Appraisal Multiple Lots

[J Grant]

Not that far of a stretch.

I've appraised several farms that were comprised of multiple parcels where the HBU of some of the parcels was not agri use. Just because they plant corn or beans on an assemblage of 10 acre tracts doesn't mean that the HBU of the individual tracts is ag.

That goes back to the same question that is the heart of the OP appraisal, what is the HBU of a bulk property, when the property appraised as one entity, a property with improvement and 2 or more lots/parcels , which could have their own HBU if severed/vacant..

Did you appraise the above as HBU Agricultural/ /farm, even though some of the parcels could have an HBU that was not agri? If not, how did you handle it?

 

[Mark K]

Did you appraise the above as HBU Agricultural/ /farm, even though some of the parcels could have an HBU that was not agri? If not, how did you handle it?

I appraised each parcel on its own merit. The HBU of many of the small tracts was residential. The larger tracts...Ag. Ag land is about $8K/ac.; 10 ac. (for example) homesites, $15K/ac.

 

[Lee Lansford]

I never framed the argument for the appraisal about what Fannie will lend on, I mentioned that Fannie does lend on these properties ( since it was asked at one point)

Post 52 develops 3 market value opinions, which imo an appraiser would have to do in this assignment, the argument, if there is an argument, is where to put the market value opinions. Denis argues that the MVO for the combined lot and house be put on the addendum rather than on the bottom of page one. Where you put a market value opinion on a form does not change the fact that you provided a market value opinion, which meant the HBU was part of making that MVO opinion.

I fail to see how moving the MVO of the house and lot to the addendum instead of the bottom of page SCA makes it a better appraisal, because it simply moves the MVO client engaged appraiser for to another spot.


The real heart of this is not where to put the MVO on a form, but what is the HBU for the entire property when it is a bulk property, imo it is as improved- Denis and Mich CG agree 3 market value opinions including one market value opinin for the bulk sale, but they did not idncoate what HBU for the entire property as a bulk property they would assign as asked in the URAR, HBU as improved yes or no. They just seem to avoid it by saying put that MVO on addendum instead of on SC page. But to develop the MVO they'd still have to decide HBU for the entire property, so what is their answer. WE know the vacant lot can have its own HBU as a stand alone lot so that is not the issue either.

The heart of this matter is, and has been, making certain that appraisers understand their responsibilities when appraising in such a situation. Specifically, with Fannie rules applying, a regulated lender is required to obtain an opinion of Market Value and "Bulk Transfer Value" is NOT the value that they are required to obtain.

 

[Terrel L. Shields]

Page 305, 12th Edition of The Appraisal of Real Estate
The reasonably probable and legal use of vacant land, or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.

I appraised each parcel on its own merit.

Then you inflated the value of the FARM...You created a scenario that did not exist (residential lots) and turned a farm into something that it wasn't, nor would sell as without being subdivided.

The fact my farm is flat enough to be a airport landing strip does not make it a commercial runway.

 

[J Grant]

The heart of this matter is, and has been, making certain that appraisers understand their responsibilities when appraising in such a situation. Specifically, with Fannie rules applying, a regulated lender is required to obtain an opinion of Market Value and "Bulk Transfer Value" is NOT the value that they are required to obtain.

? Who said the assignment was bulk transfer value (whatever the heck that is ) Market value could be opined on any kind of property....mixed use, multi parcel properties, single family with one lot, single family with 2 lots and far more complex properties. .

The assignment is market value opinion and re read Mich CG and Denis's posts; they did provide 3 market value opinions and one of those market value opinions was for the "bulk transfer" (your term ) aka they both provided market value opinions for the combined entity of a single family house and adjacent lot. Only difference is they recommend not putting that MVO on bottom of page one, so what, they still made a MVO for the house and adjacent lot together ...I fail to see how not putting it on the bottom of SC page means it is anything other than that.

 

[J Grant]

I appraised each parcel on its own merit. The HBU of many of the small tracts was residential. The larger tracts...Ag. Ag land is about $8K/ac.; 10 ac. (for example) homesites, $15K/ac.

So was your assignment to appraise the individual lots within the farm, or was the assignment to appraise the property as a whole, aka one enitty that happened to consist of many parcels?

If you appraised it as one entity and your HBU was "agri", then you concluded one HBU for the whole... but seems if a farm has only marginal value improvements and lots of vacant parcels each of has a higher HBU as residential then the HBU would for the entity would be vacant for res development ...imo from what is presented as example.

