Missouri and Chapter 9—Competency and Scope of

[MoTim]

I have questions as to how this rule applies to Certified Residential Appraisers. Does anyone have a clear understanding of what a Cert. Appraiser can appraise concerning land and if it has a home, does it make a difference? I keep hearing HBU, but the rule doesn't state that. I've talked with everyone I can talk to, but no one seems to have a clear definition or understanding. I would appreciate anyone's input who has any experience with this as I am as lost as can be!!! Thanks in advance.

 

[Terrel L. Shields]

State by State issue - need to move to the MO forum.

In your Southern neighbor the law is different or could be. But here you can appraise any property up to $250,000 whether licensed or registered so long as it is not complex. I would not consider a vacant land tract complex under normal circumstances. Your law could be different

 

[MoTim]

Thanks, Terrel. Do I need to move this thread or has it already been moved? I didn't know there were specific states. Yes, our law is different, they have provided a definition, but its pretty murky. Just let me know how to and I'll move thread. Thanks.

 

[nachocheesefries]

In Missouri, if the highest and best use is anything other than residential, you must have a General sign off. No more commerical stuff under $250K! The state statue was revised in 2008.

So....don't go appraise a beef operation on 200 acres and say the HBU is residential. Also, don't appraise a 50 acre vacant recreational site or ag site in the middle of no where with timber or cattle/dairy operations all over and say that its HBU is "residential".


I keep hearing appraisers in Missouri say, "A certified residential appraiser can appraise land up to 80 acres" Wrong! In most cases around our state, many "vacant" 40 acre tracts have a HBU of recreation or agriculture...not residential....which means a state cert resi can't do it.

If you are appraising properties with acreage you MUST step outside of the "Fannie Mae Brain Dead Box" and do a thorough HBU analysis.

There are situations where an appraiser could make a case for an 80 homestead having an HBU as residential....but most are used at as hobby farms, recreation, ag....

I just did an appraisal for an estate on an 50 acre tract in a rural community and concluded the HBU as recreational use (due to the lay of the land, adjacent land uses, economy, etc.). The trustee of the estate forwarded an appraisal from a residential appraiser who had just appraised it for twice what I did concluding an HBU of residential but used prime development land around Springfield (the third largest city in the state) as comps...several of which had access to city water/sewer etc.

I still haven't decided what to do with her appraisal...

Hopefully that helps...be careful...they are watching us close these days.

 

[nachocheesefries]

here is the statute....

State-certified residential real estate
appraisers may perform appraisals on residential
real estate of one to four (1–4) residential
units without regard to transaction
value or complexity and may perform
appraisal consulting in the area of residential
real estate, if, and only if, performed in compliance
with all state and federal laws, rules
and regulations pertaining to the appraisal
assignment. This designation permits the
appraisal of vacant or unimproved land that
may be utilized for one- to four- (1–4) family
purposes. This certification does not permit
the appraisal of subdivisions or of agricultural
real estate. Individual parcels of property
located within a residential subdivision shall
be considered residential real estate. For all
other appraisals, the appraisal report shall be
signed by the state-certified residential real
estate appraiser and a state-certified general
real estate appraiser. For the purposes of this
rule, “agricultural real estate” shall be
defined as improved or unimproved land with
a highest and best use and primary purpose
devoted to income production by crops, livestock
and other products of the soil (fruit,
pasture, timberland, etc).
(C) State-licensed real

 

[MoTim]

Sean, thanks for responding.

I understand the changes, however, I was wondering if the "Hobby Farms" on 10,20,30,40 acres, etc. would happen to fall under this and not be able to be appraised by a Cert. Res? I saw an article on the MREAC website newsletter that stated, "Any land with Income Potential" could not be appraised by a Cert. Res. This would basicially exclude ALL acreage sites since nearly all could have hay, raise 2 calves, etc. Also, was personally told by a Commissioner that a "Hobby Farm" could be appraised, as long as it didn't produce any income. Basically, Cert. Res. appraisers can appraise acreage and homes with acreage as long as they don't produce any income. I personally don't see how that is possible. From your comments, I don't take it that way, but just aren't sure based on what I'm reading and being told.

