7.8.7 Updating Procedures

A. Appraisers must not trend expenses to reflect a time adjustment from the effective date of the most recent expense comparable to the anticipated date of project occupancy following construction and initial endorsement. Instead, expense estimates must be effective as of the date of the appraisal and must reflect the same year of operation.

B. The appraiser may use a factor expressed as a percentage to adjust expense comparables up to the same date as the most current expense comparable in order to make a more creditable comparison. However, if all of the expense comparables have data from the same operating year, no adjustment for updating is necessary.

C. Adjusting expense data is a two-stage process, as follows:

1. First, the oldest comparables are updated to the date of the most recent comparable, so that all comparable data is representative of the same effective time period. Second, after updating the comparables to the same effective time period, the line items are correlated, and the subject’s expense estimate is updated to the date of the appraisal.

   • The most current comparable is entered in the first column on form HUD-92274. This comparable serves as the benchmark for updating the remaining comparables.

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Chapter 7 Valuation & Market Analysis 7.8 Project Operating Expenses, NOI

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• The effective date of the operating expense data is always the beginning date of the operating year. For example, the beginning date of a financial statement dated January 1[st] to December 31[st] is January 1[st] of that year. If the financial statement fiscal year ends June 30, 2000, the beginning date is July 1, 1999.

• Other than the first comparable being the most recent, the remaining comparables do not necessarily need to be in chronological order.

• The appraiser must enter the comparables’ itemized expenses as reported on audited, reviewed, or certified financial statements. Per unit expenses or per square foot expenses are treated similarly:

  • 1. The actual expense amount must be entered in the first column, without any adjustments.
  • 2. Once the adjusted per unit expenses are determined for each comparable, the subject project’s expenses are then correlated from the array.
  • 3. Once the correlated line item expenses for the subject project are determined, they are added and updated to the date of the appraisal.
• 4. The correlated subject expenses are updated based upon the beginning date of the expense period of the most recent (the benchmark) comparable. HUD may request from the appraiser the names and addresses of any confidential expense comparables used in the expense analysis, pursuant to the Confidentiality sub-section of the Ethics Rule, along with Standards 3.1.e and 3.2.f of the USPAP. If the appraiser still refuses to provide this information, the HRA may request additional non-confidential comparables.