9-13. DERIVING ESTIMATED MARKET RENTS

This section provides guidance to RCS appraisers for deriving estimated market rents based on the Rent Comparability Grid (Form HUD-92273-S8) prepared for the subject project.

• A. Derive the estimated market rent. For each primary unit type, the RCS appraiser must analyze the adjusted rents of the comparables computed pursuant to Section 9-12 and the line-by-line instructions in Appendix 9-1-1. Then, using knowledge of the comparables, the RCS appraiser determines the rent the subject project could most probably obtain in the market. The RCS appraiser must consider: the type, size, and number of adjustments made; the quality of each comparable; whether a comparable’s data was estimated or incomplete; and how the adjusted rents for each unit type relate to each other. The comparables most like the subject should receive more weight. While RCS appraisers may compute and consider averages and other mathematical-based indices, those calculations do not allow for exercise of the RCS appraiser’s professional judgment and should not, by themselves, determine market rents. Instead, the RCS appraiser’s estimated market rent may be skewed toward the range of the adjusted rents for the best suited comparables to the subject project, as opposed to the mean, mode, or median values for the adjusted rents of all comparables.

• B. Derive secondary unit’s market rent, if applicable. If secondary unit types are included in the RCS, the RCS appraiser may adjust the market rent of the related primary unit type to arrive at the secondary unit type’s market rent. To do so, the RCS appraiser may adjust the primary’s market rent to reflect the slight differences (e.g., additional half bath) between the secondary and primary type and set the secondary’s market rent at the resulting amount.

• C. Explain the estimated market rent. The RCS appraiser must explain how the market rent (for primary and/or secondary unit types) was derived and why it was derived that way. The RCS appraiser must note which comparables were given the most weight and why, including which attributes of those respective comparables resulted in their being weighted more or less than others. If the estimated market rent is set at the high or low end of the range of adjusted rents, the RCS appraiser must explain why. Explanations should be concise, while at the same time clear and convincing.

Example: “Comparable A, although not as close in distance as the other four comparables, was given a higher weight than others because leasing agents have observed that prospective tenants often consider both properties (subject and comparable A) to be ‘family-friendly’ due to on-site day care facilities and similar services.”

Chapter Nine – Published March 2023

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