Appraisal Multiple Lots

[Lee Lansford]

Seriously?

J provided the FNMA excerpt that shows two separate parcels may be used to securitize a single loan. So, I see no reason why you can't combine two parcels on a single form, with a value that reflects the sale of them together, end of story, unless someone can provide where the selling guide says you now need two appraisals. Yes, each parcel may have its own highest and best use, yes there may be a difference in value of selling them together as opposed to selling them separately but who cares? So what? Explain all of it and move on. Two tax keys, two addresses maybe, two legals, one value. For crying out loud write it up and go to the next one.

Let me ask this: When the appraiser X's the box NO in response to the question of ""Is the highest and best use...as improved...the current use?" what do you think the result will be?

One can't ignore H&B Use and call the resulting opinion of value "Market Value". What you are suggesting is--as best I can see--Value in Use.

 

[Terrel L. Shields]

We cannot add the two together and conclude a value of the property As-Is as the current use is not the highest and best use.

Having a little trouble following some of this. The client defines the property to be appraised. The lot may have a separate value but the object is to value the defined property. Surplus or excess, both likely have the same HBU "as if vacant". So the issue is what is required by FHA or whomever.

Many farms are appraised having numerous separate parcels. Readily divisible. So? A farm operates as a single entity, simply chopping up parcels willy nilly and valuing separately will lead to a bad outcome. If the two lots are transferring as one transaction, then the " as is" value is as sold and transferred. To divide those lots is contrary to what exists therefore is NOT "as is" but is a scenario strictly created by the appraiser and that is NOT HBU "as is."

 

[Lee Lansford]

Seriously?

J provided the FNMA excerpt that shows two separate parcels may be used to securitize a single loan. So, I see no reason why you can't combine two parcels on a single form, with a value that reflects the sale of them together, end of story, unless someone can provide where the selling guide says you now need two appraisals. Yes, each parcel may have its own highest and best use, yes there may be a difference in value of selling them together as opposed to selling them separately but who cares? So what? Explain all of it and move on. Two tax keys, two addresses maybe, two legals, one value. For crying out loud write it up and go to the next one.

Let me ask this: When the appraiser X's the box NO in response to the question of ""Is the highest and best use...as improved...the current use?" what do you think the result will be?

One can't ignore H&B Use and call the resulting opinion of value "Market Value". What you are suggesting is--as best I can see--Value in Use.

Seriously?

J provided the FNMA excerpt that shows two separate parcels may be used to securitize a single loan. So, I see no reason why you can't combine two parcels on a single form, with a value that reflects the sale of them together, end of story, unless someone can provide where the selling guide says you now need two appraisals. Yes, each parcel may have its own highest and best use, yes there may be a difference in value of selling them together as opposed to selling them separately but who cares? So what? Explain all of it and move on. Two tax keys, two addresses maybe, two legals, one value. For crying out loud write it up and go to the next one.

One more thing: A regulated lender is required to obtain an opinion of Market Value for lending use.

 

[Value Ninja]

This has been a good discussion of HBU, excess land, etc.... But, I'd like to circle back around to this (if anyone has any gas left in the tank for this discussion) as I don't think that the OP's question has been completely addressed. What is the best way to communicate the results of this type assignment for a conforming FNMA appraisal? To drill the issue down a bit, consider the following scenario:

- The appraisal includes Lots A & B which are are identical (100' X 100') lots
- The house and all improvements are fully contained on Lot A
- Lot B has it's own legal description and can be sold separately
- There is an active market for vacant lots in this area
- There is data showing that the contributory value of 2nd/extra lots is approximately 70% of that lot's intrinsic market value if sold by itself.

To me, it makes sense to appraise Lot A and deal with Lot B as a separate line adjustment. But, what do you show for site area on the Site line? And is this consistent with the site area from page 1? Assume that lender will want both Lots shown in the Legal Description field on page 1. How to come up with the final number is the not problem with the assignment, it's how to put this assignment on a URAR while being consistent and not misleading.

 

[Michigan CG]

Well, let us just throw this in the blender.

 

[Value Ninja]

Well, let us just throw this in the blender. View attachment 35949

Yeah... But not exactly on point as the original question is not about treating 2 lots as 1.

