Market Rent Study.interest appraised?

[Bill Lansdowne]

Greetings all,

I am performing my first market rent study, and I'm looking for some guidance. My client is needing a opinion of market rent for a medical office space. They need to confirm that the rent they are agreeing to pay is close to market rent levels.

My question is....am I appraising an "interest" in the property? If at all? Leased Fee or Leashold? Previous appraisals from other appraisers in our office have said they are appraising the leased fee interest.

In my opinion, based on the scope of work and the level of information I am providing, I am not appraising an interest in the property at all.

Does anyone have any advice, comments, etc?

Thanks

 

[Pittsburgh Pete]

Greetings all,

I am performing my first market rent study, and I'm looking for some guidance. My client is needing a opinion of market rent for a medical office space. They need to confirm that the rent they are agreeing to pay is close to market rent levels.

My question is....am I appraising an "interest" in the property? If at all? Leased Fee or Leashold? Previous appraisals from other appraisers in our office have said they are appraising the leased fee interest.

In my opinion, based on the scope of work and the level of information I am providing, I am not appraising an interest in the property at all.

You should be focusing on the principle of substitution--very straightfoward

Does anyone have any advice, comments, etc?

Thanks

You are not performing an appraisal at all so the "interest" question is moot. You've been asked to do a rental study which is straight forward. Think of it as a portion of the income approach in an appraisal--determining market rent. That's all!!!

Focus on the principle of substitution--very straightforward assignment

 

[PL1957]

You are not performing an appraisal at all so the "interest" question is moot. You've been asked to do a rental study which is straight forward. Think of it as a portion of the income approach in an appraisal--determining market rent. That's all!!!

Focus on the principle of substitution--very straightforward assignment

If you are providing an estimate of the market rent, you are doing an appraisal

 

[H.B. Userman]

How is estimating the market rent an appraisal?? An appraisal is an opinion of value. Bill is only estimating one component of the value. His client didn't ask him to analyze the risk of the income or vacancy in the market. If this was my assignment, I would adhere to:

USPAP 2008–2009


STANDARD 4: REAL PROPERTY APPRAISAL CONSULTING, DEVELOPMENT
In developing a real property appraisal consulting assignment, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete the research and analyses necessary to produce credible results.

and

STANDARD 5: REAL PROPERTY APPRAISAL CONSULTING, REPORTING
In reporting the results of a real property appraisal consulting assignment, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.

 

[Bill Lansdowne]

You are not performing an appraisal at all so the "interest" question is moot. You've been asked to do a rental study which is straight forward. Think of it as a portion of the income approach in an appraisal--determining market rent. That's all!!!

Focus on the principle of substitution--very straightforward assignment

Although my initial reading of the relevant USPAP sections on the differences between appraisal vs. appraisal consulting, lead me to agree with your statement....

USPAP Q&A, Vol. 9, No. 2 from the ASB says that a market rent study is an appraisal, "USPAP defines an appraisal as having an opinion of value, and market rent is an expression of value for the right to use a property."

I could argue either way, and I have read a previous post to Appraisers Forum where this has been done; however, I have not found any debate or guidance and which interest is being appraised when completing a market rent study.

 

[Ken B]

Where is SS when you need him?

 

[Bill Lansdowne]

How is estimating the market rent an appraisal?? An appraisal is an opinion of value. Bill is only estimating one component of the value. His client didn't ask him to analyze the risk of the income or vacancy in the market. If this was my assignment, I would adhere to:

USPAP 2008–2009


STANDARD 4: REAL PROPERTY APPRAISAL CONSULTING, DEVELOPMENT
In developing a real property appraisal consulting assignment, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete the research and analyses necessary to produce credible results.

and

STANDARD 5: REAL PROPERTY APPRAISAL CONSULTING, REPORTING
In reporting the results of a real property appraisal consulting assignment, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.

OK, in an effort to draw other "experts" out of the woodwork...I'll say this.

After reading USPAP definition of appraisal consulting:
"the act or process of developing an analysis, recommendation, or opinion to solve a problem, where an opinion of value is a component of the analysis leading the assignment results." my initial interpretation was my opinion of market rent was only a "component of the analysis"; therefore, I was/am not completing an appraisal. However, after reading the USPAP Q&A mentioned above, it explicitly says a market rent study is an appraisal because it involves an opinion of value. I don't think it is clear, and leaves room for interpretation...that is why I'm interested in seeking other opinions before I make up my mind.

 

[Pittsburgh Pete]

Although my initial reading of the relevant USPAP sections on the differences between appraisal vs. appraisal consulting, lead me to agree with your statement....

USPAP Q&A, Vol. 9, No. 2 from the ASB says that a market rent study is an appraisal, "USPAP defines an appraisal as having an opinion of value, and market rent is an expression of value for the right to use a property."

I could argue either way, and I have read a previous post to Appraisers Forum where this has been done; however, I have not found any debate or guidance and which interest is being appraised when completing a market rent study.

While I may be incorrect in not referring to your assignment as an appraisal, the issue of "interest" is, I repeat, moot.

Leased fee and fee simple are ownership interests--not applicable here.

Leasehold refers to rights "conveyed by a lease."

None of the above apply. Your assignment is to determine "market rent" for a specified space (in which case it would be an appraisal); or if addressing a "market study" with no specific property or space being addressed, you are performing a consulting assignment. The issue of "interest" is a non-starter.

 

[PropertyEconomics]

While I may be incorrect in not referring to your assignment as an appraisal, the issue of "interest" is, I repeat, moot.

Leased fee and fee simple are ownership interests--not applicable here.

Leasehold refers to rights "conveyed by a lease."

None of the above apply. Your assignment is to determine "market rent" for a specified space (in which case it would be an appraisal); or if addressing a "market study" with no specific property or space being addressed, you are performing a consulting assignment. The issue of "interest" is a non-starter.

You guys are locked into the thought of "property interest" ... when the rent study is an appraisal of the rent (value) that one can expect to pay for the right of use and occupancy of an improvements.
The AO is pretty clear and guides the appraiser to conclude it is a "valuation" assignment.

 

[Pittsburgh Pete]

You guys are locked into the thought of "property interest" ... when the rent study is an appraisal of the rent (value) that one can expect to pay for the right of use and occupancy of an improvements.
The AO is pretty clear and guides the appraiser to conclude it is a "valuation" assignment.

That was the thrust of his original question!! Thus the "locked" in nature of my responses.