No consideration for Cost Approach on a one month old property.

[alebrewer]

The problem I see with the IA is that on the 1025 the GRM is based on current rents in the sales grid and those rents may be below market, especially in areas with rent control. The GRM from the sales grid is then applied to the estimated market rent of the subject, thereby artificially inflating the value, with no explanation.

I thought the GRM was developed from market rents?

 

[alebrewer]

Which means USPAP is not valid and FNMA sets the rules, right?

Not at all. Remember - the ultimate decision for an appropriate SOW is the appraiser's. If the appraiser believes the proposed SOW (i.e. that you're putting 100% of your weight on the SCA) is not sufficient to develop credible results, or that using that SOW would lead to a misleading report - they must recuse themselves from the assignment.

 

[alebrewer]

On an unrelated note, seeing LOTS of misconceptions about the cost approach in this thread.

Please share some of those misconceptions. Best to get those cleared up if possible.

 

[Sadie]

I thought the GRM was developed from market rents?

On the 1025 it is auto calculated based on current rents of the comparables. If the appraiser uses these GRMs as a basis for the subject GRM, they are not comparable to what the GRM would be if the comparables were rented at market rates.

 

[alebrewer]

On the 1025 it is auto calculated based on current rents of the comparables. If the appraiser uses these GRMs as a basis for the subject GRM, they are not comparable to what the GRM would be if the comparables were rented at market rates.

And how do you know the comparables aren't rented at market? Shouldn't you be using the most recent, comparable, rentals available? If so, those should reflect market, right?

 

[Sadie]

And how do you know the comparables aren't rented at market? Shouldn't you be using the most recent, comparable, rentals available? If so, those should reflect market, right?

Normally it says right in the listing-rented at below market or something like that. Also, you should have a pretty good idea of what market rents are in the area because you just performed a market rent analysis of the subject and analyzed the rental market.

 

[Sadie]

And how do you know the comparables aren't rented at market? Shouldn't you be using the most recent, comparable, rentals available? If so, those should reflect market, right?

The GRM is auto calculated in the SCA, not the section on comparable rents. This is in reference to the 1025 form

 

[alebrewer]

The GRM is auto calculated in the SCA, not the section on comparable rents. This is in reference to the 1025 form

ok

 

[CGinMN]

The GRM is not auto-calculated and the1025 is a non-UAD form. Regardless, even if your software does auto-populate and doesn't allow you to change and lock the field, you can't let the form drive the results. You should be using market rents to develop the GRM.

 

[glenn walker]

I thought the GRM was developed from market rents?

Sadie is wrong the GRM is not determined by what the Subjects Rents-- YOU DO NOT ADJUST THE SUBJECT - PROPERTY --Your Comps both sales and rentals are what drives the final opinion of market value. Most two to four Fannie-FHA are supposted to be owner occupied in a purchase or at least one unit. Anyway the GRM is based on the market not the subjects rents.