Nearly-contiguous surplus land ?

[Sals Dad]

I own a waterfront home with an accessory apartment, on about 1/4 acre (typical for the neighborhood). I need to refinance in the next 12 months, and am concerned -- in this market -- that the appraisal come in at a reasonably high valuation ;-)

Simultaneously, I have an opportunity to purchase an almost-contiguous lot: twice the area, with ten times the water frontage. The two lots face each other at the head of a cove - at the closest point 20 or 30 feet apart across water, but by land separated by an unused strip of municipal property. This second lot is considered by the municipality to be unbuildable - "landlocked" and not meeting current setback requirements. The tax assessment is very low.

I believe that ownership of the view, and additional frontage, will add significantly to the value of the house. While the lot would be larger than neighbors, there are even bigger ones not too far off, so it is not completely out-of-scale. I'd be happy to put both properties on the same deed, encumbered by one mortgage. It is common here to see deeds that list more than one platted lot. But how would an appraiser treat these almost-contiguous parcels?

On another thread I came across the references below that address this issue - sort of. I am unfamiliar with the governing bodies and rules in the real estate appraisal world - is this an area where guidelines may differ? (in other words, should I be looking at any particular "brands" of mortgage? FHA vs Fannie Mae vs ...)

http://portal.HUD.gov/huddoc/2011summernewslettr.pdf ,
and
[FHA/HUD] Handbook 4150.2, Chapter 3-6 (A) (1) states:

The subject property must be adequately identified as a single, marketable real estate entity. However, a primary plot with a secondary plot for an appurtenant garage or for another use contributing to the marketability of the property will be acceptable if the two plots are contiguous and comprise a readily marketable real estate entity. Please note that we checked with Headquarters regarding the subject and they stated that in multiple lots of the same ownership, the legal description must be all encompassing.

Handbook 4905.1, Chapter 2-2 states: The property must comprise a single readily marketable real estate entity.

Underwriting staff has confirmed multiple parcel numbers under one loan is not acceptable for FHA and would require combination under one, single parcel number.

Of course an appraiser's treatment will not be the primary driver in my decision whether to purchase and at what price, but it might determine how the ownership/deed is structured.

I appreciate any insights or advice

Sal's Dad

 

[The Warrior Monk]

I believe that ownership of the view, and additional frontage, will add significantly to the value of the house.

The land in question has no legal access nor is it buildable. It would seem to me that the view is already protected.

I'd be happy to put both properties on the same deed, encumbered by one mortgage. It is common here to see deeds that list more than one platted lot. But how would an appraiser treat these almost-contiguous parcels?

There are several issues to deal with. The parcels are not contiguous so can't be physical combined.

The issue pertaining to the mortgage is complex. The GSEs (Fannie, Freddie, etc.) don't do land loans, so you'll have to look elsewhere for a mortgage. Various lenders will deal with land loans (e.g., commercial banks). However, you are dealing with a landlocked parcel, and I seriously doubt that you'll find anyone that would lend you the money. Lenders simply don't want to take back a landlocked parcel if the mortgage goes sour.

 

[AnonApprsr]

The land in question has no legal access nor is it buildable. It would seem to me that the view is already protected.

Exactly what I was thinking. Let someone else own your protected view land.

 

[Sals Dad]

Exactly what I was thinking. Let someone else own your protected view land.

For the relatively small expense (a couple percent of the total value) I like the idea of being in control. Another owner could dramatically change the landscaping, build a big dock, or whatever.

If I were buying, I'm sure "3/4 acre, with 750 feet of waterfront" along with other amenities and advantages, would catch my attention. Someday, when it is time for resale, both parcels would certainly be kept together. Surely with some incremental increase in value?

Or am I overly optimistic?

Thanks for the helpful advice - ( perhaps soon somebody will chime in with what I really want to hear? ;-)

 

[Mark K]

Thanks for the helpful advice - ( perhaps soon somebody will chime in with what I really want to hear? ;-)

I think you should clarify your question.

If the question is: "But how would an appraiser treat these almost-contiguous parcels?", a competent appraiser would appraise them as what they are, NON-contiguous parcels. Contiguous, like pregnant, is not a matter of degrees. It either is or isn't.

Each lot has its own highest and best use and should be appraised separately. They could be included in one report but they need separate valuations. BTW, very few banks would have much interest in loaning on a landlocked parcel.

If you're asking "would the whole be worth more than the sum of the parts", the answer is maybe. Its possible. How much? Without a lot of research, that's impossible to tell. If you're thinking that adding the LL parcel in with the house parcel will enhance the the overall value beyond the cost of the LL parcel, this is a novel approach. I'd recommend getting a good appraisal prior to committing.

