Short‑term rental (STR) appraisal work is fundamentally different from traditional long‑term rental analysis. Yet many lenders still ask whether Appraisal Form 1007 can be used to support STR income—particularly for DSCR lending. 

The answer is clear: Appraisal Form 1007 cannot be used to support short‑term rental appraisals. 

The form was built exclusively to estimate long‑term monthly market rent. Using it to reflect nightly pricing, seasonal occupancy, or business‑driven STR income can result in a misleading appraisal report and create compliance risk for both appraisers and lenders. 

This article explains: 

• Why lenders often want to use the appraisal form 1007 for STRs 
• Why appraisers cannot do so under professional standards 
• How STR income should be analyzed instead 
• What lenders should prepare for as appraisal reporting evolves 

What Lenders Need to Know About Short Term Rental Appraisals and Form 1007 

Short‑term rentals have become a mainstream investment strategy. Many STR properties generate income well above long‑term market rent, making them attractive for DSCR and investor lending. 

From a lender’s perspective, the question is understandable: If Form 1007 supports rental income for long‑term leases, why not use it for STR income as well? 

The challenge is that Appraisal Form 1007 was never designed for that purpose—and using it that way conflicts with how the form is defined and how income must be reported. 

Why Lenders Want to Use Appraisal Form 1007 for STRs 

Lenders are not wrong to want consistent, documented income support. Common reasons the 1007 Appraisal comes up in STR lending include: 

• DSCR underwriting requires income documentation 
• GSE‑built forms are widely recognized and included in historical guidelines 
• Private and non‑QM lending is not bound by agency eligibility rules

However, non‑agency lending does not change the purpose of appraisal forms or the obligations placed on appraisers. Even when a loan is not destined for the GSEs, the misuse of a standardized form can still produce a misleading appraisal. 

Why Appraisers Can't Use the 1007 Appraisal for Short‑Term Rentals 

This is where the distinction matters most. 

Appraisal Form 1007 Measures Real‑Property‑Driven Rent 

 In long-term rental markets, rent levels are established by how the real estate competes in the market—not by operational decisions. Tenants select housing based on factors such as: 

• Bedroom and bathroom utility 
• Location relative to jobs, schools, and transportation 
• The basic need for housing rather than discretionary travel

The income generated from a long-term lease is therefore real-property–driven.  

The appraiser analyzes the real estate, the long-term rental market, and derives a monthly rent figure—that’s what Appraisal Form 1007 was built to do. 

STR Income Is Business‑Driven 

Short‑term rentals operate as small hospitality businesses. STR income depends on real estate + operational performance, often described as the “hassle factor” (a concept highlighted by Dave Ramsey).  

STR income depends on far more than the physical property and operational performance which includes: 

• Dynamic nightly pricing 
• Seasonal and event‑driven demand
• Volatile occupancy rates 
• Reviews, marketing, and host performance 
• Cleaning costs, turnover frequency, and variable management fees 
• Tourism cycles and local regulations 
• Owner expertise and platform optimization

These factors cannot be captured anywhere within Form 1007. 

Senior policy leaders at Fannie Mae have publicly stated that if an appraiser is asked to “corrupt or contort” Form 1007 to reflect short‑term rental income, the appraiser must decline the assignment because doing so would create a misleading report. 

State appraisal boards across the country have reinforced this position by: 

• Disciplining appraisers who inserted STR income into a 1007 Appraisal 

• Prohibiting the use of Form 1007 for STR analysis 

• Warning AMCs not to request STR‑based 1007 assignments

As a result, appraisers with STR competency increasingly refuse these requests—not because they lack expertise, but because they are required to comply with professional and regulatory standards. 

How DSCR Lending Highlights the Mismatch 

DSCR loans evaluate whether income from a property can cover monthly debt obligations. 

In STR markets, actual operating income may exceed long‑term market rent. When a lender relies on Form 1007 for DSCR analysis, the result is often an artificially low DSCR that does not reflect real‑world STR performance. 

That does not make the 1007 “conservative.” It makes it incompatible with the income being evaluated. 

To evaluate STR‑based DSCR loans accurately, income analysis must reflect STR operations—not long‑term lease assumptions. 

What Appraisers Use Instead: Short‑Term Rental Projected Income Analysis 

Competent STR appraisers rely on a Short‑Term Rental Projected Income Analysis, reported through a clearly labeled narrative addendum. This approach exists because STR income cannot be developed or reported within Form 1007. 

A compliant STR income analysis typically includes: 

• A narrative addendum titled “Short‑Term Rental Projected Income Analysis” 

• Market‑supported occupancy rates 

• Seasonal and event‑driven pricing patterns 

• Comparable STR income data (not long‑term rents) 

• Transparent revenue assumptions and explanations 

• STR‑specific expenses and income volatility 

• Confirmation that STR use is legally permitted for the subject property

These elements are essential to avoid misleading the reader and to comply with USPAP development and reporting requirements. 

Because addenda are narrative in nature, consistency is achieved through clear engagement letter requirements, not by forcing STR income into an incompatible form. 

How to Mitigate Risk on STR and DSCR Appraisals 

1. Align Expectations Early

Engagement letters should clearly state that STR income will be analyzed through a narrative addendum—not Form 1007.

2. Stress‑Test Income Assumptions

STR income varies widely by market. Lenders should evaluate income against occupancy swings, seasonality, and expense volatility.

3. Work With STR‑Competent Valuation Partners

STR valuation requires specialized expertise. Applying long‑term rental tools to short‑term rental income increases risk rather than reducing it. 

How Class Valuation Supports STR and DSCR Lenders 

Class Valuation treats STR appraisal work as a specialty, supported by experienced appraisers, purpose‑built assignment workflows, and rigorous quality control. 

Specialized STR and DSCR Appraiser Bench 

Our national panel includes appraisers vetted for STR competency, non‑QM experience, and complex income analysis. 

Smart Assign™ 

Our assignment technology matches STR orders with appraisers who have demonstrated STR expertise and local market knowledge. 

STR Income Addendum Standards 

We establish clear engagement expectations so lenders receive consistent, defensible STR income support—not improvised spreadsheets. 

Class INtelligence™ AI QC 

Our proprietary QC platform evaluates STR appraisals for income reasonableness, seasonal risk indicators, comparable support, and DSCR alignment. 

Preparing STR Appraisal Workflows for UAD 3.6 

UAD 3.6 will retire legacy appraisal forms, including Form 1007, and replace them with a standardized, data‑driven reporting structure. 

At rollout: 

• Legacy forms will no longer exist 

• Custom or proprietary STR forms will not be embedded in the data schema 

• Narrative addenda and supplemental exhibits will remain the primary method for supporting STR income

Preparing for UAD 3.6 is less about replacing forms and more about updating workflows, engagement language, and expectations to reflect what appraisers can credibly deliver. 

Visit the UAD 3.6 Resource Hub for guidance and tutorials on transitioning to the new form. 

The Bottom Line 

Short‑term rentals are not long‑term rentals. 

Appraisal Form 1007 cannot and should not be used to support STR income. 

Lenders who modernize their STR valuation workflows—rather than forcing STR income into incompatible forms—will improve underwriting accuracy, reduce compliance risk, and build stronger DSCR lending programs. 

Class Valuation is here to help lenders do this the right way.