Single Family Comparable Rent Schedule

[DWiley]

There is no appraisal here. Its simply anohter assignment to do a rent analysis. ...As you will be providing rental rates instead of value I dont think USPAP applies for an appraisal, however, as an appraiser you must comply with USPAP regarding a consultation assignment.

Estimating market rent is an appraisal assignment; its just not an appraisal of the whole bundle of rights. You are estimating the value associated with the rights to use and occupy space for a specified time. See AO-21, example 3 (page A-72 in 2008 USPAP document) for discussion.

Form 1007 alone is not sufficient to meet reporting requirements in this case. Like any other appraisal assignment, you must provide at least a restricted use report. In most cases a 1007 is supplied as part of a larger report, and reporting requirements are met by other forms used in the report - though many forget to cite the definition of market rent and/or the source of the definition.

 

[mark a. gonzalez]

So what form would be the best to use?

 

[Mztk1]

Ditto to what DWiley said. Providing market rent on a property is providing a value of the real estate interests and it is an appraisal.

Some appraisers have no problem with a desk top appraisal, or a driveby appraisal, while others do.

You can determine the scope of your work based on how comfortable you are with your data. If you believe a desk top rental survey will provide a credible opinion of rent, then you can do that, all the way to requiring, like Mike Boyd said, having to inspect the interior and measure the property.

I've done quite a few of these. Mostly I like to walk through the property, our tax data system is real good. But there were occassions where the house was in a PUD project, a standard model, and I had seen it a year or two before so I felt comfortable with a driveby on market rent.

It is entirely up to you.

You can reference the prior assignment and that this rental survey is in connection with that mortgage application and that the limiting conditions and assumptions made apply except...and list them. Also, like Wiley said, you technically need a definition of market rent, though most of your peers do not provide one.

 

[Mike Boyd]

Ditto to what DWiley said. Providing market rent on a property is providing a value of the real estate interests and it is an appraisal.

Also, like Wiley said, you technically need a definition of market rent, though most of your peers do not provide one.

OK....I will admit to being one of "them." Where do I find the definition of market rent?

 

[PropertyEconomics]

Estimating market rent is an appraisal assignment; its just not an appraisal of the whole bundle of rights. You are estimating the value associated with the rights to use and occupy space for a specified time. See AO-21, example 3 (page A-72 in 2008 USPAP document) for discussion.

Form 1007 alone is not sufficient to meet reporting requirements in this case. Like any other appraisal assignment, you must provide at least a restricted use report. In most cases a 1007 is supplied as part of a larger report, and reporting requirements are met by other forms used in the report - though many forget to cite the definition of market rent and/or the source of the definition.

Danny I also believe you could do so by completing a consulting assignment and meeting the requirements as outlined in USPAP could you not?

 

[Michigan CG]

market rent
The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby:
1. Lessee and lessor are typically motivated.
2. Both parties are well informed or well advised, and acting in what they consider their best interests.
3. A reasonable time is allowed for exposure in the open market.
4. The rent payment is made in terms of cash in United States dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract.
5. The rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction.

 

[JSmith43]

market rent
The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contract as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby:
1. Lessee and lessor are typically motivated.
2. Both parties are well informed or well advised, and acting in what they consider their best interests.
3. A reasonable time is allowed for exposure in the open market.
4. The rent payment is made in terms of cash in United States dollars, and is expressed as an amount per time period consistent with the payment schedule of the lease contract.
5. The rental amount represents the normal consideration for the property leased unaffected by special fees or concessions granted by anyone associated with the transaction.

Where is the * part and not dollar for dollar verbiage?

 

[RSW]

Could you not use the old 2075 Fannie Mae form, along with a few addendums and the 1007?

 

[DWiley]

Danny I also believe you could do so by completing a consulting assignment and meeting the requirements as outlined in USPAP could you not?

In my opinion, no.

Like many USPAP-related things, the advice/opinions in AO-21 are rooted in the DEFINITIONS. Value is defined as

the monetary relationship between properties and those who buy, sell or use those properties.

Opining about the market rent is opining the value of using the property. Hence, it would be an appraisal assignment.

If the client wanted only a report of what other properties were renting for, one might call that "consulting." I would call it appraisal practice which which there are no specific Standards Rules.

 

[DWiley]

Could you not use the old 2075 Fannie Mae form, along with a few addendums and the 1007?

I have encountered the situation in the OP exactly 1 time in my 25+ years of doing this, and it happened just a few weeks ago. I used the 1007 form and just added a text addendum to cover the required report contents covered in Standard 2.

As a side note, a similar situation occurs when a client says, "I just need you to fill in an estimate of the market rent."

Many appraisers do not realize that this constitutes another type of appraisal of the property, and they fail to document it correctly.