Proposed Construction, Land Purchase

Discussion in 'General Appraisal Discussion' started by CANative, Jul 26, 2005.

Thread Status:
Not open for further replies.
  1. CANative

    CANative Elite Member

    29
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    The client wants an appraisal done for their borrowers proposed project. It's complicated for several reasons. Besides being in a remote, rural area with few sales and none that are particularly similar or recent, the following issues are hexing me:

    1. They want a value based on a 7.5 acre tract and the proposed residence.There are actually three 2.5 acre parcels with the house to go on one of them. All three lots are contiguous, buildable lots and have not been merged.

    2. The improvements are of a panelized (SIP) design and they will be built by the borrower (a general contractor who also owns the company that makes the panels and other components)

    3. The parcel that the improvements that are to be built on have been flagged with some sort of code violation. I have a feeling it's over the junk on that parcel but I can't get the code enforcement official to call me back. He always seems to be in the field.

    4. The borrower does not own the parcels yet. He has made an offer to purchase and I can't seem to get a copy of the contract. The lender has not asked me to appraise the parcels for a purchase. They just want an appraisal based on hypothetical conditions that the 3 lots are 1 larger lot and that a new house has been built.

    Can I get away with just doing a single appraisal, identify the hypothetical conditions used, state that the borrower is purchasing the land but that the client has not requested a separate written appraisal report for the purchase and then forge on with this.

    I'm pretty much finished with this one, but I need to do some USPAP housekeeping. Any thoughts?
     
  2. Jan Roseberry

    Jan Roseberry Senior Member

    0
    Sep 25, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Ohio
    May want to combine parcels for tax reasons, that is common in our area since it is less expensive.

    I've done two higher end paneled homes and I was quite impressed. Went and saw the larger one "assembled"-- most intense residential construction I have ever witnessed with 2 cranes, professional work force with consulting engineer on site. Interiors are custom finished. In both cases the general contractor was not at all pleased with the foundation, concrete guys and assembly of homes was postponed until they redid their work.
     
  3. Chris Colston

    Chris Colston Elite Member

    0
    Jul 24, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    Florida
    SCOPE OF WORK. Just make sure your report fully explains what you did, why you did it, who you did it for and that the value is totally hypothetical and subject to change as conditions may change.
     
  4. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    First suggestion is narrative.

    IMO, H&BU would be as separate buildable lots because USUALLY the value of each as a separate site then added up would probably total more than them combined as one site. I could not combine them and then call the proposed combination the H&BU, at least not in any market I'm aware of for SFRs.

    Maybe try telling them this in writing using a rediculously low hypothetical value. Such as:

    IF each buildable site on it's own is worth $1,000+/- because that's what 2.5 acre sites have been selling for in that area, the total of each X 3 = $3,000+/-.

    BUT, IF these were combined as one 7.5 site, sales of 7.5 acre sites in that area have been selling for $1,500+/-.

    Hopefully, explaining this to them might make them see the light. If not, tell them that explaining the H&BU issues and completing an appraisal that's not misleading becomes a HUGE undertaking with a fee commensurate for the time it will take to do that and it will NOT be on any of the Fannie forms.

    UNLESS, that code issue causes the lots as individual not to be buildable on their own, but it doesn't sound like that's the issue. Going to have to find out what that's all about though.

    If they still want it the way they've said, NARRATIVE with lots and lots explanations.
     
  5. Pamela Crowley (Florida)

    Pamela Crowley (Florida) Elite Member

    3
    Jan 13, 2002
    Professional Status:
    Retired Appraiser
    State:
    Florida
    Not saying it can't be done, but the way they want it really should be a narrative with a long Scope of Work, H&BU explanations and loaded throughout that it's based on a Hypothetical Condition that very probably is different than the true "As Is" value of these properties - Large and Bold - throughout the report.

    If the fee for doing it their way doesn't change their mind, go ahead and have fun!

    :p
     
  6. Otis Key

    Otis Key Elite Member

    0
    May 15, 2004
    Professional Status:
    Certified Residential Appraiser
    State:
    New Mexico
    Chris & Pam's on line. Full and detailed SOW. Disclose the assemblage instructions, the code issues and the other known problems about the WHOLE enchilada. I would also go along the lines of the narrative report. Most likely, this will be a portfolio deal.

    I wouldn't waste my time explaining the 3x1 concept like Pam said. They are, after all, "acting in their own best behalf and are informed and knowledeable". The borrower and lender already know it's going to be a can of worms and that it wouldn't conform to Fannie guidelines.

    $,$$$.00

    :beer: :beer: :beer:
     
  7. Mike Garrett RAA

    Mike Garrett RAA Elite Member

    1
    Jan 14, 2002
    Professional Status:
    Certified Residential Appraiser
    State:
    Colorado
    Can be done with a hypothetical condition as a single appraisal. Do you have land sales to support your site value? Will a 7.5 acre site be worth three times the value of a 2.5 acre site? It could be worth more, the same, or less.
     
  8. Terrel L. Shields

    Terrel L. Shields Elite Member

    57
    May 2, 2002
    Professional Status:
    Certified General Appraiser
    State:
    Arkansas
    You can give an as is value as the site value. You would be reporting both as is and as proposed values. The as is value of the land sold as 3 parcels is just that whether buildable or not. Will 3 lots sold together bring less than 3 sales of one lot apiece. In my area, a builder would likely be able to wrangle a 10% discount or so for buying 3 lots at a time. I don't see how 3 lots would not be worth whatever 3 lots are worth unless he builds in such a way as to encumber 2 or more lots by building too close to the line.
    Typically in the area, a person may by the adjacent lots just to have more space between them and the neighbor or to build an overly large improvement that straddles both lots. Most towns allow that as a variance.
     
  9. CANative

    CANative Elite Member

    29
    Jun 18, 2003
    Professional Status:
    Certified Residential Appraiser
    State:
    California
    The "neighbors."

    And this is one of the higher density tracts in this area.
     
    Last edited: Nov 9, 2007
  10. Mike Boyd

    Mike Boyd Elite Member

    0
    Jan 18, 2002
    Professional Status:
    Retired Appraiser
    State:
    California
    What IS that reddish brown thing in the lower left hand corner?

    Go with Mike Garrett on this one. I don't think you need to do a narrative. What would that accomplish that you could not show in an addendum? Banks like FORMs. However, it might give you some good experience in establishing a narrative format.

    Keep in mind that in rural subdivisions in mountainous areas, the density is regulated by the topography. On paper, each lot might be buildable but you might not be able to get septic systems on each 2.5 acre site. Creeks, trees, and steepness dictate location of septic systems.

    If it were me I would follow their instructions and provide them a value of the house on 3 lots. If you wish, in the highest and best use section, simply state, build separate houses on each site. However, you can modify that in your comments by saying that it beyond the scope of the assignment to determine if each site, by itself, is buildable.
     
Thread Status:
Not open for further replies.

Share This Page