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Current Monthly Rent in 1025 Rent Comps Grid

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Mark Ziegler

Thread Starter
Freshman Member
Joined
Mar 15, 2002
Professional Status
Certified Residential Appraiser
State
Wisconsin
As I have always interpreted this, estimated rents are necessary in the case of owner-occupied (and even vacant) units, as opposed to diplaying partial or no rents. Never had a problem until now. One unit is owner-occupied, but I used actual and estimated. I personally beleive this is necessary to represent a realistic "Rent/GBA" and thus reconcile this indicated value to the additional property attributes. Any thoughts? Anyone have access to FNMA All-Regs? Thanks.
 

Tim Schneider

Member
Joined
Feb 8, 2007
Professional Status
Certified Residential Appraiser
State
Wisconsin
Here's how I do it:

actual rents=actual rents, even if zero
estimated rents=market rents
Income Approach section completed using actual rents (As I was directed by the State), and then explained in the comment area below the data. In the reconciliation section, I show what the value indicated by IA would be using estimated market rents, and reconile using that amount.
 

Mark Ziegler

Thread Starter
Freshman Member
Joined
Mar 15, 2002
Professional Status
Certified Residential Appraiser
State
Wisconsin
By the State?

Since when does the state direct you how to complete appraisals?
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
Fannie guidelines are availabele at the top of the Fannie section of the forum.

XI, 408: Income Approach to Value (11/01/05)
The income approach to value is based on the assumption that market value is related to the market rent or income that a property can be expected to earn. Its use generally is appropriate in neighborhoods that consist of one-unit properties when there is a substantial rental market, and it can be an important approach in the valuation of two-unit to four-unit properties. However, it generally is not appropriate in areas that consist mostly of owner-occupied properties since adequate rental data generally does not exist for those areas. We will not accept an appraisal if the appraiser relies solely on the income approach to value as an indicator of market value.
To arrive at the indicated value by the income approach to value, the appraiser multiplies the total gross estimated monthly market rent for the subject property by a reconciled gross monthly rent multiplier. (Because of the way the appraiser’s opinion of value is derived under this approach, the income approach to value provides a reliable indication of value only when the comparable sales are truly comparable.)
Estimated market rent is based on an analysis of comparable rentals in the neighborhood. After appropriate adjustments are made to the comparable properties, their adjusted (or indicated) values are reconciled to develop an estimated monthly market rent for the subject property.
The gross rent multiplier is determined by dividing the sales prices of comparable properties that were rented at the time of sale by their monthly market rent, which is then reconciled to create a single gross rent multiplier (or a range of multipliers) for the subject property.

The appraiser must use his or her best judgment regarding the applicability of the income approach to value. An instance in which the income approach may not be an appropriate indicator of value involves the appraisal of a two-unit rental property in a neighborhood that is dominated by two-unit properties that are owner-occupied. In such cases, the appraiser does not need to develop a gross monthly rent multiplier, but must report the estimated market rent for the subject property. In such cases, the appraiser should provide an appropriate explanation of why he or she chose to report in this manner.
When the property being appraised is a one-unit property that will be used as an investment property, the appraiser must prepare a Single-Family Comparable Rent Schedule (Form 1007) in addition to the appropriate appraisal report form. [This form is not required for a two-unit to four-unit property because the Small Residential Income Property Appraisal Report (Form 1025) provides substantially the same information, nor is it required for a Community Living group home mortgage.] When the appraiser is relying on the income approach to value, he or she should include the supporting comparable rental and sales data, and the calculations used to determine the gross rent multiplier in the appraisal report.
 

Mark Ziegler

Thread Starter
Freshman Member
Joined
Mar 15, 2002
Professional Status
Certified Residential Appraiser
State
Wisconsin
Great, But.

Thanks Mr. Rex. But, it still doesn't go to the specificity of the line item. As such, what's your take?
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Are you appraising fee simple? Then you use market rents.
Many times, the actual rents are consistent with market so actual rents are used. When they are not, then market rents should be used.
If a unit is owner-occupied, its actual rent is zero but its market rent is whatever your market analysis determined. Market rents are the basis for the GRM (usually).

Don't get confused (which is easy to do with the form) between the need to report the actual rents and the methodology of using market rents in analyzing the subject (and comps) using the Income Approach.

Good luck.
 

jakeboeger

Member
Joined
May 12, 2005
Professional Status
Licensed Appraiser
State
California
I love it when I see appraisal report that say "the income approach is not applicable since the subject is owner occupied"
 
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