Rents - Duplex Appraisal

[Leon Stewart]

Judy:

All Appraisers who do those 1025 Forms use estimate or "so called" Market Rents. It's almost impossible to verify the actual amount of rent someone pays or receives on small Rental Units like Duplexes or Fourplexes. If a Landlord is trying to sell his property he will inflate the amount of rental income he gets so the Selling Agent will put the inflated Rent in the MLS to make the potential buyers think the property is a good income producer. Thus enhansing the sale possibility.

If the landlord is preparing his Taxes he'll deflate the amount of Rent he get so that he will pay less taxes. If you try to get information from the Tenant they will usually tell you a lie or chase you from the property and tell you it's none of your business.

This requirement for accurate Rental Data is a weakness in the Appraisal Process for 1-4 Family Rental Units since there is no record where accurate rental information can be documented and verified for these small rental units.

The Appraiser can get the Sale Price of a Property from Public Records, but correct Rental Income can't be had in the same manner.

Many Appraisers use the estimate and Market Rent process and include a statement like: "All data on Rents were derived from MLS Data, Newspaper Advertisements, Communication with Real Estate Agents, direct contact with Landlords and Tenants with evaluations and conclusions based on the experience of the Appraiser over a period of years". Or something to that effect.

That about all you can do. People lie about income and personal finances, so you can never take a persons word about what they pay or collect in Rent. They will usually will give you just the info to suit their purpose, not yours.

This should not be a part of a "Small Unit" Rental Property Format, because you know you're "Fudging" when you complete this part of the Report.

leart3

 

[Larry Lyke]

Judy --

I don't think the UW will give you any trouble. Just enter your estimated rent in the grid as $700E and keep right on writing on...

The property is new construction, and like you said, there's minimal activity, if any, and information is hard to come by. Your overarching worry is taken care of by the marketplace itself: you've certainly come up with as much information as a straining Review Appraiser will be able to fetch without Ex-lax. So, it's likely that the UW won't be able to obtain a better version of your appraisal.

I do at least one 1025 a month.

If the UW has questions, just handle her in your "professional" manner and she'll go away and hassle the next Appraiser.

Works for me.

L- in MN

 

[Judy Whitehead (Florida)]

Thanks - that is exactly what I thought, as well. That form is the most useless form that I think we use (almost!) I did use estimated market rent and was able to verify plenty of them through a real estate broker who handles many like it. (I also trust her! - she offered to let me see the leases!) Thanks again!

 

[Larry Lyke]

Judy --

I forgot to say one thing about a new-construction duplex.

You could "consult" with the LO on the 1003. They've used something in support of the additional income in the purchase of the property, -- AND that's whether the purchasor needs that additional or not.

By having ANY discussion with the LO prior to submitting your appraisal, the LO is "fore-armed' and likely to become an ally - of sorts, for whatever that might mean.

Good lukc.

 

[Anonymous]

Sounds like you are trying to find out the rent for the units that have sold that you are uising as compaable sales to estimate their GRM's. The new owner will rarely talk to you. Call the seller. The seller will usually tell you. I also have developed a good relationship with several property management companies. Do this. They are a godsend in this situation.

 

[Tom Hildebrandt]

I am amazed by those who had trouble getting help from other professionals.

Sometimes I have had trouble getting getting for rental comaprables, that is to say it took a lot of phone calls to run down the sales, but once I had the sales identified and could get hold of the buyer, seller, Realtor, or property manager, I had no trouble getting actual rents so that GRM's could be derived.

As several have noted, this kind of property analysis begs discussion with those close to the transaction.

The big problem I have seen is that the sales price is seldom based on current or contract rent, it is usually derived from potential rents. The reasoning is that long term tenants are in place with a reliable rental payment schedule and no damage to the property. Landlords love this sort of tenant and are relucant to raise rents to market levels. If you use actual rents in this scenario and the sale price, the GRM is inflated.

Without a good discussion with the motivation of the buyer, sellers, and the property history in terms of rents and expenses, the selected GRM can really be off.

Regards

Tom Hildebrandt GAA

 

[Mike Garrett RAA]

Judy, sweetie....have you tried calling rental management companies? I solved the problem by picking up some of the free rental guides from restaurant newspaper stands. Found several management companies who were willing to help.

Another thing is that our MLS has an income property section and the form has all the rent info including GRMs. Many times I use the same properties, ie sales..for the rental data.

My fee for small income is substantially higher just because of all the research necessary!

 

[Leon Stewart]

Bill:

It dosen't work like that, the seller will give you the same information he gave the Realty Agent which is the same information the Agent put in the MLS, and in most cases this information is inflated to enhance the Sale.

Management Companies don't usually manage Duplexes (Two Units), there isn't enough income.to justify a reasonable fee.

leart3

 

[Judy Whitehead (Florida)]

Mike, let me see if I can explain where I am.......we have a population of about 125,000 people in the entire county. Only about 0-5% of anything - including single family homes are rented. We do have a new apartment complex that was built last year, as the population is exploding (to us) here.

Anyway, there is really no such thing as a rental management company. I did get comparable rents from an agent who handles a lot of duplex rentals (it was a planned community and the duplexes are grouped together - not much driving for her). The problem I had was getting rents on the sales. The rude real estate agent returned one call at 9pm on Friday night and left a message telling me to call his office and ask his secretary (who laughed). She said he probably didn't know what the rents were, anyway.

One of the big hints I have gotten from this forum is to check the newspaper and call - I had never thought of that. I never thought beyond the real estate agents!