Appraisal_Assignment_Guidance_Document_8-27-2014.pdf

USDA Rural Development Appraisal Assignment Guidance for Multi‐Family Housing Appraisals

(All data and guidance must be verified with your client)

To: (Appraiser) Date:

RE: (Project Name)

(Project Address)

Project Information:

Unit Type

Number of Units

Basic Rent (As‐is)

Prospective Rent

Project Total

Studio

1 Bedroom

2 Bedroom

3 Bedroom

Other:

Are utilities included in the above basic rents?

Current Owner Name:

Borrower Name:

RUPS: Year Expired: Month/Year to Expire:

Is there a HUD Contract (HAP/Section 8) on the property?

Is there USDA Rental Assistance? Number of units receiving assistance?

Type of Transaction:

Other: (Describe)

Calculate Value of Interest Credit Subsidy?

(*If yes, see note on reporting requirements hereinafter)

(If yes to above):

Current RD Loan Amount: $ Prospective RD Loan Amount: $

Interest Rate: % Prospective Interest Rate: %

Note Term: (Years) USDA “Note Rate”: (For Interest Credit Use)

Prospective Loan Term: (Years)

Amortization Period: (Years) Prospective Amort: (Years)

Balloon:

Prospective Loan Closing Date:

Third Party Loan Amount: Lender Name:

Interest Rate: %

Note Term: (Years) Amortization Period: (Years)

Federal Tax Credits: State Tax Credits:

Total Award: Total Award:

Term of Allocation: (Years) Term of Allocation: (Years)

Net Credits to Project: Net Credits to Project:

Tax Issuing Entity: Tax Issuing Entity:

Grants: Grant Entity Name:

(If Yes) $

Attachments:

Project’s operating statements//budgets for the prior 3 years.

Project’s proposed budget for the upcoming year (no construction).

Prospective budget (post-construction)

Copy of Form 1924-13 identifying rehabilitation and costs

Restricted rent comparable income/expense statements

Purchase Agreement

Contact for additional RD related information:

RD Office:

Phone:

Appraised Value Type(s) and other assignment conditions and reporting requirements:

Value Conclusion(s) based on Current Date/Current Condition:

1. “Market Value, Subject To Restricted Rents within 7 CFR Part 3560.752(b)(1)(i)”. (The appraiser must consider all restrictions and report the value of intangible assets individually and separately from the real estate.) (QR 2)

A request for “market value, subject to restricted rent” means the appraisal will take into consideration any rent limits, rent subsidies, expense abatements, or restrictive-use conditions that will affect the property as a result of an agreement with the Agency or any other financing source.

Each type of financing involved, including, but not limited to, interest credit subsidy, low-interest loans from other sources, tax-exempt bond financing, tax credits, and grants, must be valued separately in the appraisal.

2. “Market Value within 7 CFR Part 3560.752(b)(1)(ii) (The appraiser must consider all restrictions and prohibitions currently existing, if any (including Restricted Use Provisions), but should not report the value of intangible assets). (QR 3)

A request for “market value means the appraisal will take into consideration the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(A) Buyer and seller are typically motivated;

(B) Both parties are well informed or well advised and acting in what they consider their best interests;

(C) A reasonable time is allowed for exposure in the open market;

(D) Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

(E) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

3. “Market Value within 7 CFR Part 3560.752(b)(1)(ii), Premised Upon a Hypothetical

Condition As-If Conventional Market Property” (QR 3)

A request for “market value, premised upon a hypothetical condition as if conventional housing” means the appraisal will take into consideration the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

(A) Buyer and seller are typically motivated;

(B) Both parties are well informed or well advised and acting in what they consider their best interests;

(C) A reasonable time is allowed for exposure in the open market;

(D) Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

4. “Market Value within 7 CFR Part 3560.752(b)(1)(ii), premised upon a Hypothetical Condition as-if unsubsidized conventional Housing in compliance with 7 CFR Part 3560.656(c)(1)(i) (QR 4)

A request for “market value means the appraisal will take into consideration the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

interests;

(C) A reasonable time is allowed for exposure in the open market;

(D) Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

Prospective Value Conclusion based upon:

Completion of proposed construction

(and/or)

Prospective loan closing date of proposed/new loan:

Prospective Date:

5. “Prospective Market Value, Subject To Restricted Rents within 7 CFR Part

3560.752(b)(1)(i), Premised upon the Extraordinary Assumption that the improvements have been completed and/or that the proposed loan is closed as of the prospective date of valuation”. (The appraiser must consider all restrictions and report the value of intangible assets individually and separately from the real estate.) (QR 1)

A request for “market value, subject to restricted rents” means the appraisal will take into consideration any rent limits, rent subsidies, expense abatements, or restrictive-use conditions that will affect the property as a result of an agreement with the Agency or any other financing source.

