71B form for Mixed Use property(residential and commercial)

[justin7777]

I have appraisal work for a mixed-use property (residential and commercial), and my client wants me to use the 71B form.
Do I need to analyze the cost approach, comparable rental data, market approach, and income approach for both the residential and commercial units?
Can someone help me with how to use the 71B form for a mixed-use property (residential and commercial)? Thank you so much in advance. Have a great weekend

 

[George Hatch]

Personally, I think it's simpler to augment the general purpose commercial form with the apt unit breakdowns and unit of comparison grids from the apartment forms. I do a lot of mixed use and I've never written one up on a 71a or 71b.

What modes of analysis have you been using to appraise those when not using a form? I've done it both ways - sticking to price/sf on the GBA in some markets where there are a lot of these, or by breaking it down into 2 separate datasets when working in markets where there aren't enough of these to make sense out of them.

15% residential vs 85% commercial will usually work differently than when the ratios are reversed.

Unit mix varies on these and the contributory net incomes for the residential component are usually different than for the office or retail of commercial component. So sometimes it makes sense to run separate analyses of both.

 

[sputnam]

I have appraisal work for a mixed-use property (residential and commercial), and my client wants me to use the 71B form.
Do I need to analyze the cost approach, comparable rental data, market approach, and income approach for both the residential and commercial units?
Can someone help me with how to use the 71B form for a mixed-use property (residential and commercial)? Thank you so much in advance. Have a great weekend

You CAN use any form for any appraisal. USPAP is silent on that issue. The question is whether you SHOULD use it or not.

Per USPAP you MUST consider every approach for every appraisal. There are two valid reasons for omitting an approach. 1- The approach is not applicable... like the Cost Approach for a land appraisal. 2- The approach is not necessary for credible assignment results. That's a judgement call by the appraiser... however, that decision is subject to being evaluated by a reviewer or underwriter. Too often I've reviewed an appraisal report where the appraiser said something like 'Income Approach not developed due to insufficient rental data' and then a few days later, I see an appraisal report in the same neighborhood where the appraiser miraclously found plenty for rental data. The difference? The Client for the 2nd assignment required the Income Approach as an assigment condition. "Not required by the Client" is never acceptable as a reason for omitting an approach.

As for help, the Form is not the appraisal. The form does not change the requirements of the appraisal report. The report either meets the requirements of 2-2(a) or 2-2(b) or it doesn't. It's your job to make sure the report complies with one of those standards. The form really only dictates how the report looks.

I agree with George. The legacy GSE forms are very out of date. A GP form would be better. Talk to your Client.

 

[justin7777]

Personally, I think it's simpler to augment the general purpose commercial form with the apt unit breakdowns and unit of comparison grids from the apartment forms. I do a lot of mixed use and I've never written one up on a 71a or 71b.

What modes of analysis have you been using to appraise those when not using a form? I've done it both ways - sticking to price/sf on the GBA in some markets where there are a lot of these, or by breaking it down into 2 separate datasets when working in markets where there aren't enough of these to make sense out of them.

15% residential vs 85% commercial will usually work differently than when the ratios are reversed.

Unit mix varies on these and the contributory net incomes for the residential component are usually different than for the office or retail of commercial component. So sometimes it makes sense to run separate analyses of both.

Thank you for your help. I am trying to analyze both residential and commercial units on the 71B form. However, the grid only allows for one subject unit for rental comps, income approach, and cost approach. So, if I analyze a residential unit, I cannot add another grid for a commercial unit. Do you know how to resolve this problem?

 

[justin7777]

You CAN use any form for any appraisal. USPAP is silent on that issue. The question is whether you SHOULD use it or not.

