Form 216: 1025 Owner-occupied Market Rent

[gregb]

No income or expenses included for owner-occupied units.

 

[TMG]

The engagement was for a 1025 and a 216.

Engagement is for a 1025 with a 216.

Bottom of page 2 on the 1025 form has the data areas for actual and market rents. I agree with Lee, I have never been asked to include a 216 with a 1025.

 

[Charles West]

I was classically trained back in the day and was taught that rent estimates must be at their most supportable levels, i.e. median or typical for the location, quality, class and condition which is usually the highest rent obtainable in any given situation. You proscribe your median and start searching for negatives and or positives to add or subtract. The problem was back in the day we didn't have digital platforms to glean data from, take half a day to do properly.

 

[Terrel L. Shields]

Seems counter-intuitive to exclude owner rents...The owner benefits in lieu of paying rents elsewhere. I'd certainly use market rents (which I read as "typical" not "highest") ...so how would you calculate a GRM if you have rental comps vs 75% rental subject?

 

[Charles West]

Seems counter-intuitive to exclude owner rents...The owner benefits in lieu of paying rents elsewhere. I'd certainly use market rents (which I read as "typical" not "highest") ...so how would you calculate a GRM if you have rental comps vs 75% rental subject?

You are correct Terrell. You have to look at the subject through the eyes of the market, ie the investor. Let the underwriter make the adjustment.

 

[ZZGAMAZZ]

I was classically trained back in the day and was taught that rent estimates must be at their most supportable levels, i.e. median or typical for the location, quality, class and condition which is usually the highest rent obtainable in any given situation. You proscribe your median and start searching for negatives and or positives to add or subtract. The problem was back in the day we didn't have digital platforms to glean data from, take half a day to do properly.

So you're saying that "market value" might indeed be indentical to the "highest value," if the highest value is the most recent and proximate--such as the current market when escalating home properties is being carried over to rental income as increasing numbers of individuals no longer can afford to purchase a home, as expressed via the "affordability index."

 

[Charles West]

So you're saying that "market value" might indeed be indentical to the "highest value," if the highest value is the most recent and proximate--such as the current market when escalating home properties is being carried over to rental income as increasing numbers of individuals no longer can afford to purchase a home, as expressed via the "affordability index."

Yes. I always valued the property as if fully rented with no owner occupancy otherwise you have something other than 'market'. That is what a investor would look at and investors are the market. As a sidebar the market here in Sacramento is crazy hot right now. I have a vacant unit right now that I renovated a few years ago and people are clamoring for it. Problem is the potential tenants are mostly unqualified given the economic turmoil going on so I have to wait for the right party. I've had 57 queries in 14 days.

 

[ZZGAMAZZ]

Assignment is 4-unit conventional re-fi. Owner lives in one unit.

Should the Form 216 "Market Rent Per Month" include that value for the owner-occupied unit as well as the 3 tenant-occupied units.

I'm thinking "No" because no real rent is forthcoming and so market rent would be unrealistic; and I'm thinking "Yes" because the market rent is theoretical and could apply to an owner-occupied (or a vacant unit).

Nobody else to ask except AF peers.

Regards.

There appears to be a difference of opinion between the instructions on the version of the 216 provided in Post# 11 and overall appraiser consensus, concerning the impact of Market Rents on the GRM if the potential market income for all units, regardless of whether owner- or tenant-occupied, are not calculated. Perhaps the current Form Initiative would consider incorporating the 2nd page of the 216 into the 1025, and including instructions on the 1025 that the 216 isn't needed to supplement the 1025 (although the 216 might otherwise be pertinent)...