Residential Appraisals and Airbnb Income?
By Julie Friess, SRA, AI-RRS, MA
Don’t get caught like a deer in the headlights! State appraisal boards ARE disciplining appraisers across the country for improperly using the business income (Short term Rental – STR) from Airbnbs on the residential 1007 Fannie Mae form.
Lenders and AMCs want residential appraisers to value these properties as both the real estate and the business values of these properties – Wrong!!
Some of the topics:
• USPAP issues
• GRM is an Income Approach that applies to homes with long long-term tenants, not homes with many Short Term Rentals.
• Functional Obsolescence
• External Obsolescence
• Covid-19 Pandemic and Airbnb’s
The photo below has an exterior entrance to a bedroom, typical for an Airbnb remodeling.
To read more, click here
My comments: This mainly applies to cities where many homes are being converted to Airbnbs, including exterior doors for bedrooms (see foto below) and expanding the number of bedrooms. In popular vacation areas, such as Sedona, AZ, where Julie lives, investors purchase homes and do extensive remodels to turn them into Airbnbs with Airbnb management companies handling everything for them (clean up, new furnishing, and renting).
Julie does not include short-term rental income (STR) in her appraisals of homes with Airbnbs. I posted her article on my website so that everyone can read it. I have a few of my comments, of course!! I’m a commercial appraiser and know how hotels and Bed and Breakfasts are appraised. The appraisals include separate values for real estate, fixtures, and Going Concern (business income and expenses).
Julie speaks about this topic regularly on our weekly Clubhouse meetup, Real Estate Appraisal Questions, every Thursday at 2 PM Pacific Time (audio-only social media). All the sessions are recorded. The May 12, 2022 session was “Residential 1004/1007 Form Appraising & AirBnB Income”.
Click here to subscribe to our FREE weekly appraiser email newsletter and get the latest appraisal news!!
To read more of this long blog post with many topics, click Read More Below!!
NOTE: Please scroll down to read the other topics in this long blog post on real estate market changing, appraisal bias research, unusual homes, mortgage origination stats, etc.