305: Community Living Group Homes

The group home that secures a Community Living mortgage must maintain its residential nature and have no modifications that would make it unacceptable as a one- or two-family residence.  The property appraisal for a one-family property should be documented on the Uniform Residential Appraisal Report (Form 1004), while the appraisal for a two-family property should be documented on the Small Residential Income Property Appraisal Report (Form 1025).  The appraiser generally does not need to use other group home properties as comparable sales in developing the sales comparison approach to value because we expect the appraised value to reflect the value of the group home as a typical one- or two-family residence.  The appraiser will not need to analyze and report comparable rental properties on the Single-Family Comparable Rent Schedule (Form 1007) since the room and board payments received under the contract with the state or local funding agency are not dependent on, or comparable to, market rents.  However, we do expect the lender's underwriter to review the rent information that appears on our Operating Income Statement (Form 216) or a similar cash flow and operating income statement and to make any adjustments that are needed for any income and expense items that appear unreasonable for the market in which the group home is located.

When the loan proceeds are used to fund repairs or rehabilitation to the group home property, the appraiser must have demonstrated competence and experience in evaluating properties for rehabilitation financing.

•    If the rehabilitation work has already been completed, the appraiser's opinion of value must reflect the completion of the improvements -- and the borrower must provide evidence showing that the work was paid for from the borrower's own funds. 

•    If the rehabilitation work has not been completed, the appraiser must review the plans and specifications (and attach them to the appraisal report) and provide an opinion of the "as completed" value of the property.  The "as completed" value must be supported by market data that demonstrates the contributory value of the repairs and renovations.  We will not require a second appraisal after completion of the repairs or renovations -- as long as the appraiser provides a certification of completion stating that the work was completed in accordance with the plans and specifications.  (If the original appraiser is not available to make the certification of completion, the lender may use a substitute appraiser provided that the appraiser reviews the original "as completed" appraisal so that he or she can certify that the property was completed in accordance with the plans and specifications.)