7.13.5 Valuation for Section 231 Substantial Rehabilitation

A. Section 231 substantial rehabilitation cases require two value estimates: 1) a value subject to the completion of rehabilitation using all applicable approaches, which shall be used in Criterion 3 of form HUD-92264-A, and 2) an “As Is” value entered in Section G, line 73b of form HUD-92264 to determine the Total Replacement Cost of the Project, in a manner similar to the procedure used in Sections 220 and 221(d) (4). Depreciation is not included. The value upon completion of the project should reflect that which could be obtained through an arms-length sale. If rental restrictions exist and will survive postsale, then the value will be based upon these limitations. Alternatively, if the restrictions terminate upon sale, then the As-Is estimate would reflect the higher value. The “As Is” value is also used in completing Criterion 6 of form HUD-92264-A.

B. If the Total Estimated Replacement Cost of the Project (Line 74 of Section G of form HUD-92264) exceeds the value after rehabilitation, the residual “As Is” value by formula must be completed. This amount must be entered on line 73b of Section G, and Section G, line 74 will be considered to be the value of the project after rehabilitation, and this amount must be entered in Criterion 3 of form HUD-92264-A.