an appraisal is completely subjective to the opinion of the appraiser and even though the OACLB agreed with me, there was nothing we could do.
I was forced to order a 2nd appraisal (paid by me) from a different appraiser so that we could get the deal done. It's a sad state of affairs when an appraiser that's finished his 2000 hours of apprenticeship still has no clue how to qualify a 2nd home. I wish I could share with you Jimbo's real name but unfortunately, I'd rather not open myself up to any legal issues. If anyone in the area want to email me direct, I'd be happy to let you know who to stay away from.
Thanks for reading!
* Real names have been changed.
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