There has been a lot of discussion on social media about the proper way to handle properties that are being bought and sold just to use as AIRBNB or another style of short-term rental(STR). There has been a lot of disinformation floated out there as well. The Appraisal Buzz is bringing together some of the industry experts to give appraisers, AMCs, and Lenders a definitive resource on this topic before appraising their next STR.
What was the 1007 form designed for? What is market rent? Why are appraisers being asked to do this? What are appraisers doing? What happens when they do it and do it wrong? Join us tomorrow as we discuss these topics and more with the following presenters:
- John Dingeman, Chief Appraiser, Class Valuation
- Craig Capilla, Attorney
George Paquette, Chief Appraiser, SettlementOne
Bryan Reynolds, AQB USPAP Instructor, Certified General
Plus, check out this exclusive interview that Appraisal Buzz had with webinar host John Dingeman, Chief Appraiser at Class Valuation and expert on this topic.
Appraisal Buzz: What is your background in the industry?
John Dingeman: I am a Certified Residential Appraiser and have been serving as the Chief Appraiser for now four (4) appraisal management companies (AMC) for the last decade. I currently serve in that capacity for Class Valuation which is one of the largest, non-lender owned AMCs in the country and one of the most frequent submitters to the UCDP and EAD portals on behalf of our lender partners.
Appraisal Buzz: What makes Short Term Rentals unique?
John Dingeman: The concept of Short Term Rentals (STR) is somewhat new. Airbnb was not even born until August of 2008. Historically, residential properties were used for leases or long-term occupancy of 30-days or more. STRs offer the investor an opportunity to capture a market and compete with hotels and motels much like Uber does with taxis, without tying the property up long term. For those purchasing the investment property for a vacation home, this makes even more sense because it allows you to use the property too.
Leases generate passive income which simply means that the investor is not “actively” involved. Sure, you may have the occasional repair item, or might have to clean the property up if tenants change, but you are not actively participating on a daily basis. The income generated from an STR is considered a business income because it does require your active participation to be successful.
Appraisal Buzz: What are the most common misconceptions regarding this investment property?
John Dingeman: In 2018, the GSEs announced that they would accept the “income” generated from an STR for qualification purposes and lenders who offer DSCR loans do the same. The GSEs, who designed the 1007 Single-Family Rent Comparable Schedule, did not update all sections of their respective selling guides. In other words, depending on where you look, it may still state that the income used for qualification purposes is demonstrated through the completion of the 1007. That form was never designed to report STRs or the potential income generated by the STRs which is completely different from market rent.
Appraisal Buzz: Why should appraisers attend this webinar?
John Dingeman: Some lenders or banks have very clear guidelines for both leases and STRs indicating that the 1007 must include long-term leases only and the income generated by an STR must be supported in another way. Other lenders are asking for and requiring an appraiser to complete the 1007 utilizing STRs and developing an opinion of market rent based on it. Appraisers do need to understand what is being asked of them and what are their obligations based on the scope of their license and our standard in USPAP.
Don’t miss this webinar, “Short Term Rentals & How to Appraise Them” this Thursday, July 20th at 1:00PM Central / 2:00PM Eastern.