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A different spin on your basic "house and 5 acres".

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by Susan Klimaszewski, Jan 4, 2009.

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  1. Susan Klimaszewski

    Susan Klimaszewski Junior Member

    0
    Jan 9, 2003
    Professional Status:
    Licensed Appraiser
    State:
    Texas
    A little info...

    5 out of 27 acres, survey of the 5 acres provided to me.
    Fannie Mae conventional refinance. (Previously refinanced in 04 and 06)
    Single-family house (2,000 sqft) (2 bedroom, 2.75 baths)
    40x40x15 barn with kitchen & bath.
    Outside the city limits therefore there is no zoning.

    The survey provided details a 5 acre flag lot which contains all of the above improvements.

    The "neighborhood" consists small acreage ranchettes up to large farms. Goats, horses, crop production, some cattle and a lot of hay fields. The subject acreage outside the 5 acres are hay fields.

    Problems

    Problem #1 at the appointment the owner made a big deal about having had the survey done so that now the 5 acres are just "lawn" and have no agricultural use and AG doesn't have to be mentioned on the appraisal. (I didn't respond to that.)

    Problem #2 there are 12 goats penned up on the 5 acres athough they are released to graze acreage behind the house and outside of the 5 acres.

    Problem #3 the survey notes that "This survey was performed for financial reasons only and may not be used for conveyence of the property.". My question here is that although I have been provided with the 5 acres to appraise it appears that those 5 acres can't be used to secure the loan if based on the survey.

    Problem #4 the survey has not been filed with the county obviously since it was prepared for financial reasons. The county has the house and 1 acre designated as homesite and the other 26 acres as AG exempt, therefore 4 out of the 5 acres on the survey are taxed as AG.

    My thoughts...

    1, 2 and 4. There is no way that I can not mention AG on the appraisal. It is a flag lot surrounded by AG usage, 4 of the 5 acres are being taxed as AG. As far as AG usage I'm still on the fence. The goats were penned on the 5 acres and had a water trough but there were no shelter structures. I did talk to another appraiser in the area and he said that he would not call the 5 acres AG as many people who have goats keep them penned near the house off and on to protect them from predators.

    3. Provide a copy of the survey with the appraisal, note the limitation of no conveyence and let the lender make their own decision.

    Am I off base? Your thoughts...
     
  2. Terrel L. Shields

    Terrel L. Shields Elite Member
    Gold Supporting Member

    133
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    If it has a survey, then appraise what is surveyed.

    12 goats hardly consitutes an economic agricultural pursuit
    that would be my bugaboo and would also be the reason that the lender would kick back. They intend to take a mortgage on the 5 acres and they cannot sell it as "5 acres"...so
    some states require all surveys to be filed to be legal surveys. as for assessment, it depends upon your county. "AG" takes in recreational acres in many states as well as actively farmed property. Lots of 5 acre tracts that are residential in nature are treated as 1 HL and 4 ag acres...It is meaningless. Breaking out 1 acre tracts and valuing separately is a tactic used by assessors and some appraisers. I don't agree with it and don't do it. Land is land and I value the whole parcel being appraised.

    BTW, there is nothing in USPAP that prevents you from appraising a partial interest or segment of a property - survey or not. Just as long as you identify it.

    However, the issue for Fannie would be the lack of fungibility. That is, the survey cannot convey the property as is and that appears to relate to a legal use? That is, can the property not be sold as a 5 acre parcel? If not, then the appraiser would have to relate that you are appraising a part of a tract; that the APN includes additional acreage; and, HBU (if the tract is not severable) would be as the full acreage. I would not consider the goats a factor personally.
     
  3. CANative

    CANative Elite Member

    60
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    Don't worry about this. They just want you to submit a misleading appraisal report so they can make a loan, get their commission and if anyone creates a problem a few years down the line they'll have an appraiser to blame.
     
  4. Terrel L. Shields

    Terrel L. Shields Elite Member
    Gold Supporting Member

    133
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    I see no problem appraising it; stating that it is part of larger parcel and may lack fungibility and let the chips fall where they may. I will disclose but I will not make the underwriter's decision for them.

    These kinds of situations are where Fannie mae proves themselves to be idiots. A house and 5 acres obviously isn't worth what a house and 25 acres is....do they accept this as an abundance of caution? Nope, they want to take only 5 acres and a house.

