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September USPAP Q&A / Prior Sales History

Discussion in 'Fannie Mae, Freddie Mac, USPAP' started by David Wimpelberg, Sep 26, 2008.

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  1. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    29
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    Regarding the answer to the prior sales history of the subject property, Question 1:

    http://www.appraisalfoundation.org/s_appraisal/bin.asp?CID=12&DID=1246&DOC=FILE.PDF

    An additional example might be the appraisal of 20 acres subdivided from a 200-acre parcel. The appraiser must research and analyze prior sales of the subject, even if these sales include the 200-acre site in its entirety.

    USPAP states: Standards Rule 1-5


    When the value opinion to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business: (note14)

    (a)
    analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal; and

    (b)
    analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal.(note15)


    I'm not so sure that I agree with this answer. A lot in a subdivision is not the same property as a subdivision itself...not even close. I would agree that it would be good appraisal practice to discuss the history of the subdivision. However, I think this interpretation is clearly a stretch.

    Comments?
     
  2. AnonApprsr

    AnonApprsr Elite Member

    0
    Jan 21, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Massachusetts
    I agree with you 100%, and prior to this very minute I have always considered it so. And done the analyzing of prior sales as of THAT PROPERTY not a property from whence it came.
     
  3. PropertyEconomics

    PropertyEconomics Elite Member

    0
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico
    The issue is that THE PROPERTY did in fact sell as part of a larger transaction. In accordance with USPAP you are required to disclose the sales history of THE PROPERTY you are appraising. It did in fact sell. Its sales price cannot be split from the balance of the other property, but it did sell.
    I think the answer is very much in line with the reasoning and requirements of USPAP and failure to disclose would be a violation.
    If the property were "created" during the 36 months prior to the date of your report it would be improper not to discuss that creation and how it happened and how it was facilitated.
     
  4. George Hatch

    George Hatch Elite Member

    47
    Jan 15, 2002
    Professional Status:
    Certified General Appraiser
    State:
    California
    I wasn't crazy about the reply until I gave the entire reply some consideration, whereupon I realized they pretty much had to answer it that way.

    If we approach the question from an "appraisers appraise property rights" perspective I think the ASB might be concerned about not encouraging appraisers to avoid the requirement to analyze sales history by using the "different property rights" dodge.

    If we allowed appraisers to use "property rights appraised" as the dividing line some appraiser would surely exploit that loophole and possibly get away with it. For instance, a property sold in fee simple 30 days ago, but as a result of that buyer putting a lease on it - arm's length or not - and the appraiser appraising the leased fee interest it might be tough to enforce the requirement to analyze the prior sale.

    Whether the property rights appraised differs by manner of ownership, physical segment or financing wouldn't matter; the unscrupulous would argue that a precedent established by allowing one type of distinction is also applicable for the others.
     
  5. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    29
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    The problem I see is that USPAP specifically states "subject property," not "some other property that the subject property was created from." The subject property did not legally exist at the time of the sale of the subdivision; i.e., it could not be bought, sold, mortgaged, have insured title, etc. prior to being created.

    If it existed in its current form that would be a different story. Say, for example, the subdivision was finalized, was sold, and the subject property was part of that transaction.
     
  6. PropertyEconomics

    PropertyEconomics Elite Member

    0
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico

    David,
    I understand what you are saying, but from a very pure sense the real estate did not simply appear, it has always been there. The subject property in fact has been there, it was there in a different bundle as Mr. Hatch refers to. None the less, the disclosure of its creation and sale as part of a larger parcel would be necessary in order to meet the pure requirements of USPAP.
    I find the answer very consistent with the requirement of disclosure.
     
  7. David Wimpelberg

    David Wimpelberg Moderator Staff Member Moderator

    29
    Mar 30, 2005
    Professional Status:
    Certified General Appraiser
    State:
    New York
    George,

    Your scenario was the first thing that came to my mind when I read the Q&A. In particular, the fee simple versus leased fee/leasehold argument.

    The way USPAP is written, a good attorney could easily get an appraiser of the hook if the property rights are not them same.
     
  8. AnonApprsr

    AnonApprsr Elite Member

    0
    Jan 21, 2008
    Professional Status:
    Certified Residential Appraiser
    State:
    Massachusetts
    I'm appraising the Subject Property not the piece of land the Subject Property came from. I'm expected to analyze the sale of the 100 Acre property? What am I analyzing it for? How does that sale affect my Subject Property? The Subject is what it is now.
     
  9. PropertyEconomics

    PropertyEconomics Elite Member

    0
    Jun 19, 2007
    Professional Status:
    Certified General Appraiser
    State:
    New Mexico

    Did your subject sell as a part of the larger tract? Answer that question and you have the answer to the question which the Q&A has clearly defined and answered.
    And I dont think you have to analize the sale of the 100 acre parcel, but you do have to recognize that it happened to be in compliance with the history of the subject.
     
  10. farmguy

    farmguy Member

    0
    Jun 27, 2007
    Professional Status:
    Banking/Mortgage Industry
    State:
    Texas
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