| (i) Sales information should include address, legal
description, tax assessor's parcel number(s), sales price, financing
considerations and adjustment for cash equivalency, date of sale,
recordation of the instrument, parties to the transaction, three year
sale history, complete description of the Property and property rights
conveyed, and discussion of marketing time. A scaled distance map
clearly identifying the subject and the comparable sales must be included.
(ii) The method(s) used in the Sales Comparison Approach
must be reflective of actual market activity and market participants.
(I) Sale Price/Unit of Comparison. The analysis of
the sale comparables must identify, relate, and evaluate the individual
adjustments applicable for property rights, terms of sale, conditions
of sale, market conditions, and physical features. Sufficient narrative
must be included to permit the reader to understand the direction
and magnitude of the individual adjustments, as well as a unit of
comparison value indicator for each comparable.
(II) Net Operating Income/Unit of Comparison. The Net
Operating Income statistics for the comparables must be calculated
in the same manner. It should be disclosed if reserves for replacement
have been included in this method of analysis. At least one other
method should accompany this method of analysis.
(C) Income Approach. This section must contain an analysis
of both the actual historical and projected income and expense aspects
of the subject Property.
(i) Market Rent Estimate/Comparable Rental Analysis.
This section of the report should include an adequate number of actual
market transactions to inform the reader of current market conditions
concerning rental Units. The comparables must indicate current research
for this specific property type. The comparables must be confirmed
with the landlord, tenant or agent and individual data sheets must
be included. The individual data sheets should include property address,
lease terms, description of the property (e.g., Unit Type, unit size,
unit mix, interior amenities, exterior amenities, etc.), physical
characteristics of the property, and location of the comparables.
Analysis of the Market Rents should be sufficiently detailed to permit
the reader to understand the appraiser's logic and rationale. Adjustment
for lease rights, condition of the lease, location, physical characteristics
of the property, etc. must be considered.
(ii) Comparison of Market Rent to Contract Rent. Actual
income for the subject along with the owner's current budget projections
must be reported, summarized, and analyzed. If such data is unavailable,
a statement to this effect is required and appropriate assumptions
and limiting conditions should be made. The Contract Rents should
be compared to the market-derived rents. A determination should be
made as to whether the Contract Rents are below, equal to, or in excess
of market rates. If there is a difference, its impact on value must
be qualified.
(iii) Vacancy/Collection Loss. Historical occupancy
data and current occupancy level for the subject should be reported
and compared to occupancy data from the rental comparables and overall
occupancy data for the subject's Primary Market.
(iv) Expense Analysis. Actual expenses for the subject,
along with the owner's projected budget, must be reported, summarized,
and analyzed. If such data is unavailable, a statement to this effect
is required and appropriate assumptions and limiting conditions should
be made. Historical expenses should be compared to comparables expenses
of similar property types or published survey data (such as IREM,
BOMA, etc.). Any expense differences should be reconciled. Include
historical data regarding the subject's assessment and tax rates and
a statement as to whether or not any delinquent taxes exist.
(v) Capitalization. The appraiser should present the
capitalization method(s) reflective of the subject market and explain
the omission of any method not considered in the report.
(I) Direct Capitalization. The primary method of deriving
an overall rate is through market extraction. If a band of investment
or mortgage equity technique is utilized, the assumptions must be
fully disclosed and discussed.
(II) Yield Capitalization (Discounted Cash Flow Analysis).
This method of analysis should include a detailed and supportive discussion
of the projected holding/investment period, income and income growth
projections, occupancy projections, expense and expense growth projections,
reversionary value and support for the discount rate.
(10) Value Estimates. Reconciliation of final value
estimates is required. The Underwriter may request additional valuation
information based on unique existing circumstances that are relevant
for deriving the market value of the Property.
(A) All appraisals shall contain a separate estimate
of the "as vacant" market value of the underlying land, based upon
current sales comparables. The "as vacant" value assumes that there
are no improvements on the property and therefore demolition costs
should not be considered. The appraiser should consider the fee simple
or leased fee interest as appropriate.
(B) For existing Developments with any project-based
rental assistance that will remain with the property after the acquisition,
the appraisal must include an "as-is as-currently-restricted value
at current contract rents." For public housing converting to project-based
rental assistance, the appraiser must provide a value based on the
future restricted rents. The value used in the analysis may be based
on the unrestricted market rents if supported by the appraisal. Regardless
of the rents used in the valuation, the appraiser must consider any
other on-going restrictions that will remain in place even if not
affecting rents. If the rental assistance has an impact on the value,
such as use of a lower capitalization rate due to the lower risk associated
with rental rates or occupancy rates on project-based developments,
this must be fully explained and supported to the satisfaction of
the Underwriter.
(C) For existing Developments with rent restrictions,
the appraisal must include the "as-is as-restricted" value. In particular,
the value must be based on the current restricted rents when deriving
the value based on the income approach.
(D) For all other existing Developments, the appraisal
must include the "as-is" value.
(E) For any Development with favorable financing (generally
below market debt) that will remain in place and transfer to the new
owner, the appraisal must include a separate value for the existing
favorable financing with supporting information.
(F) If required the appraiser must include a separate
assessment of personal property, furniture, fixtures, and equipment
(FF&E) or intangible items. If personal property, FF&E, or
intangible items are not part of the transaction or value estimate,
a statement to such effect should be included.
(11) Marketing Time. Given property characteristics
and current market conditions, the appraiser(s) should employ a reasonable
marketing period. The report should detail existing market conditions
and assumptions considered relevant.
(12) Photographs. Provide good quality color photographs
of the subject Property (front, rear, and side elevations, on-site
amenities, interior of typical Units if available). Photographs should
be properly labeled. Photographs of the neighborhood, street scenes,
and comparables should be included. An aerial photograph is desirable
but not mandatory.
(d) Additional Appraisal Concerns. The appraiser(s)
must be aware of the Department program rules and guidelines and the
appraisal must include analysis of any impact to the subject's value.
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