Also, note this from the rule, "This designation permits the appraisal of vacant or unimproved land that may be utilized for one- to four- (1–4) family purposes." Have you noticed, or has anyone pointed out before, that it doesn't state that HBU is needed, but only that the land "may be utilized" for ..... ? They use HBU in the ARE definition, why not use it here? Seems to me to be a lesser standard and I don't know why it isn't included.

And....following your reasoning, would a lakefront "lot" of acreage size, be considered "recreational" and outside the scope of a Cert. Res? I'm not sure what qualifies as a "recreational" site? Would this be vacant land with significant slopes, covered in mature trees and brush? Basically, prime "hunting" land? Not trying to argue, but like you said, trying to stay out of trouble.

Thanks for your thoughts.

 

[Midwest Guy]

Years ago I addressed the board on this issue at the yearly meeting in the Lark of the Ozarks. Other appraisers and I took the question to a non zoned rural house with one acre a two car detached garage and a Chihuahua (minature dog) breeder. Situational we were told.

A response was given to old farm house and 50 acres of tillable. Clearly a Cert General we were told, and this is not the threshold.

Sean, thanks for responding.

I understand the changes, however, I was wondering if the "Hobby Farms" on 10,20,30,40 acres, etc. would happen to fall under this and not be able to be appraised by a Cert. Res?.

 

[nachocheesefries]

This is the way I approach each assignment (mind you I have a General in my office who can sign off on anything I do so its a non issue for me, but...)

HBU HBU HBU! What is the motivation of a potential buyer for this property? What are other properties in this market that are similar being used for? Is the land "as though vacant" worth more that the residential improvements are?

I was told face to face by ALL of the board members that, and I quote, "if the HBU is ANYTHING other the residential, a General must sign off"

Typically, in my area, depending on the size and nature of the subjects's residential improvements, I don't opine an HBU of a hobby farm, or recreational use unless the property has 50+ acres because there is not enough income potential to to outweigh the importance of the residential improvements.

Assuming the site has residential improvements, I would imagine you are safe in most instances opining an HBU of residential for homesites with 50 acres or less (which is typically what I do). Keep in mind, in my area (the Ozarks) there is little tillable ground. Once you start increasing the lot size much beyond 50 acres the income potential can increase to a point that may alter is highest and best use to something other than residential (this is especially true if there are no residential improvements on the site). As an aid to support my approach...just look at a Google map, if most of the 40's and 80's in a given area are timber or pasture land with no resi improvements, chances are you are dealing with rec or ag land...not residential. I have also seen residential appraisers appraise 40's and 80's with marketable timber for less than that the timber alone is worth because they just went and found comps with "trees".

As far as your scenario about the lake front lot goes....depending on the size of the acreage...Does it have subdivision potential? We are all going to be in trouble if the board thinks a one acre lake front lot is recreational. What the hell kind of recreation can you do with one acre?

I know it may seem gray but its really not if you understand the importance of a thoughtful, researched Highest and Best Use analysis...many residential appraisers do not. We often think if it has a house on it, the HBU must be residential which is not true.

 

[nachocheesefries]

Also, was personally told by a Commissioner that a "Hobby Farm" could be appraised, as long as it didn't produce any income.

Based on their own statute, this is just not true. Just because a property is not currently producing income, does not mean you're in the clear. Again, everything comes down to the HBU.

I would like to ask that commissioner, where in the statute it says a "Hobby Farm" could be appraised, as long as it didn't produce any income? The statute doesn't even suggest that...

 

[The Warrior Monk]

The minimum standard for FRTs are as follows:

A. The Certified Residential Real Property Appraiser Classification qualifies the appraiser to appraise one to four residential units without regard to value or complexity.

1. The classification includes the appraisal of vacant or unimproved land that is utilized for one to four family purposes or for which the highest and best use is for one to four family purposes.
​

2. The classification does not include the appraisal of subdivisions for which a development analysis/ appraisal is necessary.​

If you are dealing with the appraisal of land for a lender, there is a good chance you are dealing with a FRT, and the above will apply at minimum. Your state could be more restrictive. If the assignment is not a FRT, then the above may or may not apply, depending on your state law. However, competency always applies.