Barndominium receiving above market rent from VRBO

[J Grant]

Or a commercial property trying to get a residential loan rate?

The borrower is running the subject like a commercial property but hopes to get a residential loan rate. A common scenario.

The odd part is that Fannie/Freddie allows STR to count toward the borrower's income,e - but that is about income qualification for the person, and not the property being appraised for res purposes.

 

[Mark K]

Would the average buyer look at it like that I am not sure, odds are this would appeal to investors only.

Investor only.

It's a commercial endeavor, along the lines of a small hotel, B&B, etc. Its a commercial property and should be treated accordingly. No way should a lender even consider this for a loan sold on the secondary market as residential.

Maybe if it's a local bank keeping the loan in-house and they're comfortable with a CR completing an appraisal based on the cost approach and the LTV is 60%, +/-, i.e., construction loan.

This is exactly the type of property that a lender DOES NOT want to take back when the STR business model doesn't work as planned and the owner walks away. That's when a lender starts looking very closely at the file, including your appraisal.

Be very careful.

 

[alebrewer]

My problem with the GRM is that even if the rents are accurate ( it is often hard to find actual rents ) and one analyzes them, if the stale price is divided by the rents for the GRM - what happens when sale prices are inflated? It seems to me a closed loop circling back on itself.

It's interesting - in Texas - EVERYBODY uses MLS for rentals (at least in my market), meaning that there is good data. In Oklahoma - no one does. Finding and confirming rentals is a PITA. WRT the GRM and market rents - you reconcile that just like you do any other opinion of value. Assuming your sales grid sales were rented at the time they sold, you have good GRM data. Find the range, select a GRM from within that range, and apply it to your market rents. I usually find that my IA is slightly higher than my SCA, and will often reconcile between the two (on a 1025). On a 1004, we're certifying that our weight is on the SCA, so I don't include the IA or CA in my reconciliation.

 

[Terrel L. Shields]

so I don't include the IA or CA in my reconciliation.

I think I would still say I did NOT weigh either the IA nor CA approach - especially in OK. So, I do mention all 3 approaches in my reconciliation, even though I may reconcile the strength of the approach in its separate section.

In the final analysis, the sales approach was given the most weight because it tends to measure the​

reaction of buyers and sellers in the marketplace. Buyers buy and sellers set price based upon sales.
The cost approach supports the value indication and provides a basis for the land value. The​

income approach was not necessary for a credible report. Owner -operators tend to buy properties to
benefit their business model rather than buy it based upon its actual income rental potential.​

 

[alebrewer]

I think I would still say I did NOT weigh either the IA nor CA approach - especially in OK. So, I do mention all 3 approaches in my reconciliation, even though I may reconcile the strength of the approach in its separate section.

In the final analysis, the sales approach was given the most weight because it tends to measure the​

reaction of buyers and sellers in the marketplace. Buyers buy and sellers set price based upon sales.​

The cost approach supports the value indication and provides a basis for the land value. The​

income approach was not necessary for a credible report. Owner -operators tend to buy properties to​

benefit their business model rather than buy it based upon its actual income rental potential.​

Oh, I do. I actually cite Cert 4 as the reason I can't weight the CA and IA - for 1004 reporting only. On the 1004C (MFG form) Cert 4 says the appraiser developed the CA in support of the SCA. On the 1025, Cert 4 says the appraiser developed their opinion based on the SCA and IA. I have different reconciliation statements depending on which form I'm reporting on.

 

[sputnam]

If the Lender insists on an appraisal reported on the 1004, you have a little bit of a problem. The 1004 specifies and defines 'market value'. That means that you have to appraise both the land value and the as improved value at their highest and best use. What your property owner has done is create a business. From your all too brief description of the subject and the market that it's in, no one here can do a credible highest and best use analysis. In my under informed opinion, the 1004 is usually not appropriate for VRBO or AirBnB properties. They are businesses.

 

[J Grant]

Separate the going concern used by the owner from the property itself. when appraising it for a res loan, GSE, you can not use the STR. It is a res style condo ( a barndominium)


However, the OP describes the Barndomium as an over-improvement, too large for the area, and a floorplan with many bedrooms. That creates funct obs for the residence. THAT is what the appraiser has to deal with,. If they do an income approach, they use LTR.

The client may want a simple 1004 form, which does not ask for in cme approach. If that is the case, disclose that the owner is using it for VBRO/str but that it is being appraised as a residence and no income approach is used. Occupant: tenant. The loan might get rejected, but that is not the appraiser's problem.

If someone uses their Toyota ( for example) to drive for UBER or Lyft, the car does not turn into a taxi. When it is time to sell the car, Toyota competes among similar cars. The same goes for a resieneital property.

 

[chad hampton]

Doesn’t seem like a residential single-family home to me. But if you do it, the AMC will want at least one sale of the exact same property property and sold with the last year in the market area. doesn’t seem worth the money regardless of the fee. Good luck

 

[J Grant]

Or a commercial property trying to get a residential loan rate?

It is not a commercial property trying to get a residential loan. It is a residential property that the owner is using as a going concern STR, and yet the owner hopes to get a better rate residential loan. For GSE loans, the appraiser can not sSTR, so if they use an income approach ( the client may not want one), the appraiser discloses that it is being used for STR. If they use an income approach, it is LTR.

 

[Terrel L. Shields]

It is a residential property that the owner is using as a going concern STR

Therefore, it is a commercial use property.