We have had numerous deals almost die or come close to dying over the years – solely because our appraisers could not find adequate rental comp data.
There are several reasons why we often need to support the full market rent in an appraisal, including:
- The borrowers often need every penny of the rent to qualify.
- Appraisers need the full market rental data to support value.
Or - Lenders need to see the full market rents to ensure 3 or 4-unit properties “cash flow” for FHA purchases.
The problem is that there are very few data sources with current and accurate rental data for a particular area – especially when rents are rising quickly.
If appraisers are not given accurate data, they are often forced to use whatever they can find – and that data is usually dated and way under market.
The best sources for data are often property owners who have recently purchased units or investment properties, and the only way we can access such buyers are via the agents who represented them.
Appraisers will often not take the time to do this, and we are not able to do this ourselves prior to the inspection too (and often end up doing so only after the appraisal comes in with too low of rental rates or too low of a value).
So, it is much better to nip the problem in the bud at the time of the property inspection – when agents are meeting the appraiser at the property.
In addition, because agents usually know other agents, it is often much easier for them to obtain the rental data.
As an aside, our Appraisal Manager, Taylor Allen, recently saved a deal by doing exactly what I suggested above – but it was only after the appraisal came in low and things got very sticky because the appraiser would not budge until we pummeled him with sufficient data.
But – if that appraiser had received the same data at the time of inspection, I am certain we would have never had an issue.
Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167
