Southeast Mortgagee Advisory Council

• FHA Multifamily Underwriter Training• May 29, 2013

Southeast Mortgagee Advisory Council

Valuation

Distinctive "must know" Differences

• Effective Date of Value• Market Rents• Vacancy - Retail or Commercial Space• Operating Expenses• Replacement Reserves• Critical and Non-Critical Repairs• Land Value• Forms• Discounted Cash Flow• Other Differences

Effective Date of Value

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Hypothetical Condition:

Construction is complete and development is stabilized as of the

effective date of value.

Prospective date of completion and

stabilized occupancy.

Market Rents

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

HUD Form 92273 Rent Adjustment Grid:

Very detailed

Rent grids are typically less detailed.

Vacancy - Retail or Commercial Space

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Limited to:

10% for 223(f)20% for 221(d)(4)

Market derived.

Operating Expenses

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

HUD Form 92274:

Operating expenses are trended from the beginning of the

expense comparable fiscal/calendar year to the effective date of

value.

Subject's operating expenses are not

trended from expense comparable properties.

Replacement Reserves

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Market derived. Market derived.

Critical and Non-Critical Repairs

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Hypothetical Condition for 223(f):

Repairs are completed as of the effective date

of value.

Critical repairs (deferred maintenance) are

deducted to derive an As Is Market Value

estimate.

Land Value

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Based on the existing or proposed multi-family

use.

Based on the highest and best use of the site,

as if vacant.

Forms

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Form 92273 (Rent Adjustment

Grid)

Form 92274 (Expense Analysis)

Form 92264 (Appraisal Summary)

Specific forms are not typically required.

Discounted Cash Flow

HUD MAP GuidelinesHUD MAP Guidelines Traditional Bank Traditional Bank FinancingFinancing

Not permitted. May be applicable.

Other Differences

Remaining Economic Life

Remaining Useful Life

Remaining Economic Life

The estimated period during which improvements will continue to represent the highest and best use of the property; an estimate of the number of years remaining in the economic life of the structure or structural components as of the date of the appraisal; used in the economic age-life method of estimating depreciation.

Source: The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago, Illinois, 2010

Remaining Useful Life

The estimated period during which improvements will continue to provide utility; an estimate of the number of years remaining in the useful life of the structure or structural components as of the date of the appraisal; used in the breakdown method of estimating depreciation.

Source: The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, Chicago, Illinois, 2010

Vacancy/Collection Loss

It's more than just vacant units!

Questions?

Contact Information

Michelle Alexander, MAI, MRICSIntegra Realty Resources - Memphis901.866.4934 ext. 229malexander@irr.com

Lauren GreenIntegra Realty Resources - Tampa Bay813.287.1000 ext. 168lgreen@irr.com