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FNMA 216--OPERATING INCOME STATEMENT

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Verne Hebert

Senior Member
Joined
Feb 25, 2002
Professional Status
Certified General Appraiser
State
Montana
The second page of this form on the top is the Replacement Reserve Schedule. It deals with the REMAINING LIFE of appliances, heating and cooling, floor covering, and roofing.

Does this column deal with total physical life of each item? Or the portion of the total physical life remaining, as the column suggests?
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
The 216 doesn't make sense in this area. It doesn't account for the fact that the owner of the property may already have money in reserves. If some large component like the roof, furnace, etc only has a remaining life of one year, then the replacement reserve amount ends up being huge. It almost always results in a huge negative cash flow for qualification purposes. The replacement reserve amount should be based on the total life of the component, and the lender should reconcile that figure with any reserves that the owner may have in the bank.
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
The reason it doesn't take owner reserves into account is because almost none of the owners have any (at least not earmarked for applicances, roof, etc.)

Most of the ones I have done (usually on 2-4 family) have had positive cash flow. You put in replacement cost, from M & S, look at the actual age, and estimate remaining life. You can be pretty liberal and they will allow that (most refrigerators last longer than 15 years) just as long as you don't get ridiculous.

I always charge extra for this form. I also qualify my turn around time because some of the stuff you need may have to be supplied by the owner.
 
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