Fannie Mae and "Multiple Parcels"

[George Hatch]

In the multiple parcel situations I have personally seen (and I was actually in contract on one myself) the second parcel was sold in the market upon the basis of value in use. Go figure.

"most probable price" and "typical buyers" don't refer to any one transaction or any one buyer, but to what's common for the group.

What types of buyers are typical for vacant parcel purchases? do they use the same units of comparison that SFR buyers use? Do they use the same comparables?

 

[George Hatch]

If you want to test the principle then switch out the property characteristics. Lets say it's two adjacent parcels with the same zoning, but one had a house on it and the other had a 4plex. They both have a "residential" use and zoning which permits either type of occupancy, but do they have the same HBU as improved?

Or how about two properties, one with a 1980s SFR of 1500sf and the other with a recently built custom of 3500sf. The can both have the same general "residential" use and can both be encumbered with the same loan, so does that mean they would typically sell to a single buyer?

 

[Terrel L. Shields]

In new USPAP FAQ 211 is 223, and since a dual lot property exists and therefore was purchased at the same time likely, I do not follow how it is "hypothetical". It is NOT contrary to what exists. One merely makes the assumption they sold together and market dictates if the two land values are identical or the second lot acts more like a surplus land parcel or as a separate and equal lot. I opt the latter in most cases but will see the opposite in cases.

In agricultural land farms are usually several tax parcels if any size. If you tried to value them separately as stand alone parcels, you might inflate the value on the basis of tract sizes (small tracts bring more per unit acre), or alternatively run a risk of discounting any tract landlocked or otherwise suffered impairments. My farm has 2 deeds but combined under 1 tax parcel. But if the tracts were in different sections I would have 2 tax cards. That is because the assessor separated properties by section. In any case it is one economic unit. There are no parcels over 640 acres...there are farms that large. An extreme case exists where an apple orchard was subdivided into 5 to 20 acre lots, no roads, etc. One ranch had some 40 or more lots. So the assessor lumped a number of them together. But the ranch would have 40 tax cards otherwise.

 

[George Hatch]

Tax card doesn't equal separate property interest. Or vice versa

 

[alebrewer]

So it would appear that (a) no one has posted either of the FAQ's, and that (b) most see this as a black and white issue - IF there is a 2nd lot, and if that lot is severable, then it MUST be excess land, which is just not the case. First to the FAQ (at least the one that has more meat) 223 - to use the 20/21 version (since we have only 7 days remaining of the 18/19 cycle). The question is (and I summarize), lender wants a MV appraisal on a property with two separate legal lots, and wants them appraised as though they were one legal lot; intended use is mortgage lending. Question (not paraphrased): "May this assignment be completed treating these two lots as if they were one legal lot with the highest and best use as one legal lot?" Response (not paraphrased): "Yes. However, complying with the lender’s request will require use of a hypothetical condition. If the client is a federally regulated financial institution, the client may also need an “as-is” appraisal. If the appraisal were based on a hypothetical condition (i.e., market value of the subject as if it were a single lot), and if necessary for credible results, the appraiser would have to develop an opinion of highest and best use of the hypothetical parcel. If this leads to the conclusion that the highest and best use would be subdivision into two or more lots, the appraiser must perform the appraisal recognizing that potential use and may need to perform a subdivision analysis to reach a credible opinion of the highest and best use of the hypothetical parcel."

Couple of points: (1) the fact that there are two separate lots does not absolutely imply that there are two different H&B uses (e.g. that there is excess land). Determination of whether or not there are separate H&B is the job of the appraiser, who may, OR MAY NOT, conclude that the vacant parcel is excess land. (2) IF the appraiser determines that the 2nd lot is NOT excess land, then the guidance is to invoke a HC (namely that the appraiser is valuing the property as if it were one single lot).

To J's point, if her determination is that the 2nd lot does not have a separate H&B, then the guidance is that she can invoke a HC, and appraise the property 'as if it were one lot'. To the point of (most) others on the post, if the determination is that the 2nd lot does have a separate H&B, then, per the guidance, the appraiser may need to perform a subdivision analysis to reach a credible opinion of the highest and best use of the hypothetical parcel (which may, or may not, require competence that the appraiser engaged in the original assignment may possess).

IMO

 

[J Grant]

If you want to test the principle then switch out the property characteristics. Lets say it's two adjacent parcels with the same zoning, but one had a house on it and the other had a 4plex. They both have a "residential" use and zoning which permits either type of occupancy, but do they have the same HBU as improved?

Or how about two properties, one with a 1980s SFR of 1500sf and the other with a recently built custom of 3500sf. The can both have the same general "residential" use and can both be encumbered with the same loan, so does that mean they would typically sell to a single buyer?

They might sell to a single buyer ... it would be a smaller group of buyers, but some buyers might want two properties bought together: one to live in one to rent ,or both to flip, who knows. As with any other appraisal a case by case basis .

 

[Mr Rex]

What if the parcels can be legally combined? The argument seems to reach out to governmental control over private property rights. The "State" or USPAP in Lee's interpretation as the pent-ultimate HOA. Yep, I have an issue.

 

[J Grant]

The question is (and I summarize), lender wants a MV appraisal on a property with two separate legal lots, and wants them appraised as though they were one legal lot; intended use is mortgage lending. Question (no

For the fannie example, The lender does NOT want them appraised as though they were one legal lot. The house and adjacent lot remain a house and an adjacent lot, conveyed under one sale and under one mortgage.

Can an appraiser appraise the single value of a house that sells with an adjacent lot ? I believe they can, don't appraisers tackle harder problems than that?

 

[alebrewer]

The question is (and I summarize), lender wants a MV appraisal on a property with two separate legal lots, and wants them appraised as though they were one legal lot; intended use is mortgage lending. Question (no

For the fannie example, The lender does NOT want them appraised as though they were one legal lot. The house and adjacent lot remain a house and an adjacent lot, conveyed under one sale and under one mortgage.

It is my understanding that (a) they are identified as two separate parcels (e.g. two legals, two APN's, maybe two addresses?), but (b) the analysis would require the HC that they were, in fact, one lot. I'm thinking of the grid - you combine the site sizes as one site size in the grid, do you not?

 

[gregb]

The question is (and I summarize), lender wants a MV appraisal on a property with two separate legal lots, and wants them appraised as though they were one legal lot; intended use is mortgage lending. Question (not paraphrased)

My understanding is that the client does not want two adjoining separate legal lots appraised as though they were one legal lot, but as one economic unit, in one appraisal. Recently appraised a property with two adjoining beach front sites. One site was improved with a main house as well as a guest house, while the adjoining site benefited from the tennis court and swimming pool. Historically both sites have always sold together. There are recorded certificate of compliances for each site, stating each site is a legal lot.