 

[Lee Lansford]

Having a little trouble following some of this. The client defines the property to be appraised. The lot may have a separate value but the object is to value the defined property. Surplus or excess, both likely have the same HBU "as if vacant". So the issue is what is required by FHA or whomever.

Many farms are appraised having numerous separate parcels. Readily divisible. So? A farm operates as a single entity, simply chopping up parcels willy nilly and valuing separately will lead to a bad outcome. If the two lots are transferring as one transaction, then the " as is" value is as sold and transferred. To divide those lots is contrary to what exists therefore is NOT "as is" but is a scenario strictly created by the appraiser and that is NOT HBU "as is."

Terrel, the problem with combining the 2 parcels--1 having all of the improvements and the 2nd vacant with a H&B Use ready to go for residential development--is the that combining of the two as though one results in a price that is less than would market would yield if the two were marketed separately. The two as though one might--in this instance--be something along the lines of Value in Use, but, the "value" opined to is not Market Value.

 

[Michigan CG]

Yeah... But not exactly on point as the original question is not about treating 2 lots as 1.

See Lee's post above.

 

[Lee Lansford]

This has been a good discussion of HBU, excess land, etc.... But, I'd like to circle back around to this (if anyone has any gas left in the tank for this discussion) as I don't think that the OP's question has been completely addressed. What is the best way to communicate the results of this type assignment for a conforming FNMA appraisal? To drill the issue down a bit, consider the following scenario:

- The appraisal includes Lots A & B which are are identical (100' X 100') lots
- The house and all improvements are fully contained on Lot A
- Lot B has it's own legal description and can be sold separately
- There is an active market for vacant lots in this area
- There is data showing that the contributory value of 2nd/extra lots is approximately 70% of that lot's intrinsic market value if sold by itself.

To me, it makes sense to appraise Lot A and deal with Lot B as a separate line adjustment. But, what do you show for site area on the Site line? And is this consistent with the site area from page 1? Assume that lender will want both Lots shown in the Legal Description field on page 1. How to come up with the final number is the not problem with the assignment, it's how to put this assignment on a URAR while being consistent and not misleading.

To respond to the question "What is the best way to communicate the results of this type assignment for a conforming FNMA appraisal?" Well, without pounding a round peg in a square hole--one cannot do it.

The appraisal at hand is for mortgage lending. The appraisal is being communicated on a Fannie form. Adherence to Fannie requirements is a given. There are two properties, each having its own H&B Use. A regulated lender is required--not optional--to obtain an opinion (here, if done correctly OPINIONS) of Market Value. H&B Use is integral to Market Value. The values of the 2 properties cannot be "lumped" together for the purpose of offering one opinion of value (which might be Value in Use but would not be Market Value).

Take the situation to an extreme to better understand the problem here: Let's say the contract of sale is for the 1st new house in a 30 lot subdivision of proposed SFRs. There is demand for the remaining 29 vacant parcels for construction. IF...IF...the contract of sale--and where this is a regular appraisal and financing for "Big Bank" and a loan headed to the secondary market--included the 29 surrounding parcels, would you offer a single opinion of Market Value? If you did, what would your H&B Use analysis look like ?

 

[Carnivore]

As-vacant, the H&BU would be to split the lot if there was excess land.
As-improved, it depends. If the existing improvement makes a lot split non-feasible (say, it straddles the line where the lot should be split), and assuming the improvement contributes value, then H&BU as-improved would not be to split the land.

Denis, This entire thread could be used for a CE Class on HBU. You'r comment above almost caused me to knee jerk reply and then I paused for a moment to really think about it. What I try to do is take what I learn from this forum and apply it to the Market area I service(competence claim). I am sitting here trying to think of where am I going wrong on HBU in my area. The pace of growth in the Charlotte MSA is so rapid that HBU is becoming critical.

So I have numerous sub-market segments that site value is appreciating so fast(demand) the current improvement contribution is as expected rapidly declining.
I have a close friend who i see and talk to weekly. He keeps asking me if he should sell his house because his mailbox is full of offers to buy. I keep telling him don't sell because what you will get is only enough for you to move a considerable distance further outward. I told him to maintain the house to keep it livable, but not a dime more. FTR, he doesn't need to do anything because his current improvement meets his needs.

I think I will start a new thread.