Rent Schedule 1007

[Kelley Leigh]

Help please! I want to make sure I stay in compliance. My client has ordered a conventional appraisal for the purchase of a single family home that also requires rental comps. The client has ordered the report with two different order numbers and insists that I upload the rent schedule separate from the rest of the appraisal report and vice versa. Is this appropriate or a violation of USPAP? Any insight would be appreciated!

Thanks!

 

[RSW]

What's wrong with that? It is two seperate orders.

 

[Peter LeQuire]

RSW wrote, "What's wrong with that? It is two seperate orders."

Yes - each requiring the appropriate development and reporting standards.

 

[Fritz in NY]

Why a violation??? Go for it.

 

[Kelley Leigh]

That's what I thought, but I had not had this request before so I thought I better double check! Thanks!

 

[DWiley]

Why a violation??? Go for it.

Form 1007 asks the appraiser to express an opinion of market rent - which is an appraisal. If form 1007 was sent without addenda, then the report would fall well short of the report content required by SR 2-2(b) (or even 2-2(c))

When it comes to reporting market rent, I find that many clients, and many appraisers, do not understand all the implications.

For a more complete answer, refer to Example 3 at the end of Advisory Opinion 21.

A client recently asked to to complete only a 1007. The report I sent was a 1007 with attachments that addressed the required reporting elements for a Summary Appraisal Report (intended use, intended user, definition of Market Value, certification, etc.). If done correctly, submitting the 1007 seperately is a LOT more work.

 

[nstanbru]

Just my cyincal opinion, but they're probably trying to see if they can get it through as owner occupied for a better loan rate. Or, on the less cynical side, the borrowers may or may not need the rental income to qualify for the loan.

 

[RSW]

Form 1007 asks the appraiser to express an opinion of market rent - which is an appraisal. If form 1007 was sent without addenda, then the report would fall well short of the report content required by SR 2-2(b) (or even 2-2(c))

When it comes to reporting market rent, I find that many clients, and many appraisers, do not understand all the implications.

For a more complete answer, refer to Example 3 at the end of Advisory Opinion 21.

A client recently asked to to complete only a 1007. The report I sent was a 1007 with attachments that addressed the required reporting elements for a Summary Appraisal Report (intended use, intended user, definition of Market Value, certification, etc.). If done correctly, submitting the 1007 seperately is a LOT more work.

You are absolutely correct. The 1007 is an appraisal and must be in compliance with USPAP.

 

[Kelley Leigh]

I agree with those of you who are indicating that the 1007 is an appraisal and "not just an addendum" as I have heard others express. I was starting to think that I was being a pain by sticking to my guns on this issue. Now I have additional support from you, so thank you! I will add my addendum to meet the requirements for Standards 1 & 2 and I believe I will not accept this type of work in the future! It's either the complete report or nothing at all!

 

[Mike Kennedy]

ADVISORY OPINION 21 ​

"Rent Survey
3. A client has asked Mike Black to perform a rent survey. The client owns the Acme Office Building and wants to know if he is charging enough rent. The client asked Mike to perform this work because he knows Mike is an appraiser; therefore, this valuation service is included in appraisal practice and USPAP applies. How can Mike provide this service in compliance with USPAP?

Answer: Mike should fully investigate the client’s expectations before determining the scope of work for this assignment. Does the client want only to know what rental rates are being charged for other office buildings in the area? If so, this is likely a service for which USPAP has no Standards (i.e., STANDARDS 1 and 2 when providing real property appraisals). Mike would then be obligated to

comply with the portions of USPAP that apply generally to appraisal practice (i.e., DEFINITIONS, PREAMBLE, the Conduct.​

Management, and Confidentiality sections of the ETHICS RULE, the COMPETENCY RULE, and the JURISDICTIONAL EXCEPTION RULE). The development and reporting of the assignment results would be entirely at his discretion, and a workfile would not be required.

However, if the client expects Mike to collect rental rate and lease term information and to analyze them to conclude the market rental terms for the Acme Building, this is an appraisal. This assignment is an appraisal because it includes a specific subject property (i.e., the right to use space in the building) and the problem to be solved in the assignment is a value opinion (i.e., the market rental terms for that space). The appraisal assignment should then be completed in compliance with STANDARDS 1 and 2."

http://www.USPAP.org/2010USPAP/toc.htm​