Rental home doesn't need 1007

[Fernando]

I thought rental appraisals need a 1007.
My assignment indicated nonowner but didn't ask for 1007.
I wasn't sure if this was a mistake so I asked if client wanted 1007 since I don't want to go back there and get rentals.
Client responded and said they didn't need it.
It seems 1007 not necessarily needed for rented appraisals.

 

[Tom4value]

You are forgetting the difference between appraisal practice and reporting. If the property, determined by you, that the income approach is applicable, then you develop it. You keep the data in your file. If the client doesn’t want the 1007, that is their prerogative. In that case, you just fill out the income approach in the 1004 and summarize your findings.

 

[Fernando]

You are forgetting the difference between appraisal practice and reporting. If the property, determined by you, that the income approach is applicable, then you develop it. You keep the data in your file. If the client doesn’t want the 1007, that is their prerogative. In that case, you just fill out the income approach in the 1004 and summarize your findings.

I don't do income approach for SFR. I put the canned comments.
Should I have inquire the amount of the rent?
Since lender doesn't care of rent, I didn't bother to find out.

 

[Tom4value]

I don't do income approach for SFR. I put the canned comments.
Should I have inquire the amount of the rent?
Since lender doesn't care of rent, I didn't bother to find out.

“I don’t do the income approach on a SFR” is a blanket statement that has gotten appraisers in a heap of trouble. USPAP states that you develop all approaches that are applicable to a credible report. If the income apprpoach is applicable, you develop it.

Yes, you should have inquired what the rent is and at the bare minimum summarized your findings in the report. The URAR is a summarize report.

 

[Fernando]

“I don’t do the income approach on a SFR” is a blanket statement that has gotten appraisers in a heap of trouble. USPAP states that you develop all approaches that are applicable to a credible report. If the income apprpoach is applicable, you develop it.

Yes, you should have inquired what the rent is and at the bare minimum summarized your findings in the report. The URAR is a summarize report.

If I make a comment on the rent, I open the door to investigate the rent especially indicating whether it's above or below or at market rent.
Even when I do a normal 1004 with a 1007, I don't mention the rent in the 1004.

 

[Tom4value]

If I make a comment on the rent, I open the door to investigate the rent especially indicating whether it's above or below or at market rent.
Even when I do a normal 1004 with a 1007, I don't mention the rent in the 1004.

Ugh!

 

[glenn walker]

I thought rental appraisals need a 1007.
My assignment indicated nonowner but didn't ask for 1007.
I wasn't sure if this was a mistake so I asked if client wanted 1007 since I don't want to go back there and get rentals.
Client responded and said they didn't need it.
It seems 1007 not necessarily needed for rented appraisals.

Thats usally because the loan is being done as a second home or relatives live in it and rental income is noty being counted towards borrowers DTI -Not uncommon

 

[Tom4value]

Thats usally because the loan is being done as a second home or relatives live in it and rental income is noty being counted towards borrowers DTI -Not uncommon

True, but if the income approach is applicable- buyers do purchase SFR for income in that market- then you should develop it. If you don't, then you must explain why you didn't. If you say, "because the client doesn't want it" or "because I never develop the income approach on a SFR", don't be surprised if you get notified by a regulator.

 

[glenn walker]

True, but if the income approach is applicable- buyers do purchase SFR for income in that market- then you should develop it. If you don't, then you must explain why you didn't. If you say, "because the client doesn't want it" or "because I never develop the income approach on a SFR", don't be surprised if you get notified by a regulator.

It normally on refinances not on sales and even on a tenant occupied sale it usually being purchased by someone to live in it so its income ends the day escrow closes. BUT if its being purchased as investor and tenant occupied the lender is going to require the appraiser to do a 1007 and a income & operating statement . In my area rarely does the income appraoch support the sales comparison approach but if it does the appraiser should also get rental comps develop a GRM and use it as a supporting approach to his SC approach. And dont forget that Red-Tesla in the driveway that always adds another + 3% for the curb appeal

 

[JasoninAK]

True, but if the income approach is applicable- buyers do purchase SFR for income in that market- then you should develop it. If you don't, then you must explain why you didn't. If you say, "because the client doesn't want it" or "because I never develop the income approach on a SFR", don't be surprised if you get notified by a regulator.

I agree you have to describe why you are not developing the income approach to value and be careful that your commentary is accurate and understood by the reader of the report. That said even if people are purchasing an SFR for income potential I simply don't see the income approach as credible in my local market. It may be credible in different markets. Where I live the sales are still based on what other properties are selling for even if they are doing an analysis to see if it is a beneficial rental property.

So just a friendly discussion. Why would I ever develop the income approach if it doesn't produce credible results? I am not saying you suggested to do so, just wondering.