Does the Operating Income need to be included in the 1025 form by USAP Standards?

[Manuel Rondon]

I got a call today. This mb stated that I was REQUIRED to include a 216 to the 1025. I know it makes sence for a 216 to be included in the multifamily report, but then, why it is not included in the 1025 in the 1st place? Just like the rent schedule. He also said that I was required to include the rental photos in the 1025 report. I never had this situation before. I was hoping for some help. Should I charge extra for the 216? or is it included?

 

[Tom Barclay]

Your client needs to be more upfront with the requirements of the assignment when giving you your SOW prior to your accepting the assignment, and you need to be specific when accepting these assignments as to what the client expects. Nothing in USPAP requires the use of any form. If the lender needs it, they need to notify you in advance so that you can agree on a fee.

I should add that I provide the Operating income statement, as well as a Comparable rent survey with any multiple I do, but I include those in the original fee that I quote. Most of the information is just part of doing the assignment anyway. If they don't need them, or don't want them then they just go in the file for the time in three weeks when they call in a panic demanding that they have to have them.
Sorry, and then I didn't answer your question. They are not required unless requested as part of your original assignment, and I personally would charge extra for them.

 

[Financially Feasible]

Manual,

Tom is spot-on accurate. As soon as I heard the words "investment property", "rental property" or "1025", then my first question is always "do you need the OI or Rent schedules?". I always charge more for this service, as a lot of agents in my area don't use MLS for their rental listings so it will involve a LOT of phone calls. There is no USPAP requirement for these forms (nor any other forms for any other type of work). If the lender says that they don't need it at first and then calls me back after I submit the report asking for these forms, I simply tell them that the report will sit on my desk until my check for $zzz comes in and then I will get it to you right away. I have no patience for lenders who have no idea what they need from an appraisal perspective. :new_2gunsfiring_v1:

Tom, on that note, I have to give you a lot of credit for doing those forms anyway and sticking them in your file. If a client isn't paying for something, I'm not doing it! If they call "in a panic" for these forms, I make them wait until I get my check before I left a finger!

 

[Dale Hill]

If your assignment called for fanniemae guidelines, here is what they show as being needed,
Providing exhibits to accompany Form 1025:
To support an appraisal report for a two- to four family property, you need to include the following exhibits:
* Photographs that show the front and back of the property you are appraising and a street scene;
* Photographs that show the front of each comparable sale (but not comparable rental or comparable listing);
* A street map showing the location of the property you are appraising and the comparable sales, comparable rentals, and the comparable listings you use;
* A sketch of the exterior of the building and of the exterior improvements to indicate the dimensions and the calculations you used to arrive at your estimate of gross building area and the square feet per unit;
* An Operating Income Statement (Form 216), unless the property you are appraising is a two-family property in which both units are owner occupied.

Page 46, Appraising 2 - 4 family residential properties.

Granted this was publised before the 1025 revised 3-05 was issued that removed listings from the previous 1025 form, but as new guidelines on required exhibits have not been issued, these would appear to still be their requirements.

 

[444nutman]

When I used to do appraisals for WAMU(before the darkside took over ordering appraisals) you did not have to do them.The darkside requires it and pays about 116 bucks less. The rest of my clients require it but pay for it. The difference I have is the info is easily available in my MLS. The other thing is I have done a bunch of them, so I have a good data base of info and know which management companies to call for rental data. (side note)The 216 and rent survey are included in the new 1025 and the same with the old forms.

 

[Mike Garrett RAA]

Not an USPAP issue.

 

[PropertyEconomics]

Manuel to answer your question .. they are not required by USPAP but arerequired by Fannie and probably by the investor your appraisal is going to.
While it is true they should have disclosed their need to you in the beginning, it happens all the time, and you just need to complete them and move forward. There is nothing untoward in providing the information to your client.

 

[Lloyd Bonafide]

If the client on a 2-4 unit property is a lender, I have never not included a 216 and rental comp photos.

 

[Non Sequitur]

Dale not only nailed it but provided a cite.

 

[Mike Boyd]

I never provide rental comp photos unless specifically asked to do it. 216, always and charge extra. Many new clients are amazed that I charge more for a 1025 than a 1004. I am amazed that THEY are amazed. Twice as much work and more liability. I also charge more for the 216. Rental analysis is part of the 1025 so I do not charge for it. My fee for the 1025 is based on the number of units. Base price is for a duplex, $100 more for each additional unit. Each unit has the potential for 100% more bodily contamination.