Certified Residential vs Certified General

[Zoe]

I'm a CG and I only appraise the realty rights. I exclude the non-realty rights, which a lender is never going to get in a foreclosure anyway.

A house is just a house, even if they are renting by the bed or operating a marijuana grow in the garage or basement. Here today, gone tomorrow - house remains the same.

I don't value liquor licenses or inventory when appraising a liquor store, I don't value the restaurant business itself when appraising a restaurant, and I don't value motel businesses when appraising small motels or bed-n-breakfast SFRs. Not for mortgage related appraisals. If there's a lease then that speaks to the realty interest.

As an aside, if a CR or CG is valuing a non-realty business interest I'd argue the appraisal board has no jurisdiction over that portion of a valuation.

A girl that got out of appraisal business completely and was MAI wrote a book and specialized in hotels pretty much. I worked with her deceased father. I won't swear but I think she was first female MAI.

Nothing wrong with licensed real property appraiser incorporating other experts opinions in a real property or personal property when focusing on appraisal on real property rights appraisal and MV appraisal.

Her daddy was MAI and hated AI and complained about to me constantly.

He was a good appraiser. His daddy owned biggest railroad tie producing company in Birmingham AL when railroad production was big time.

Many auctioneers will do both personal property appraisal and real property appraisal rights. A CPA is pretty much needed on business valuation.

He was huge Alabama fan and had a little white poodle name after Alabama crimson Tide and would ask the poodle would you rather be dead or get beat by TN in football. That poodle would roll over and play dead. LOL

I worked with him in Memphis and know many of the residential appraisers that worked with him. He had like way more than 10 eventual certified residential appraisers that worked with him. When I came in the residential side was gone and a lady I knew very well worked with him and first female Pres of Appraisal Institute chapter in Memphis that moved to Mississippi.

She was CR only and did residential in North Mississippi with her husband.

Two different women. One was his daughter and I think one was first MAI in TN and maybe TN for sure. She left appraisal industry.

The other woman was CR and first female ever that became Pres. of local AI chapter in Memphis.

Keep things in perspective.

 

[George Hatch]

100% on the CPA or equivalent.

 

[Zoe]

When I came in to his business, I was already CG. His residential side had imploded. He did drive a nice little Mercedes with nice little push button where convertible top just folded in the trunk.

LOL

He wanted me to buy his practice on commercial side.

I think his Mercedes car was a 2 seater. I think he put his nice house in Germantown, TN in bankruptcy, which is suburb of Memphis and very high income individuals in Memphis MSA.

Germantown and east Memphis are highest income areas in Shelby County.

 

[J Grant]

The OP broached two different topics - license level ( and competence ), and specifically, is a res appraiser is competent to do an Airbnb valuation.
IMO, competence starts with identifying the property type. An Airbnb is NOT a hotel, or motel, and imo it is not a good practice to evaluate a SFR or residential condo as " an Airbnb" (whatever that is supposed to mean)

The term Airbnb describes a way for a property owner to monetize the property beyond its original residential occupancy use. Sometimes it is legal, other times not legal such as an HOA prohibits it, and other times it is a gray area. An Airbnb could be any one of a number of things wrt the physical property, a house, a condo, or one room that gets rented . Can Airbnb income be valued as income? Sure it can - but it is an income stream that does not convey with the property, and imo, is not appropriate for a typical res property loan assignments.

Renting a house as an Airbnb does not change the fact that it is still a house. When the house goes on the market, it competes against other houses. Using your Toyota Camry for UBER driving to oern income does not turn the Toyota Camry into a taxi. If you go to sell the Toyota, it competes against other Toyotas.

That said, Real estate is location-anchored and there are locations such as beachside or trendy urban that can get high Airbnb rents - in which case that potential gets baked into the sale price of the properties.

 

[George Hatch]

Location specific means the most similar properties will have the same location attributes. Where the appraisal problem grows some additional hair is if there are licenses involved. And if so, what the availability is for those licenses and what it would cost to transition a have-not into a have. There are areas around here where the locals are not issuing any other licenses so a buyer cannot assume they can convert a have-not into a have.

The other stray hair between the haves vs have nots are the furnishings.

But none of these conditions turn an assignment for the realty-only into a CG-only assignment. Besides, even if there is an income approach that's just one approach to value for these. You still have to do a Sales Comparison and if your most similar comps are also being operated as a STR then those are the comps and the SC will still end up being the dominant approach to value via principle of substitution.

 

[George Hatch]

Another reason lenders should be asking for the value of the realty-only is because vacation rentals are a form of discretionary spending that will ebb and flow depending on the general economy. It's common for a motel or other hospitality to get financed after a good year and fail during a couple bad years later on in the holding period. Then all the lender gets is the physical facility gone dark. Scary stuff if a lender is thinking about it.

 

[J Grant]

Another reason lenders should be asking for the value of the realty-only is because vacation rentals are a form of discretionary spending that will ebb and flow depending on the general economy. It's common for a motel or other hospitality to get financed after a good year and fail during a couple bad years later on in the holding period. Then all the lender gets is the physical facility gone dark. Scary stuff if a lender is thinking about it.

Lenders can do whatever they want. However, the appraiser has to make sure they understand, in the case of a residential property, that what they are appraising ( the property) is not the same as the income from an Airbnb a lender uses to qualify a borrower for the loan (Fannie allows it, see below )

Some lenders might try to pressure an appraiser into appraising a residential property as "an Airbnb", to get the value of the property asset higher. Yet Fannie ( and I assume Freddie) have guidelines where they want the appraiser to use long-term month-to-month or annual leases as the market rent and not short-term or Airbnb rents
Ifrenquelny have borrowers tell me how much $ they get from renting it out as an Airbnb and I politely tell them that the appraisal will use long-term/annual rents for the market rent.

AI Overview-

Yes, Fannie Mae allows lenders to use consistent Airbnb income to qualify borrowers, but requires at least one year of consistent rental income and documentation. The lender will typically use a percentage of the documented income (like 75% with 12 months history, or 100% with 24 months) to qualify the borrower and ensure they have a principal residence or current housing expense.

 

[sputnam]

In your example of an STR, it very much depends on what the Client has asked for. If they what the value of the property as a going concern, it probably should be a CG. Very few CRs have had any training or experience in that realm. It is a matter of competence. We are supposed to self regulate but, I've reviewed way too many appraisal reports where is was apparent that the appraiser was out of their depth. I don't think all of us are diligent or even honest with ourselves about declining or getting help.

 

[Zoe]

In your example of an STR, it very much depends on what the Client has asked for. If they what the value of the property as a going concern, it probably should be a CG. Very few CRs have had any training or experience in that realm. It is a matter of competence. We are supposed to self regulate but, I've reviewed way too many appraisal reports where is was apparent that the appraiser was out of their depth. I don't think all of us are diligent or even honest with ourselves about declining or getting help.

But your referencing different property rights. Business and real property rights are different.

A CR or CG could do it with help from CPA on business value.

Think about it. This stuff goes to IRS and tax code is involved on "going concern". IRS has tax rules relative to "going concern" and "business value".

 

[J Grant]

wrt business value - do the CGs value the business, or do they apply a cap rate to the income stream from the business? I thought it was the latter.

In the second case, a residential appraiser could apply a cap rate - but should not take the assignment if the property has a commercial use to get that income.