Many of us have walked into a home and recognized immediately that there was more than one family or many occupants in a home than is typical. The question is, does this multiple tenancy of a residential home negatively affect mortgage eligibility or real property value?

Mortgage lenders generally ask their appraisers to advise them if they have seen evidence of renters or multiple tenancy in a single-family residential (SFR) building, and thus appraisers are required to report when a home is not being used for a single-family purpose . Lenders generally reject multiple tenancy homes from single-family lending programs since they do not meet SFR lending requirements

Often the multiple family use of a home violates home owner association rules, master-plan community rules, city codes, zoning and planning, but it always violates the rules for single-family residential home lending.

The problem for homeowners is that while they may escape dealing with some multiple tenancy violations that doesn't mean that they won't have problems later. Getting rid of co-habitat or multiple tenants doesn't always go that well and if a home has been guaranteed after a sale or as of a date certain one of the tenants may not vacate on time. That can create liability and be the cause for some serious damage claims.

If you are going to sell your home and you have multiple tenants living in it, you should disclose that fact to the buyer and give your tenants or co-habitants enough notice to vacate the property so that they don't create problems for your sale or the buyer's possession.

If a SFR property has been modified for a use like a group home then changes may likely be necessary to bring the property back to its original single-family layout. Most buyers purchasing a property for a single-family use will take exception to home changes that are atypical like those having 6 to 10 bedrooms.

Multiple tenancy over an extended period of time can take its toll on a SFR building physically. When you have 12 to 20 adults living and working in a residential building for years, which happens in group homes, the cost to bring it back to a marketable state can be significant. If changes are not made the amount of time taken to market it can be significantly extended and as discussed many lenders may reject it even though the tenants have vacated.

It's my opinion, living near individuals who use their large, single-family homes occupied by multiple tenant that the most damaged parties are the neighbors of the multiple tenancy building not the owner. Parking 5 or 6 cars on the street, when the HOA rules ban the practice, can create an everyday eyesore. Add to that the constant movement of adults and children in an out of a home and you can turn a building and its surroundings into a circus atmosphere. It's not what responsible adults should do with their homes, especially not in a tract home development.

The answer to the question "does multiple tenancy in a SFR home affect value?" is "sometimes" depending on the intensity of the use, the number of tenants, the changes made to the home and the length of time it is used for a non-traditional purpose.

While an owner may escape from being sued by an HOA or the City / County that restricts such uses, you won't be making lots of friends with your neighbors by having a prolonged, multiple tenancy use, and you had better hope than none of them are attorneys or that one of your neighbors doesn't think that the violation is more important than his money. So, multiple tenancy can have a small or a large negative impact on a SFR home, depending on the circumstances.