Per USPAP you MUST consider every approach for every appraisal. There are two valid reasons for omitting an approach. 1- The approach is not applicable... like the Cost Approach for a land appraisal. 2- The approach is not necessary for credible assignment results. That's a judgement call by the appraiser... however, that decision is subject to being evaluated by a reviewer or underwriter. Too often I've reviewed an appraisal report where the appraiser said something like 'Income Approach not developed due to insufficient rental data' and then a few days later, I see an appraisal report in the same neighborhood where the appraiser miraclously found plenty for rental data. The difference? The Client for the 2nd assignment required the Income Approach as an assigment condition. "Not required by the Client" is never acceptable as a reason for omitting an approach.

As for help, the Form is not the appraisal. The form does not change the requirements of the appraisal report. The report either meets the requirements of 2-2(a) or 2-2(b) or it doesn't. It's your job to make sure the report complies with one of those standards. The form really only dictates how the report looks.

I agree with George. The legacy GSE forms are very out of date. A GP form would be better. Talk to your Client.

Thank you for your help. I am trying to analyze both residential and commercial units on the 71B form. However, the grid only allows for one subject unit for rental comps, income approach, and cost approach. So, if I analyze a residential unit, I cannot add another grid for a commercial unit. Do you know how to resolve this problem?

 

[George Hatch]

Thank you for your help. I am trying to analyze both residential and commercial units on the 71B form. However, the grid only allows for one subject unit for rental comps, income approach, and cost approach. So, if I analyze a residential unit, I cannot add another grid for a commercial unit. Do you know how to resolve this problem?

I haven't owned an appraisalware program in the last 10+ years. (I do all my report formats in Excel so I don't have this problem).

But when I was using Total I'd open a 2nd file with just the report form and an extra comps page and fill out the extra comps page by itself and use that. Add as an addendum. Same as I was doing when I wanted to grid land sales for a URAR or other form that didn't have a grid. Or you can insert a table into an addendum page and fill that out manually. Or take a screen grab of your extra comps page and add the image to an addendum page. There are probably other solutions at this point that I never got around to but the bottom line is that whatever you're doing in your narratives will probably also work with the formsware addenda pages.

 

[Terrel L. Shields]

my client wants me to use the 71B form.

Why? Can they be persuaded to use a better form? I would get back to them and explain the issue. And what exactly is the mix of commercial and residential?

 

[Marty S.]

At Freddie Mac Multifamily, we retired Multifamily form 71A around 2016 (+/-) and I don't think we ever sanctioned the use of 71B during my tenure there as Chief Appraiser/Multifamily. Look at the bottom of the forms you are using and see the revision dates; my best guess is that whatever version you are using was last revised in the 20th Century. As has been said above, you can use any form for any report, as long as it meets the Scope of Work, agreed to by your client, and meets USPAP requirements. But, as I remember, the 71-series forms were horrendous to use to write the report and equally horrendous for the client/Intended User to review.
Just my 2cents.

Marty

 

[sputnam]

Thank you for your help. I am trying to analyze both residential and commercial units on the 71B form. However, the grid only allows for one subject unit for rental comps, income approach, and cost approach. So, if I analyze a residential unit, I cannot add another grid for a commercial unit. Do you know how to resolve this problem?

Sure.... Write a narrative

 

[Marty S.]

Thank you for your help. I am trying to analyze both residential and commercial units on the 71B form. However, the grid only allows for one subject unit for rental comps, income approach, and cost approach. So, if I analyze a residential unit, I cannot add another grid for a commercial unit. Do you know how to resolve this problem?

Justin: Part of your solution depends on where you are getting the form from and how you are going to deliver the appraisal to your client.

Your form provider might be able to offer a solution for adding an extra page(s) of comparables depending on the technology of how the form is compiled in their software -- I don't know about those specifics or details, but it might be worth asking them if they have a solution.

On the other hand, if you are delivering your appraisal to your client as a PDF via email, it might be easy enough to fill out a second set of grids for the commercial unit, then print it / save it as a PDF, and then combine the PDF of the primary pages of your report with the additional PDF page(s) of your commercial grid(s). Your PDF software might allow you to merge/combine PDF files and arrange the pages as you want them; there is also free software on the web to do this, too.

Good luck!

Marty S.