    Since fannie has proven itself to be perfectly happy with all sorts of trashy properties it is laughable that they balk at accepting additional collateral in the form of vacant land.
     
  5. CANative

    CANative Elite Member

    60
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    How could it be OK to do this appraisal in a credible manner when the client and the borrower are both trying to pull a fast one. They intend to make a loan on 27 acres but thet loan program they've selected doesn't work with the collateral they have. So they get an appraiser to sanitize the collateral be kinda-sorta making it look like different collateral.

    Just being involved in this puts the appraiser at risk and doesn't do a thing in promoting and maintaining a high level of public trust in appraisal practice.

    IMO.
     
  6. Mike Kennedy

    Mike Kennedy Elite Member

    38
    Sep 28, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    New York
    FANNIE'S Handbook for Appraisers, "Addressing unique features of rural and urban property appraisals", page 35:

    Quote:
    Some appraisers report that they have been asked to appraise only a portion of a larger site: for example, the borrower owns a 30-acre site and you are asked to appraise only five acres and the property improvements. Fannie Mae considers this an unacceptable appraisal practice because the appraisal does not accurately report the facts of the subject property.

    also https://www.efanniemae.com/lc/ou/pdf/app_rural_props.pdf

    see !., 2. and possible scenario #1:
     
    Last edited: Jan 4, 2009
  7. George Hatch

    George Hatch Elite Member

    47
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    There is an intended use and an intended user for this assignment. Credibility of a workproduct is always judged within the context of the intended use.

    What you see is what you get. The property being appraised is the property being appraised. The market value of the property being appraised is what it is.

    If the property being appraised (and as identified all through your appraisal report) is the 27 acres then you're solving the question of what the value is for the 27 acres. If the property being appraised in only the 5 acres - and assuming that use is legally possible, physically possible, and financially feasible - then that segment is what you're identifying as your subject throughout the appraisal report.

    If that segment doesn't already exist on it's own, then you have an "as is" value for the 27 acres and a "subject to" value for the 5 acres that only becomes meaningful to a lender if/when that "subject to" becomes an "as is". If this is your assignment then you're going to end up providing value opinions for the property being appraised under both conditions - an "as is" that covers the 27 acres and a "subject to" that only covers the 5 acres.

    The bottom line here is that your client probably won't have any use for your appraisal by the time you spell all this out in the report. That's because they're attempting to do something with your report that their lenders wouldn't accept if they recognized it for what it is.

    In your place I'd tell them that if I perform an appraisal on this property under these conditions, I will include an "As Is" value of the 27 acres along with disclosure of the notes on the survey as well as the status of the site with the County and any comments that they have for it.

    That way, if the users of your appraisal make a dumb decision after that it won't be because you didn't tell them.
     
  8. Rich Heyn

    Rich Heyn Senior Member

    0
    Jan 17, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Michigan
    Susan,

    In addition to Mike Kennedy's post above, I'll quote from Fannie Mae's recent Announcement 08-30:

    "Appraising the Entire Site of a Property Selling Guide, Part XI, Section 404: Site Analysis
    The property site should be of a size, shape, and topography that is generally conforming and acceptable in the market area. It also must have comparable utilities, street improvements, adequate vehicular access, and other amenities. Fannie Mae is clarifying that the appraisal must include the actual size of the site and not a hypothetical portion of the site. For example, the appraiser may not appraise only 5 acres of an unsubdivided 40-acre parcel. The appraised value must reflect the entire 40-acre parcel."

    I'll take your statement "Fannie Mae conventional refinance" to mean that your assignment conditions include a client request that you develop and report your assignment in a manner that complies with Fannie Mae requirements. If that is the case, your client is requesting a mutually exclusive set of assignment conditions.
     
  9. Susan Klimaszewski

    Susan Klimaszewski Junior Member

    0
    Jan 9, 2003
    Professional Status:
    Licensed Appraiser
    State:
    Texas
    Thank you all.... you have set me on the right path, as usual. I'll be speaking to the client tomorrow morning.
     
  10. George Hatch

    George Hatch Elite Member

    47
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    Do a copy/paste out of the selling guide. That way the problem becomes Fannie vs. them instead of you vs. them.
     
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