1007 only (Certifications needed?)

[J Grant]

I get the 'rent is an estimate of the value of a property to be used for a specific period of time', and understand the thought process, but I disagree with it. I adhere to the requirements, but disagree nonetheless. In my mind an estimate of market rent for a particular piece of property would fall under 'Appraisal Practice', but not 'Appraisal' as an estimate of market rent has no relation to a property's overall value sans any kind of quantification of the relation of that rent to the overall value (GRM, cap rate, DCFRR). That's just me, though.

I disagree - a borrower might base a purchase decision on the rent estimate -to determine a cash flow after expenses for example.

Even if we the appraiser do not provide a qualification of the relation of the rent to the overall value (GRM, cap rate etc), other users can - the lender might use the rent $
opinion with UW to determine a relation of the rent to value to make a lending decision on the property.

 

[DWiley]

I would agree that his would fall under appraisal practice, since not everything in Standard 2 really applies for the particular scope of work. But after reading AO-21 I will follow Standard 2 and kind of CYA.

I created a template in Word. I labeled it as a Market Rent Appraisal Report and saved it for just such an emergency. I basically created my own "form" to attach to a 1007 so that in combination all the requirements in STD 2 were met. For the value definition I used the definition of Market Rent from the Dictionary of Real Estate Appraisal.

 

[DWiley]

but not 'Appraisal' as an estimate of market rent has no relation to a property's overall value sans any kind of quantification of the relation of that rent to the overall value (GRM, cap rate, DCFRR). That's just me, though.

Could the same not be said of an appraisal of a partial interest? Yet, there is not the same debate on that topic that we see when it comes to market rent.

But, an opinion of market rent is really just the same thing; it is a partial interest appraisal - it is an opinion of the value of SOME of the bundle of rights.

 

[alebrewer]

Could the same not be said of an appraisal of a partial interest? Yet, there is not the same debate on that topic that we see when it comes to market rent.

But, an opinion of market rent is really just the same thing; it is a partial interest appraisal - it is an opinion of the value of SOME of the bundle of rights.

I fully understand the premise. And yes, the case I presented: "rent is an estimate of the value of a property to be used for a specific period of time" is technically a form of a partial interest. A more common form of partial interest, however, is when there is more than one owner of a property, and an appraiser is asked to estimate the MV of that interest, which is generally not associated with some interim time period. Again - as I said, I get the thought process, I just disagree that estimating rent is an appraisal. And again - that's just me. I'm not here to convince anyone to come around to my crazy ideas.

I disagree - a borrower might base a purchase decision on the rent estimate -to determine a cash flow after expenses for example.

Even if we the appraiser do not provide a qualification of the relation of the rent to the overall value (GRM, cap rate etc), other users can - the lender might use the rent $
opinion with UW to determine a relation of the rent to value to make a lending decision on the property.

Well, first of all, a borrower isn't going to determine a purchase decision based on the rent estimate without some method of associating that rent to an overall value right? IOW - even if not explicitly developing a GRM (or cap rate), in their mind, they're using some tool to associate that rent with a purchase price (or value).

Of course others can quantify that - but in your scenario, the appraiser isn't.

 

[alebrewer]

You are not the first to say that.

It is important to remember that what we actually appraise are property rights - not the physical property. A lease establishes property rights, an an opinion of market rent reflects the value of those rights. Hence, it is an appraisal, as that term is defined in USPAP

I seriously doubt if I've ever had an original thought...

 

[J Grant]

I fully understand the premise. And yes, the case I presented: "rent is an estimate of the value of a property to be used for a specific period of time" is technically a form of a partial interest. A more common form of partial interest, however, is when there is more than one owner of a property, and an appraiser is asked to estimate the MV of that interest, which is generally not associated with some interim time period. Again - as I said, I get the thought process, I just disagree that estimating rent is an appraisal. And again - that's just me. I'm not here to convince anyone to come around to my crazy ideas.

Well, first of all, a borrower isn't going to determine a purchase decision based on the rent estimate without some method of associating that rent to an overall value right? IOW - even if not explicitly developing a GRM (or cap rate), in their mind, they're using some tool to associate that rent with a purchase price (or value).

Of course others can quantify that - but in your scenario, the appraiser isn't.

It is not my scenario the appraiser isn't - that is the premise of the OP post, the appraiser is providing only an opinion of market rent .

But you agree that the borrower will use some method of their own choosing to associate rent to the overall value, and they are basing it on the opinion of rent $ in the appraisal. The UW for lender might do their own rent to value analysis using the rent $ value opinion we provide .

So, our opinion of rent matters to a decision-

 

[alebrewer]

It is not my scenario the appraiser isn't - that is the premise of the OP post, the appraiser is providing only an opinion of market rent .

But you agree that the borrower will use some method of their own choosing to associate rent to the overall value, and they are basing it on the opinion of rent $ in the appraisal. The UW for lender might do their own rent to value analysis using the rent $ value opinion we provide .

So, our opinion of rent matters to a decision-

You just can't help yourself, can you?

 

[Tom D]

if your not sure what certification to include with it, then just remove the 1004 from an appraisal and use all that is included. better to over state than to understate what you did.
assume it's an appraisal, for which you won't get in trouble for assuming. you get into trouble for not assuming.
i believe the newest definition of an appraisal was the determination of any value, but i can't say i remember from a couple years back when it was changed, again.

 

[J Grant]

You just can't help yourself, can you?

Nor you, apparently from making snarky remarks. Nothing in my posts was personal, it was about the topic -

 

[alebrewer]

Nor you, apparently from making snarky remarks. Nothing in my posts was personal, it was about the topic -

Again - I'm not trying to convince you of my way of thinking. I completely understand there are folks who disagree with me, and it's not a hill to die on. I'm very happy for you if you consider a rent analysis an appraisal - you're in very good company. In addition - and I don't intend this to be snarky - I doubt anything you (or anyone else) says is going to convince me otherwise. I was just sharing my thoughts on the issue. But again - not a hill to die on. There are more important issues to debate than this.