 

[Tony V]

Sals Dad..

From your posts it appears that you want to hear someone support your thought process ie..
""-- in this market -- that the appraisal come in at a reasonably high valuation ;-)""
""( perhaps soon somebody will chime in with what I really want to hear? ;-)""

The first thing you should be checking out is whether or not you could add this other lot to your deed..It may not be doable which means that it would become a separate deeded lot..

From there an appraisal, without the winks, performed by a good honest appraiser would be the best you could ask for...

I think that you will find that the answers David W are among the most upfront and honest you will get here...
I know the type of assignments that he is involved with on a daily basis..and he has a boat load of experience with this type of work..

 

[Sals Dad]

I think you should clarify your question.

OK:
Is it possible that the whole is worth more than the sum of the parts?
(answer so far: probably not, or not much -- without more knowledge of the property, and local markets.)

If the whole is worth more, can I borrow against the larger amount, using a low-cost mortgage?
( so far: Only if contiguous, and the properties are combined as one )

Are there any circumstances in which these nearly-contiguous parcels could be treated as contiguous, as I apply for financing?
( so far - NO. Hoped for answer: If an appraiser follows the Flabbie Mannie guidelines, and you can throw a silver dollar between the banks, and certain legal mumbo-jumbo is recited, YES! )
If I want contiguity, I need to ask the municipality to sell me the narrow dividing strip.

The Highest and Best Use for this lot is probably as a view-enhancement to one of the neighbors - some might prefer to see it cleared, others (like me) want to retain most of the vegetation. Of course maybe the Government would put some value on it for conservation purposes, but there seem to be no funds available this year...


Again, thank you. This is the second time I have turned to this forum for technical questions about appraisals, and both times you all have offered great insights and advice. ( even if I am too headstrong to follow it ;-)

 

[The Warrior Monk]

OK:
( so far: Only if contiguous, and the properties are combined as one )

It is feasible that these properties could be combined by some legal mechanism, such as requiring that they must be under the same ownership. You'd have to speak to any attorney regarding those matters, since they could be specific to your state. Generally, I don't think it is a good idea to do so, since it limits the utility of the parcels. What one particular owner desires is not necessarily what the market desires.

Are there any circumstances in which these nearly-contiguous parcels could be treated as contiguous, as I apply for financing?
( so far - NO. Hoped for answer: If an appraiser follows the Flabbie Mannie guidelines, and you can throw a silver dollar between the banks, and certain legal mumbo-jumbo is recited, YES! )

As noted previously, it might be possible to combine these by some legal mechanism. However, combining parcels doesn't equal increased value; it could possibly diminish value.

If I want contiguity, I need to ask the municipality to sell me the narrow dividing strip.

If you could do this, then you are talking about an entirely different situation.

The Highest and Best Use for this lot is probably as a view-enhancement to one of the neighbors - some might prefer to see it cleared, others (like me) want to retain most of the vegetation.

Keep in mind that it is there are almost certainly restrictions in place that limit clearing of the property. I am not familiar with the federal regs regarding the matter since I limit my practice to one state; I only know my local requirements.

If you had restrictions that prohibited clearing within 100' of the wetlands, and the lot was only 100' deep, you'd have a lot that could not only not be cleared, but wouldn't have a building envelope either.

 

[Tony V]

It is feasible that these properties could be combined by some legal mechanism, such as requiring that they must be under the same ownership. You'd have to speak to any attorney regarding those matters, since they could be specific to your state. Generally, I don't think it is a good idea to do so, since it limits the utility of the parcels. What one particular owner desires is not necessarily what the market desires.

As noted previously, it might be possible to combine these by some legal mechanism. However, combining parcels doesn't equal increased value; it could possibly diminish value.

If you could do this, then you are talking about an entirely different situation.

Keep in mind that it is there are almost certainly restrictions in place that limit clearing of the property. I am not familiar with the federal regs regarding the matter since I limit my practice to one state; I only know my local requirements.

If you had restrictions that prohibited clearing within 100' of the wetlands, and the lot was only 100' deep, you'd have a lot that could not only not be cleared, but wouldn't have a building envelope either.

Oh man does that sound familiar.....

 

[Restrain]

You might contact the municipality that has the unused strip and see if it would be ameniable to vacating that tract to you. In that instance, you would have a contiguous tract of land. Admittedly, it would have a significant amount of 'surplus' land, but that would solve your issue of wanting the land to be contiguous, and the land would not be landlocked. Further, if the adjacent site is owned by a municipality, and would give access to this tract, a right of egress across the municipal tract might be obtained giving access to the property and eliminating the landlocked situation.