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Remember my shared drive 3 car garage New problems

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Ray Miller

Thread Starter
Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
:D 8) Remember my shared three car garage and shared drive way property a month ago. It has brought forth new problems. Zoned R-1 with I-1 all the way around it. Well ??

When I inspected the property, the owner told me he was buying it for investment and would be renting it out. Well, that put up a red flag and I called the lender and ask if they needed an operating statement and an appraisal as income property. The lender told me no. Just do it as a single family residential. :?

Over the weekend they call (the lender) and want me to toss together an appraisal as income property and an operating statement. The owners are out of state and have no information, the buyer has not a clue about doing cash flow or what other property is renting for in the area. :twisted: :roll:

I called several realtor’s today and all they could tell me about rents in the samll town is some where between $250.00 a month and $1000.00 depending on the property and location. But they knew of none that had sold in the past year. That I could get comps on and fine out cash flow and rents. :roll:

What is a new appraiser to do in a case like this. Also they want the report completed by Thursday. :cry:
 

George Hatch

Elite Member
Gold Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Ray,

A) The terms of the assignment changed after you accepted the engagement and after you informed the client of the borrower's true intentions. The property is not currently rented and has no rental history to your knowledge. The lender needs to understand the impact of changing up midstream, and to clearly understand that for reasons beyond your control (but not thiers) you may not be able to close this thing out by Thursday. This delay was caused by a lack of communication between the client and the borrower, and from the client to the appraiser. The appraiser did not create this problem.

B) Unless your subject's market segment is one in which investors commonly buy properties for their rental income stream, you will have a difficult, if not impossible, task in locating recent comparable sales with income data. If this is the case, there will be no way to directly support a GRM and the reliability of the Income Approach will suffer, perhaps to the point of being misleading. About the best you can do is to find rentals that correspond to your sales and build your GRMS by forecasting "market" rents for them (using your rent comps) and then working backwards. The report should clearly indicate the origins of these estimated GRM indicators, along with their corresponding reduction in reliability.

C) You already hit up the local real estate people for comparable rental data, apparently with almost no luck. About the best you can hope for on such short notice is to look up rental notices in the local paper, maybe even dated ones going back a few months. If you can't do it on the internet, your best bet would be to go down to the paper's offices and ask to check their archives. Another possibility is to see if there are any rental managment companies in the area. Good luck on that one; rent surveys for SFRs are tough under the best of circumstances.

D) Building an operating income statement off of a hypothetical (at this point) income stream and without a prior income history shouldn't be real tough once you get the rental data. This is assuming you've done enough 2-4's in the area to get the general hang of forecasting landlord-paid expenses like taxes, insurance, utilities (water/sewer/trash), maintenance and reserves. If you aren't familiar with these issues in this market area, then there is a competency issue that should be resolved one way or another.

E) Regardless of how your analysis turns out, this Income Approach will really only fill in a blank on a form in this case; it won't be a dominant indicator of value. Were it not so, your income data would be so abundant that you wouldn't have been able to walk three steps without tripping over it.

F) You should consider whether performing an Income Approach will, in any way, make this appraisal more reliable. If it detracts from the overall reliability, you should consider not performing an Income Approach for this appraisal, and instead possibly furnish the rent survey and operating income analysis as a stand-alone document; or else give it no weight in the reconciliation. Job No. 1 in report writing is to not mislead the reader.

G) In the future, try and collect at least one or two classified sections from the newspapers in the areas you are working every month and save them for 6 months or so. That way, you need never fear the dreaded request for a rent survey. This works well for apartments, too. I repeat, rent surveys for SFRs are tough under the best of circumstances.

Good luck.


George Hatch
 

George W Dodd

Senior Member
Joined
Jul 9, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
) You already hit up the local real estate people for comparable rental data, apparently with almost no luck. About the best you can hope for on such short notice is to look up rental notices in the local paper, maybe even dated ones going back a few months. If you can't do it on the internet, your best bet would be to go down to the paper's offices and ask to check their archives. Another possibility is to see if there are any rental managment companies in the area. Good luck on that one; rent surveys for SFRs are tough under the best of circumstances.

I always save the classifed rental ads for the sunday paper. I've been able to find great data by calling owners/agents on properties listed for rent a few months ago.

Guess I thought everyone did this, but great heads up!
 

Mountain Man

Elite Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Georgia
Great post above, can't really add any more other than a big DITTO :D :D for the statement:

"you may not be able to close this thing out by Thursday. This delay was caused by a lack of communication between the client and the borrower, and from the client to the appraiser. The appraiser did not create this problem."
 

Ted Martin

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified General Appraiser
State
Kansas
Don't forget to double the fee!!
 
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