 

[J Grant]

HBU and credible results is the same for a MVO whether for lending or other reason client wants an opinion. Lending only enters this because that is the client, but the MVO should be the same if it were for tax purpose, divorce, or just an interested person asking what it is worth.

While the value of the vacant lot might be higher if severed vs its contribution to the whole, the value of the house is lower if severed as house gets contributory value for coming with an additional lot ( if that is the response from market )

Everybody agrees the appraiser should be competent and not misleading but isn't that true of all assignments....

 

[Terrel L. Shields]

Don't confuse what a property COULD be used for with what a property IS USED for. Feasibility isn't the same thing as HBU. If a frog had a pocket to carry a pistol in, he wouldn't be afraid of snakes.

 

[Mark K]

Page 305, 12th Edition of The Appraisal of Real Estate
The reasonably probable and legal use of vacant land, or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.

Then you inflated the value of the FARM...You created a scenario that did not exist (residential lots) and turned a farm into something that it wasn't, nor would sell as without being subdivided.

The fact my farm is flat enough to be a airport landing strip does not make it a commercial runway.

Since you're not familiar with this area or the local demand for large estate lots, your statement is really not accurate. Most ag use in this part of the county is an interim use with buyers standing in line for estate or mini-farm lots.

There is no "subdividing', I didn't 'create' anything that didn't already exist; the parcels stand legally alone but have corn on them. All it takes is a couple of phone calls or a FSBO sign and they would all sell overnight.

The owner knows that its a 'farm' in name only. My assignment was to appraise the land, a portion of the owner's larger holdings, not a 'farm'.

 

[Lee Lansford]

I never framed the argument for the appraisal about what Fannie will lend on, I mentioned that Fannie does lend on these properties ( since it was asked at one point)

Post 52 develops 3 market value opinions, which imo an appraiser would have to do in this assignment, the argument, if there is an argument, is where to put the market value opinions. Denis argues that the MVO for the combined lot and house be put on the addendum rather than on the bottom of page one. Where you put a market value opinion on a form does not change the fact that you provided a market value opinion, which meant the HBU was part of making that MVO opinion.

I fail to see how moving the MVO of the house and lot to the addendum instead of the bottom of page SCA makes it a better appraisal, because it simply moves the MVO client engaged appraiser for to another spot.


The real heart of this is not where to put the MVO on a form, but what is the HBU for the entire property when it is a bulk property, imo it is as improved- Denis and Mich CG agree 3 market value opinions including one market value opinin for the bulk sale, but they did not idncoate what HBU for the entire property as a bulk property they would assign as asked in the URAR, HBU as improved yes or no. They just seem to avoid it by saying put that MVO on addendum instead of on SC page. But to develop the MVO they'd still have to decide HBU for the entire property, so what is their answer. WE know the vacant lot can have its own HBU as a stand alone lot so that is not the issue either.

The heart of this matter is, and has been, making certain that appraisers understand their responsibilities when appraising in such a situation. Specifically, with Fannie rules applying, a regulated lender is required to obtain an opinion of Market Value and "Bulk Transfer Value" is NOT the value that they are required to obtain.

HBU and credible results is the same for a MVO whether for lending or other reason client wants an opinion. Lending only enters this because that is the client, but the MVO should be the same if it were for tax purpose, divorce, or just an interested person asking what it is worth.

While the value of the vacant lot might be higher if severed vs its contribution to the whole, the value of the house is lower if severed as house gets contributory value for coming with an additional lot ( if that is the response from market )

Everybody agrees the appraiser should be competent and not misleading but isn't that true of all assignments....

? Who said the assignment was bulk transfer value (whatever the heck that is ) Market value could be opined on any kind of property....mixed use, multi parcel properties, single family with one lot, single family with 2 lots and far more complex properties. .

The assignment is market value opinion and re read Mich CG and Denis's posts; they did provide 3 market value opinions and one of those market value opinions was for the "bulk transfer" (your term ) aka they both provided market value opinions for the combined entity of a single family house and adjacent lot. Only difference is they recommend not putting that MVO on bottom of page one, so what, they still made a MVO for the house and adjacent lot together ...I fail to see how not putting it on the bottom of SC page means it is anything other than that.

THE problem? Many an appraiser would fail (going back to the OP and referencing post #52) to recognize the correct approach and would instead lump-together the two as though one and report this as "Market Value" (which it is not).