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1 Sfr On 2 Lots

Discussion in 'General Appraisal Discussion' started by Surf Cat, Sep 21, 2004.

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  1. Surf Cat

    Surf Cat Junior Member

    0
    Apr 21, 2003
    Professional Status:
    Licensed Appraiser
    State:
    California
    How would you go about appraising an SFR on 2 Lots? I have plenty of comps with a 900 Sq. Ft. SFR on a 5,800 Sq. Ft. Lot, but no comps with 1 SFR on an 11,600 Sq. Ft. lot. (2 parcels joined per plat map) Furthermore, I do not have any vacant lots to use as comps. The subject property falls under 1 APN # and the lot has not yet been split.

    The trend in the neighborhood is for the demolition of the small bungalow/craftsman and for the construction of 2 townhomes as zoning permits. The assignment is just a Refi. not a proposed construction appraisal.

    Thanks in advance! Rick
     
  2. Hal Pollock

    Hal Pollock Senior Member

    0
    Apr 26, 2003
    Professional Status:
    Certified General Appraiser
    State:
    Connecticut
    Hi Fritz;

    Take a look at what you have as of the effective date of the appraisal.

    Do you have:

    1 house on a parcel with excess land? If So, then appraise house on legal size plot and ascribe minimal value for the excess land.

    or

    1 house on a parcel of land AND a separate adjacent subdivided parcel which could be sold as a legal building plot. If So then ask if they want 1 appraisal for house and land only, or 1 appraisal for house and land and 1 appraisal for the subdivided land adjacent to the house.

    or

    1 house on a large lot that THE OWNER HOPES could be subdivided sold and the extra money would solve all his financial problems, or appraised as though it could be subdivided and the cash out refinance would solve all his financial problems. If So Then appraise with the Extraordinary Assumption that the excess land could be subdivided and sold at market price and include this land value in your house appraisal when arriving at a final opinion of value. You must include the caveat that you may have to revise your opinion of value if the Extraordinary Assumption proves incorrect. Implied in this scenario is the probability that you would have to do a land appraisal on the land portion first to determine what value to include in your EA.

    Fritz, I got tangled up in one of these a few months ago, and it was a sticky wicket. I appraised a home under the conditions of my first scenario with minimal contribution to value of the excess land. Then the borrower when out and had a subdivision survey done and a map drawn, (never got it passed the town officials though), went to a Realtor and put this New Building Lot on the market. Because it was walking distance to the beach the listing price was quite high. During the loan processing, the borrower told the lender that "When I sell this extra land, I will have a lot of cash" and this was relevant to the loan approval process. Well dontchya know the next thing the lender did was to take my appraisal and subtract the "Hyped Up Listing Price" for the LOT and the remaining value of his house would not support even the closing costs of his loan. (Somewhat of an exaggeration).

    If I had only known or had asked about any plans for the large excess land I hope I would have had brains enough to disclose what I was doing in terms of assumptions. My Assumption would have been that I was treating the excess land as excess land and that if it were to be subdivided that would change my final value.

    Since you have enough information to ask these questions, you should get very specific instructions from your client so you can define your scope of work.

    Hope this helps.

    Hal
     
  3. George Hatch

    George Hatch Elite Member

    124
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    Two lots but only one site. Unless the individual lots are worth more if sold off separately (without the house) you have a house with bigger than average lot. The contributory value of the extra lot area will probably not be that much. Around here ($500k range), it might generate another $25k.
     
  4. Surf Cat

    Surf Cat Junior Member

    0
    Apr 21, 2003
    Professional Status:
    Licensed Appraiser
    State:
    California
     
  5. Walter Kirk

    Walter Kirk Senior Member

    11
    Jun 24, 2003
    Professional Status:
    Licensed Appraiser
    State:
    New Jersey
    What are the costs of selling the lot? are there subdivision fees? legal fees? Utility fees? building restrictions or moratoriums? Unless you consider all of these factors you will make big mistakes.
     
  6. George Hatch

    George Hatch Elite Member

    124
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    I misread your original; I thought we were talking about a site that had no split potential. With split potential (1 house + 1 lot) there is some incentive to split if the costs are low enough in relation to the lot value. Of course, you'd have to establish that it actually is possible to split it. Zoning is not the only element to this.
     
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