Portland Oregon and FHA Owner Occupant Loans

[Amy Lynn Matteson]

I'm looking at purchasing a multifamily property in Portland, Oregon via a FHA Mortgage.

Portland (and Oregon) has adopted legislation stating that (as I understand it) a current tenant must be given 90 days notice for an owner occupant to reside in a unit. FHA requires that the owner occupant move into a unit within 60 days.

Does anyone know if this is unique to Portland? 

Is it not possible to use an FHA loan on a multifamily property in Oregon unless one unit is already vacant?

Thanks for your help!

Amy

[Julee Felsman]

Hi Amy!  

First... I love that you're thinking of living in a plex.  I lived in a couple of duplexes (my second and third homes) and still own them. Buying them, living in them and keeping them was one of the smartest financial moves I ever made!

It is possible to buy a plex with an FHA loan, but you and your seller -- and your respective realtors -- need to collaborate to carefully navigate the timelines.

I can confirm that the timelines you mentioned above are accurate. The 90 day notice cannot be given until the seller has a bona fide offer from a buyer who intends to occupy the property.  Some of these rules are peculiar to Portland.

Here's how things work out in the real world:

You write your offer on the property you want to buy. You should include with your offer an addendum stating that you intend to occupy the property. That will give the seller a document that contains no additional information they may not wish to share (such as the price) with their renter. I would (personally) ask them to obscure my name on that addendum when sharing it with the seller. That protects your privacy -- the renter doesn't need to know who's buying the place.

Upon acceptance of the offer, the seller could give 90 days' notice to their renter (they now have a buyer who intends to move in). They may not want to do so, howover... they probably don't want to give formal notice until you've done your home inspection, reviewed leases and the title report and navigated any resulting issues in connection with the property. Historically, sellers have often been reluctant to give up rental income until they know they have a buyer locked in.  (Caveat: this may change now that these rules are in place... some sellers may like the excuse to give notice.)

Once you've firmed up terms, the seller gives 90 days notice to the renter in the unit you wish to occupy. The seller will also have to pay a relocation fee to the renter at this time.

If you are comfortable taking on the renter, you can close 30 days after this date.  

When the renter moves out in 60 days, you can move in, per the required terms of your loan. 

Working through that initial due diligence period usually takes 10 business days, so you would need to have a 40-45 day escrow period.  A little longer than the norm, but not beyond the pale.

If you are not comfortable taking ownership with the renter in place (what if they don't move out), you would have to negotiate quite a long closing time frame.  I have a client closing next week who did just this... they really didn't want to close with the renter in their new home, so they negotiated an extended closing with the seller.

Be sure you talk to your real estate broker and lender. And if you want to work with a lender who has some experience navigating this stuff, hit me up.  :)

I am, of course, a lender and not an attorney or property manager (although I do have my own collection of rentals), so take what i say with a grain of salt... but I'd be happy to hook you up with experts who can answer questions with a little more authority!