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Rental Comps - Trashed REO

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MRB

Thread Starter
Junior Member
Joined
Feb 22, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
I have 2 unit dwelling that has been pretty well trashed, doors broken down, holes in walls throughout, flooring fairly damaged. I dont have a comparable rental similar in condition that I can rely on in the market. Constructive input appreciated.

Thanks.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Not rentable in the current condition perhaps?

What I'd likely do is estimate market rent as if it were in average condition and discount the multipliers for necessary repairs. I'd say discount the rents but if the units are not rentable that may be misleading. Someone might think you mean the units could be rented at that price in their current condition, and you don't want that to happen.
 

leelansford

Elite Member
Joined
Mar 29, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
If the Subject is not habitable in its "as is" condition then...it's not rentable "as is"!

We can only go so far with trying to meet the needs of our clients before our efforts become senseless...and, perhaps, misleading.

Talk to your client.
 

Doug Meyer

Senior Member
Joined
Sep 13, 2003
Professional Status
Certified Residential Appraiser
State
Indiana
If the Subject is not habitable in its "as is" condition then...it's not rentable "as is"!

We can only go so far with trying to meet the needs of our clients before our efforts become senseless...and, perhaps, misleading.

Talk to your client.

I agree with Lee. Generally the client will want the rental income based upon the average condition of the units.
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
I would not provide rental comparison with an “As Is” condition. The report would become unreliable and could become a non-compliant USPAP appraisal report. I’m also in MA and I see several for rent signs out there, I do not believe the rental market would accept a unit in the condition you have describe. The vacancy is increasing in the Boston area for rental units.
 

Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
I doubt if there is a rental market for a property in that condition. Square peg, round hole sort of thing....
 

Doug Meyer

Senior Member
Joined
Sep 13, 2003
Professional Status
Certified Residential Appraiser
State
Indiana
Kevin, if this is an REO property and the client asks for the income approach could you not make that a hypothetical condition? Since this is an REO this would be an in house deal and if you explain what you have done how would that make it a misleading report?
 

bfriendly

Junior Member
Joined
Oct 14, 2007
Professional Status
Certified Residential Appraiser
State
Georgia
If they want the report to be done "AS-IS", I would be sure to start with something along the lines of:
"At the request of the client, blah blah blah AS-IS"

then end with something along the lines of:
"The appraiser would like to note that the subject property, in its current condition, is not considered to be livable, nor is marketable due to a lack of conventional or typical financing available for properties in similar condition."

Of course, if you have rentals and sales of rentals that are in crappy condition just like this one, then you will have comps and may not even need those across the board adjustments the client is requiring you to make!
 

Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
Not much to add.

The Subject property is *NOT* currently in leasable condition, as a result, the Income Approach, though considered by the appraiser, is not a valid approach.

If the property were repaired, and was in "average" condition, the projected rent(s) would be roughly $$$ per month; GRMs in this area range between Y and Z, giving a *projected* value range between $$$$ and $$$$.
,
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
Hello Doug,

I believe the reader of the report would anticipate an economic benefit from discussing rental data within a report. Without the clear discussion of the costs, permitting and time of performance the rental discussion offers no creditability to the findings. So the rental discussion is not creditable and this rental data could create a misleading report.

A lender will ask for a rent to qualify an applicant, but the rental data should not be within the body of the report. An appraiser cannot assume what is to be repaired.
 
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