Each type of financing involved, including, but not limited to, interest credit subsidy, low-interest loans from other sources, tax-exempt bond financing, tax credits, and grants, must be valued separately in the appraisal.

*See additional NOTE in CRCU section hereinafter

6. “Prospective Market Value within 7 CFR Part 3560.752(b)(1)(ii), Premised Upon a

Hypothetical condition As-If Conventional Housing” premised upon the

Extraordinary Assumption that the improvements have been completed as of the prospective date of valuation”. (QR 1b)

A request for “market value, premised upon a hypothetical condition as if conventional” means the appraisal will take into consideration the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

interests;

(C) A reasonable time is allowed for exposure in the open market;

(D) Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

7. Value of Interest Credit Subsidy (see prior page for data, loan terms, etc.):

Current (As-is) RD loan

Prospective RD loan

Third Party loan

Other loan:

NOTE: The remaining term of the loan cannot extend past the lesser of (a) 30 years from the date of transfer; or (b) the remaining economic/useful life of the property. The loan amortization period is not to exceed 50 years or REL, whichever is less.

8. Estimated Value of Tax Credit (see prior page for data)

9. Conventional Rents for Comparable Units (CRCU):

Report conventional unsubsidized market rent level for each unit type at subject (i.e.- Studio, 1BR, 2BR, 3BR)

Present at least 3 market rent comps to support CRCU for each unit type If both as-is and prospective market values reported, please report both as-is and prospective CRCU as well.

NOTE: If any of the Prospective proposed basic restricted rents exceed the appraiser’s developed Prospective CRCU, contact the RD State Appraiser for additional guidance if the assignment requires development and reporting of Prospective Market Value Subject to Restricted rents.

10. Estimated Value of Grants (see prior page for data)

11. Liquidation Value, premised upon an

Extraordinary Assumption or

Hypothetical Condition as-if an unsubsidized Market Property (*with an anticipated marketing period of months) (QR 6)

Liquidation Value

Liquidation value is defined by the 4th Edition of The Dictionary of Real Estate Appraisal as follows. “Liquidation value: the most probable price that a specified interest in real property is likely to bring under all of the following conditions:

A. Consummation of a sale will occur within a severely limited future marketing period specified by the client.

B. The actual market conditions currently prevailing are those to which the appraised property interest is subject.

C. The buyer is acting prudently and knowledgeably.

D. The seller is under extreme compulsion to sell.

E. The buyer is typically motivated.

F. The buyer is acting in what he or she considers his or her best interest.

G. A limited marketing effort and time will be allowed for the completion of a sale.

H. Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto.

I. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

12. Insurable Value

13. Farm Labor Housing…Contact RD State Appraiser for guidance.

14. Other:

15. Appraisal Report must also:

Be performed by a Certified General Licensed appraiser in the state where the subject property is located.

Be USPAP Compliant.

Identify USDA/Rural Development as:

Client and Intended User (if USDA is client engaging appraiser)

Intended User (if party other than USDA is engaging appraiser)

Consider all three approaches to value (Cost Approach, Sales Comparison Approach, and Income Approach) and state why any approach was not utilized (i.e the sales comparison approach may not be an applicable approach to value in determination of the market value subject to restricted rents). (Cost Approach required if subject is 1 year old or less)

Be in Summary or Self Contained Report Format.

Clearly state date and level of inspection and appraiser(s) performing inspection. (The inspecting appraiser(s) must sign the appraisal.)

Contain photographs of subject property.

Contain photographs of comparable properties Contain adequate area and neighborhood maps showing location of subject and all comparable sales.

State subject’s Actual Age, Effective Age, and Remaining Economic Life for as-is status and prospective (post construction) status.

Report and analyze subject’s real estate tax status Report and analyze subject’s zoning status and flood zone status Report subject site’s legal description and site size including a site plat map.

17. Additional guidance is contained in the Statement of Work document delivered contemporaneously herewith.

robert.smith2 Typewritten Text The Appraisal Report should be:

robert.smith2 Typewritten Text Emailed in a signed and secured PDF format and robert.smith2 Typewritten Text Signed hardcopy delivered robert.smith2 Typewritten Text To the following:

robert.smith2 Typewritten Text robert.smith2 Typewritten Text Please direct questions, concerns, or comments to the individual listed above.