Does Fannie require the income approach on the 1025 form? It's completely irrelevant for my assignment.

[JeffSH]

As-is value, 4-unit building with significant fire damage. The income approach is not reasonable and there are plenty of sales in terrible condition. Do I have to find rentals and develop a GRM? Has anyone left those sections blank?

 

[Elliott]

Yes. UWs expect it.

 

[Jerry Bone Jr]

As-is value, 4-unit building with significant fire damage. The income approach is not reasonable and there are plenty of sales in terrible condition. Do I have to find rentals and develop a GRM? Has anyone left those sections blank?

It depends. What type of value? Market Value? Investment Value? Rental Value? Listing Value? Rebuild Value?

 

[alebrewer]

Cert #4 on the 1025:

4. I developed my opinion of the market value of the real property that is the subject of this report based on the sales comparison and income approaches to value. I have adequate market data to develop reliable sales comparison and income approaches to value for this appraisal assignment. I further certify that I considered the cost approach to value but did not develop it, unless otherwise indicated in this report. (bold and underline added by me)

 

[glenn walker]

A 1025 form is used for loan purposes and not Non-Lending assignments. Therefore you should use either a GP or AI form or the Non Lending 2 to 4 unit forms. and only use a sales comparison and a cost approach if the income approach is not applicable.

 

[glenn walker]

Its for fire damage not a loan and 1025 form and certification is not the appropriate form or certification. A Non-Lender 2 to 4 unit form and a General Certification to insert any and all EA or Assumptions

 

[redfish]

I don't know how you would have a credible HBU if you are not developing an income analysis for the a 4 unit.

 

[Russ Kitzberger]

As-is value, 4-unit building with significant fire damage. The income approach is not reasonable and there are plenty of sales in terrible condition. Do I have to find rentals and develop a GRM? Has anyone left those sections blank?

As is maybe not, if the data quality and quantity is stronger for sales comparison.

The income approach in the damaged instance would be a development analysis; The As Is via the income approach would be supported through determining after repaired value (by GRM or sales comps), deducting investment return (entrepreneurial incentive), and cost to repair, leading to market value. Probably too small for a DCF, so GRM, investor markup/roi, or something similar would work.

What you have is similar to a partially completed building or distressed commercial asset, a rehabber/builder/developer buys it finishes it, resells or refinances it. The income approach is their return on investment.

Discuss with the client, likely not going to care about the income approach unless it is a contested issue or litigation.

You can also do the cost approach, but depending on your intended use, probably overkill.

 

[J Grant]

As-is value, 4-unit building with significant fire damage. The income approach is not reasonable and there are plenty of sales in terrible condition. Do I have to find rentals and develop a GRM? Has anyone left those sections blank?

from what I know, a bldg with that much fire damage if going conventional would be a C 6 or C 5 and thus typically made " subject to" repair to bring it into at least C 4 condition

If the building is worth salvaging and repairing, a buyer would be considering the rental potential of it as reason for purchase - so yes it is relevant.

 

[Rlong]

Well my take (comm/res guy who likes the 1025 “format”) is that the income approach on a 2-4 unit is usually fairly easy as most 2-4 MLS listings in markets I see include current rent/income, and GRM’s. So the effort is so low and the data it provides (income approach indication if it was not damaged) so foundational, “why not” how much time are you saving NOT reporting it. It could literally be a sentence (if your sale comps provide rents). Are your comps really all vacant or do they ACTUALLY provide rents and hence GRM,s.

AND if it’s not a lending assignment don’t use a lending form and certification.