Example Project in ZIP code 76469

Owner’s Gross Renewal Rent Potential Calculation

SAFMR Gross Rent Potential Calculation

Owner’s gross renewal rent is less than 150 percent of SAFMR gross rent, so the RCS does not exceed the mandatory market rent threshold.

• C. When Project’s gross renewal rent exceeds the Threshold. If the RCS-based gross renewal rent for the subject project’s assisted units exceeds 150 percent of the SAFMR gross rent for the project’s ZIP code, then a HUD-commissioned RCS will be required. In such a scenario, HUD will use independent third-party appraisal services procured through its Contracting Officer to prepare an RCS for the subject project. For an RCS that includes both “as-is” and “post-rehabilitation” market rent estimates, if either the “as-is” estimate or the “post-rehabilitation” estimate exceeds the threshold, then a HUDcommissioned RCS will be required. If the “as-is” rents do not exceed the mandatory market rent threshold, then a HUD-commissioned RCS will be procured only for the “post-rehabilitation” condition of the property. HUD shall not commission a third-party RCS until the Owner’s RCS has been substantively reviewed and deemed acceptable, with no outstanding appeals. HUD is the only intended user of the HUD-commissioned RCS, however a copy will be shared with the Owner upon written request.

• D. Funding for HUD-Commissioned RCS. A HUD-commissioned RCS may be ordered for either an insured or an uninsured property. Contract funds to pay for the studies will come from the following respective sources:

  1. FHA Insured: Technical Discipline Contract PAS Code: MTF.

  2. Noninsured: Section 8 program funds. PAS Code: CRE.

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• E. Differences in Comparability Studies. HUD is not required to perform a substantive review of the HUD-commissioned RCS but may perform such a review for the purpose of quality control of the contractor’s work product. HUD will review each HUDcommissioned RCS using the Initial Checklist (included in Appendix 9-5) to determine if all the required material has been submitted. If so, HUD will compare the gross rent potential conclusions of the HUD-commissioned RCS and the Owner-contracted RCS (as reviewed by HUD and following any appeals or adjustments) and the final market rent for the subject project will be determined as follows:

  1. When the HUD comparable gross rent potential is greater than the Owner’s comparable gross rent potential, the final comparable market rents will be the Owner’s comparable market rents.

  2. When the HUD comparable gross rent potential is less than the Owner’s comparable gross rent potential, the final comparable market rents will be determined as follows:

• a. If the Owner’s comparable gross rent potential is less than 105 percent of the HUD comparable rent potential, then the final comparable market rents will be the Owner comparable market rents.

  - b. If the Owner’s comparable gross rent potential is greater than or equal to 105 percent of the HUD comparable rent potential, then the final comparable market rents will be 105 percent of the market rents as determined by the HUD-commissioned RCS. 
  

• F. Transparency of HUD-Commissioned RCS. The Owner may request a copy of the HUDcommissioned RCS for informational purposes only. There are no negotiations allowed, however the Owner may identify factual discrepancies regarding a mistake of square footage, a mistake regarding the presence/absence of a characteristic resulting in an adjustment, a mathematical miscalculation, or other material mistake of fact and HUD will review the discrepancy. These alleged discrepancies should be presented in a numbered list, and the HUD AE will indicate whether each item is a factual discrepancy, not a factual discrepancy, or a matter of professional discretion not subject to appeal. If such discrepancies are indeed errors in the RCS, HUD will work with the third-party appraiser to correct such errors and adjust the rent conclusions. For other issues of professional discretion, such as the choice of comparables, the amount of adjustments, or derivation of concluded rent, the HUD-commissioned RCS will prevail and cannot be appealed by the Owner. HUD reserves the right to correct or return a HUDcommissioned RCS to the contractor pursuant to quality control protocols.

• G. HUD allows the use of a lender ordered MAP appraisal to serve as a substitute for the required HUD-commissioned RCS if the following conditions are met.

  1. The appraisal must be ordered, paid for, and underwritten by the lender in accordance with the requirements established in the MAP Guide. The MAP appraiser must follow the existing requirements as stated in Chapter 9 of this Guide to determine the rent. In cases where the property is participating in the Chapter 15 Capital Repairs program, comparable market rents must be estimated

Chapter Nine – Published March 2023

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both before and after repairs. The MAP Guide will be used for the remainder of the assignment.

2. The MAP appraiser must use the form HUD 92273-S8 in lieu of the form HUD 92273. The 92273-S8 form will be used in all Section 8 related appraisals. The 92273 form will continue to be used for non-Section 8 assignments.

3. Lender appraisers and HUD reviewers must follow the most current USPAP standards.

4. Any appeals regarding the MAP appraisal are to be made by the lender to the processing Regional Centers/Satellite Offices office. No direct appeals to Headquarters by the Owner will be accepted.

5. To set the Section 8 rents, HUD staff shall use the lender-supplied appraisal and the HUD 92273-S8 as they would have used the HUD-commissioned RCS and use Section 9-14(E) to determine the final comparable market rents for the project.

6. The appraiser must be in compliance with all applicable civil rights laws and statutes and must not have a disciplinary citation or finding related to discrimination within the last three years.