Are Second Homes Considered Owner-Occupied or Investor-Owned?

stuartmiles2Recently, we received an incoming inquiry generated from our pre-qualification page on the company’s website.  We reviewed the answers and it didn’t appear that this condominium project was eligible for FHA Condominium Project Approval.

The reason for this conclusion was that the owner-occupancy rate was much less than 50%.  Of the 312 units, only 129 of them were marked as owner-occupied.  In order to be eligible for FHA project approval, at least 156 of these units must be owner-occupied.

I called the person who completed the form to pass this information along to her.  As it turns out, she is the President of the Board of Directors of the condominium, a licensed property manager in Florida and a licensed Real Estate Broker.

I went on to tell her that it didn’t appear that the project was approvable with FHA because the owner-occupancy rate was below 50%.  She then asked me how does FHA view units that are second homes?

Being that the condominium project is in Florida, there are many units owned by folks who split time between this residence and another.

When applying for condominium project approval, FHA only asks how many units areowner-occupied and how many are investor-owned.  It doesn’t ask how many aresecond homes.

Among investigating whether the home qualifies as second home – such as distance between homes, location of the second home (near a lake or beach) and the time spent in the second home by the owner – there is one aspect that can be the “kiss of death” for a unit to qualify as a second home.

The unit cannot be inhabited by anyone other than the unit owner when the unit owner is absent from the unit.

This means that at any time the unit owner is away from the second home, NO ONE, not even family members, can reside or stay in the unit for it to be qualified as a second home.

Obviously, it goes without stating that the unit owner cannot rent the unit to anyone when he/she is away but it is not allowed even if the unit owner is not charging rent to the short-term or long-term tenant.  Allowing other inhabitants in the unit while the unit owner is away qualifies this unit as investor-owned, not owner-occupied, and the forms submitted to FHA must be completed accordingly.

Hopefully, this will make a difference in the ratios enough for this condominium project to get approved with FHA.

Image courtesy of Stuart Miles/