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Excess land

Discussion in 'FHA/HUD and VA' started by bugknuckles, Jul 13, 2011.

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  1. bugknuckles

    bugknuckles New Member

    0
    Mar 11, 2009
    Professional Status:
    Certified Residential Appraiser
    State:
    Oklahoma
    I just received a request for a "revision" on an appraisal completed in April. The lender is requesting the site size be changed to a 5 acre tract based on a new lot split , they have attached the new plat map and survey.
    Originally the parcel was 40 acres. When I recieved the revision request, my first response was that this would be considered a "new" assignment, although after reading the FHA 2011 summer newsletter(see below) I am confused. Can some one explain the proper way to handle this?:unsure:

    In cases where the land supporting a single family home is significantly larger in size than the supporting land area for a
    typical and readily marketable single family property, FHA instructs the appraiser to place no value on the excess or
    surplus land by assuming the size of the land supporting the improvements is in keeping with the average of the subject
    marketplace. For example, if the subject property is composed of a 15 acre parcel of land supporting a single family home
    and the subject marketplace is characterized by sales of single family properties situated on 2 to 3 acre parcels, the
    appraiser must hypothetically condition the appraisal on the assumption that the subject property is composed of 2 to 3
    acres of land, thereby giving no value to the excess or surplus land. The appraiser must, however, describe and note the​
    actual area of the land supporting the subject improvements within the appraisal report.
     
  2. CANative

    CANative Elite Member

    158
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    That FHA requirement is as old as the hills and twice as dusty. Refer to the 4150.2, Chapter 4-4. (It's been there as long as I've been appraising.)

    4-4 UNIQUE PROPERTY APPRAISALS
    Appraisers are sometimes faced with unique properties: a log
    home, an extra small home, lower than normal ceiling heights,
    etc. Eligibility of these properties depends on whether or not
    the property is structurally sound and readily marketable. If a
    property meets these criteria, the appraiser estimates market
    value. However, depending on the uniqueness of a property, the
    final determination to accept or reject the property is made by
    the lending institution's underwriter.
    Excess land is another area in which to exercise caution. Land
    is considered to be excess if it is:
    o larger than what is typical in the neighborhood
    AND
    o capable of a separate use
    o If there is excess land, describe it but do not value it.
    In this instance, the appraisal is based upon a hypothetical
    condition. A legal description of the portion being
    appraised is required.

    What you have to watch out for is that in rural areas lot sizes can vary significantly. Is 40 acres really atypical in that particular market?
     
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