I want to say I have seen this scenario on here before, but not sure under what. Loan to purchase a property which includes a dwelling (supposedly unlivable at the moment). The main purpose of the lot is be used as additional storage yard space for the company purchasing the lot. However, they are unsure if they will fix up the dwelling and rent it out or just bulldoze it. I am leaning towards not reporting this since this is primarily commercial purpose (even if they fix the house and rent it). Or, should I be safe and report it?

they are unsure if they will fix up the dwelling and rent it out or just bulldoze

There is a perceived intention the structure will be potentially renovated and rented therefore they are purchasing a dwelling at this time IMO. If they change their mind after the fact is of no consequence to the intended purpose at the time of the loan.

You may be able to exempt it if you can justify the property is a mixed use property and it is not residential due to square footage and/or generated income. The question is though if the property is just used to store material or equipment what income does it produce. Is the portion of the property being used for storage larger than the portion of the property and building that is residential?

FWIW because the borrower has clearly indicated there is a possibility they will renovate and rent the dwelling we would report the transaction as a non-owner occupied purchase.

I agree with Dan - That would be the safe route. Easier to justify why you reported it vs. trying to explain why you didn't.

Thank you, Dan and David, I appreciate it sirs!