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Advise with Form 216 Op.Inc.Stmt.

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Ross (CO)

Thread Starter
Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Doing assignment on a brand-spanking new condo with the expected 1073, yet also asking for 1007 and 216. Closing set for Jan. 31st, two owners buying as limited partnership will lease-back to builder at $990/mo. through May 31st to use unit as a model show unit for other prospective buyers. After May 31st they can extend lease monthly or these two will rent it out. Only 2 buildings (20 units) are effectively completed at this time. Subject unit is completed, just waiting to close at end of Jan. Another 5 buildings (50 units) under way or to be started. ---Client's request for 216 seems really aloof as there is NO operating incomes, expenses, utility bills, repairs, replacement reserves for future need. All that is known is Feb. 1st lease-back at $990/month and $90/month assocoation dues. My experience with the 216 is minimal, but when done before there was actual numbers to work with. Client's client insists it get done with rest of report as they have passed along reply that "it's based on appraiser's estimates, anyway". Can anyone offer advice for completing it logically, per what is known and with certain likely needed addenda to conclude it satisfactorily ? ...Thanks.
 

rtubbs

Junior Member
Joined
Jan 15, 2002
Ross, you have the $990/mo as income ($11,880/year). You may have minimal expenses in the upcoming year to paint interior and things like that. You definitely would have replacement reserves for whatever equipment is in the unit. The monthly housing expense would include PITI and the association dues, PMI (if applicable). To me the 216 would be easier to complete than the 1007. I say easier to complete because I have never appraised an investment property where the borrower or the lender actually completed the OIS; charge more for doing their work.
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Ross,

Easy money. Done all the time. Mostly B/C paper borrowers buy these homes to fix their credit. The builder leases back the home so the new owner can make on-time payments every month to strengthen their credit rating. When the year's up, they refi at a lower rate now that they are showing a current payment history.

The bummer is, finding comparable market rents. Sometimes, the lease back rentals are higher. But find three rent comps of similar condos and fill out the 1007 and develop a monthly rent for the subject. Move the rental estimate to the 216 and fill it out. For the management fee, I use one month's rent, as that's what a broker charges out here for finding a tenant. Use whatever is customary in your area-call a broker. Set-up your reserves for the appliances, heater, CAC, carpeting and water heater. Since it's a condo, you will have no roof reserve as it is in the HOA dues. Just state that on the 216. PITI, HOA fees and PMI insurance are not included on the front of the 216 as they are a separate item in the qualification process-the underwriter knows all about them-no need to repeat them on the 216. I've see appraisers put HOA fees and RE taxes on the frontof the form, like you would in a typical I&E statement. If you put them in there, the borrower will show less monthly income needed to qualify. As Ron stated, the Monthly Housing Expense is shown, but I let the underwriter place that figure on Page Two of the 216. They have all that info to which I am not privy as far as mortgage amount, rate, PMI insurance etc. So you will not be questionned if you leave the Monthly Housing Expense blank, that's the underwriter's job.

Read your lease back. The builder will usually pay for all utilities so you won't have any items to enter there. Interior Decorating will be maintained by the builder as it is a sample model. Casual Labor will be in the HOA fee-state it as such. A very nominal figure in General Repairs/Maintenance would be appropriate because most of that is also covered by the HOA fee--maybe a small amount for a service contract on the unit's heater/CAC??

You can use your Marshall Swift manual for appliance costs and life expectancies. For carpeting, figure out your ratio from the floor plan of carpeted areas to non-carpeted areas such as baths and kitchens. I use $20 to $25 per yard for carpeting. You can look at a Home Depot ad and see what carpeting is going for installed. Use that.

It's really not all that bad.

Ben
 
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