Appraising In An Airbnb World

[J Grant]

The gig economy, fm and lenders are realizing the reality and adjusting loan programs to fit. I can see higher appraisal fees to cover the added appraisal work involved in these properties. Might take years for fm to produce a new appraisal form to facilitate the reporting needs of such properties.

https://www.washingtonpost.com/news...inancing-applications/?utm_term=.57bb7db27734

The airbnb income is used to qualify the borrower for a loan...not to qualify the property. It has nothing to do with the property, as long as the property is residential ( and not modified physically from such ) There is no added appraisal work , At present neither Fannie nor lenders are instructing to appraise them as income producing or commercial properties.

I use a room in my house as an appraisal office and if I were to refinance the UW would use my appraisal income to qualify for a loan, but that does not make my house a commercial property ( unless I reconfigured it into a suite of offices inside)

Maybe Fannie will change policy later re airbnb but for now I see nothing about handling the properties as anything but residential, it's all on the lender side for borrower income qualification.

 

[Meandering]

The airbnb income is used to qualify the borrower for a loan...not to qualify the property. It has nothing to do with the property, as long as the property is residential ( and not modified physically from such ) There is no added appraisal work , At present neither Fannie nor lenders are instructing to appraise them as income producing or commercial properties.

I use a room in my house as an appraisal office and if I were to refinance the UW would use my appraisal income to qualify for a loan, but that does not make my house a commercial property ( unless I reconfigured it into a suite of offices inside)

Maybe Fannie will change policy later re airbnb but for now I see nothing about handling the properties as anything but residential, it's all on the lender side for borrower income qualification.

The difference being you can sit with your laptop and cell phone, in Panera Bread, at the Library or in your car and continue to appraise.

The income generation from the AirBnB, is not as easily, transferable. You can not rent those weekenders your house, and when they arrive, tell them they have to stay in your car instead, because the city decided you need a transient lodging license, and they will still pay you the same rental income to sleep in your car.

And while you might consider the short term rental a legal issue, you are not qualified to address, you are still responsible for it, if you know it exists.










Could the hotel laws be enforced on the property?

If hotel laws are enforced on the property, will it's value, and the value of it's comparable sales decline?

You better have some bullet proof boiler plate.


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[J Grant]

Where in this thread did anyone said dont disclose knowledge it is being used as an airbnb? Obviously we should disclose it, if it is known , I said that repeatedly.

However, since we are not appraising it as commercial or income property, why would it matter if hotel laws change or are enforced? That can impact borrower income, but that is a lender issue, not an appraiser issue. I think their allowing airbnb income is insane since yes laws can change and affect what borrower earns, but qualifying borrowers is beyond our appraisal SOW

I bet many of us have already appraised properties where owner uses it for air bnb- how would we know? We don't interrogate owners how they make their money, nor what they do with their house, as long as we walk in and see it's still residential and not reconfigured.

There is a place for analysis of airbnb influence on property in an appraisal though, since if it is prevalent in an area it might impact prices , but then we would see it in the prices of the comps.

 

[J Grant]

I would expect if air bnb is prevalent in area it would have more impact on some commercial properties...if motel/hotel vacancy is up or rates down due to them competing with air bnb in a commercial appraisal.

 

[Meandering]

why would it matter if hotel laws change or are enforced?.

It matters in the same way that it matters if zoning is changed, a USPAP requirement.
It matters in the statements for EAs and/or HCs concerning the possibility of enforcement. USPAP requirement.
It matters if the property is producing income, and you don't find the income approach credible for development. USPAP requirement.
It matters if the property is being used in a way that violates laws, enforced or not, and you are outside of your license level to appraise it. State License Laws.
It matters if the income generation from the property, is being used to qualify the loan and you explain your decision the income approach was not necessary for credible results, and you can sufficiently explain it's exclusion from the analysis and report. USPAP requirement.
It matters that the appraiser be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal for a property that is producing income. USPAP acquirement (Not just HC that income, methods and techniques, away).


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[andrew81]

i work out of a home office. my neighbor does part time auto-body and motorcycle painting in his garage. across the street is a small salon in the basement. two houses down the owner runs a property preservation and lawn mowing service out of his garage. few houses over is a medical transcriptionist that works out of a home office. a block over the owner does part time small engine and lawn mower repair out of his garage. there are a couple in home daycares within 2 or 3 blocks. the high school music teacher lives nearby and gives private lessons for a fee out of her house.

how does the current use of a single family residential property located in a single family residential neighborhood purchased by owner occupants, have any affect on what the property will bring in an open and competitive market?

 

[Terrel L. Shields]

how does the current use of a single family residential property located in a single family residential neighborhood purchased by owner occupants, have any affect on what the property will bring in an open and competitive market?

The issue for the lender is not merely value.. As I said above, "It is worth what it is worth." But the lender is concerned about conforming to the loan program and some loan programs do not allow commercial uses. Thus, if a default, the lender may have money clawed back if they discover it was used as a commercial enterprise. We somehow pretend Uber is not a taxicab and we pretend AIR (matress) Bed N Breakfast is not a hostelry. What next?

 

[andrew81]

exactly, this is appraisers forum, not lenders forum

report your findings and let them decide what they need to do.

 

[The Warrior Monk]

Any property can be used for transient housing.

Technically, that is true. However, just because someone use a property a certain way doesn't mean that the use is legal.

I think I am safe in assuming that most of us are not considering this when doing our HBU analysis. Houses in the southwest can rent their roofs out to solar panel firms. Whether or not someone chooses to is not an appraiser's concern.

I actually can't have solar panels on the south-facing side of my home, due to covenants and restrictions.

Again I ask, how does familial relationship or lack thereof of people sleeping in different bedrooms affect the market value of a home?

Maybe because this issue is noted in the zone code? This actually is an issue in the main area where I work, and is specifically addressed in the code. I work in a market with secondary homes, and it got out of control with daily rentals, weekend rentals, rentals where there are a few dozen people staying overnight and cars parked up and down the street, etc. So the codes where modified to address the chaos, and they are strict in enforcing it.

Should a thorough income approach for any and all potential uses of a home be required in every res. appraisal to cover our bases?

The standard is "necessary" to the valuation of the property.

 

[The Warrior Monk]

exactly, this is appraisers forum, not lenders forum

report your findings and let them decide what they need to do.

If it's a lending assignment, it's important to notify the lender beforehand, not after the fact. Issues like this can change the scope of work of the assignment.