Bad advice from Fannie--"Multiple Parcels" from Dec. 2019 'Appraiser Update'

[J Grant]

Canivore - think i know what the underlying problem(s) are in this specific situation.
1. The inflexibility of the form is number one.
The form can have as much narrative added as we want he

2. The Opined Value at the bottom of Page 2 does not allow for a Value in Use. Why is that so important to this specific subject property physical and economic characteristics assignment? That is the total possible mtg amount and then adjusted for Loan to Value percentage/aka actual mtg amount.

The total mortgage amount or adjusted loan to value % is a lender issue, not an appraiser /appraisal issue. The opined at the bottom of page 2 is a market value opinion. for the entirety of the subject ( 2 parcels conveyed together ) The application of value in use is the appraiser's determination of contribution value of the additional excess parcel to the whole, in order to reach a single market value opinion for the 2

It's something like a auto-fill transfer into the settlement statement and Deed of Trust Mtg Amount. and other parts of the total package paper work.
In other words the Value in Use is the total loan adjusted for LTV.

I fail to understand how loan adjusted for LTV has anything to do with the appraisal, or value in use nor market value opinion. LTV is the amount borrower puts down for the loan to value % of a mortgage-s a borrower finance and UW issue that does not impact appraisal results. A less credit worthy borrower may be asked to put 20% down by UW / a stronger borrower puts only 5% down. Thus each loan would have a different LTV ratio . What does that have to do with the appraisal of a subject property? (nothing)

 

[Carnivore]

Canivore - think i know what the underlying problem(s) are in this specific situation.
1. The inflexibility of the form is number one.
The form can have as much narrative added as we want he

2. The Opined Value at the bottom of Page 2 does not allow for a Value in Use. Why is that so important to this specific subject property physical and economic characteristics assignment? That is the total possible mtg amount and then adjusted for Loan to Value percentage/aka actual mtg amount.

The total mortgage amount or adjusted loan to value % is a lender issue, not an appraiser /appraisal issue. The opined at the bottom of page 2 is a market value opinion. for the entirety of the subject ( 2 parcels conveyed together ) The application of value in use is the appraiser's determination of contribution value of the additional excess parcel to the whole, in order to reach a single market value opinion for the 2

It's something like a auto-fill transfer into the settlement statement and Deed of Trust Mtg Amount. and other parts of the total package paper work.
In other words the Value in Use is the total loan adjusted for LTV.

I fail to understand how loan adjusted for LTV has anything to do with the appraisal, or value in use nor market value opinion. LTV is the amount borrower puts down for the loan to value % of a mortgage-s a borrower finance and UW issue that does not impact appraisal results. A less credit worthy borrower may be asked to put 20% down by UW / a stronger borrower puts only 5% down. Thus each loan would have a different LTV ratio . What does that have to do with the appraisal of a subject property? (nothing)

That's because you have a reading comprehension problem. If you slow down and actually read what I said it will make more sense to you. Another problem you have in reading is you take things out of context of the entire sentence or paragraph.

Let me give you an example: I quote myself "Canivore - I think I know what the underlying problem(s) are in this specific situation.
1. The inflexibility of the form is number one."

Let me try and make it clearer to you. I don't actually know, I just think I know.

Then you rail on about what does LTV have to do with it.... Well Again you didn't read my post. What I was trying to say is pretty simple. Let me state it again: This might be an internal issue with how they put together the loan package. Probably cause by the software they are using and how it auto-populates different documents.

Pay Attention to this next sentence! I will repeat; I think they may have a problem with how the appraisal results auto-populate the loan package documents. In the Loan package is where they determine the loan amount which is determined by the LTV(loan to value) Ratio. That is based on the Value In Use House & Lot + Extra Lot contribution.

I will give you three choices

Can you Place that Value In Use amount on page two at the bottom and also check AS-IS.

A. Yes
B No
c Maybe

I really want to know your learned Answer! You don't even have to explain, just answer A, B, Or C.

 

[Lee Lansford]

It most certainly can be appraised that way, because there's nothing that says a subject property must consist of only one parcel, and if you're appraising our adjoining improved and unimproved parcel as if separate parcels then you're appraising a hypothetical subject property.

.

Please teach us...

Explain to us exactly how you would offer one opinion of MARKET VALUE to this scenario (and one which I have encountered):

SFR improved parcel, conforms to the market, zoning etc. This is a highly marketable property "as is" for the typical occupant purchaser.

The owner of the improved parcel owns the adjoining vacant parcel. High demand for this parcel by local builders.

The land for each...that's each...parcel is $350k

The market for the one is not the market for the other. Two separate and distinct properties. The market tells us that each would sell to different buyers and that the vacant parcel would be developed into a new SFR.

Owner wants to refinance. The owner and lender ask you to offer a single opinion of MARKET VALUE.

OK, here you go...teach us how you would do it.

 

[Lee Lansford]

View attachment 42949

Trying to cram an appraisal of any other property type (or of multiple properties) into the GSE single family form report is like trying to cram the ugly stepsisters' feet into the glass slipper.

You understand.

You "get it".

There are a couple of folks in this stream of discussion who, too obviously, don't understand.

 

[J Grant]

Carnivore, with respect, am just printing the most relevant part of your post. (your portions in red)

I repeat; I think they may have a problem with how the appraisal results auto-populate the loan package documents. In the Loan package is where they determine the loan amount which is determined by the LTV(loan to value) Ratio. That is based on the Value In Use House & Lot + Extra Lot contribution.

Again, we are only responsible for our appraisal results. How it is used later to establish an LTV % or to auto populate loan docs is out of our control . However, to be clear, the appraisal provides a market value opinion for the improvement and vacant lot as a combo, which is what an LTV % is based on - NOT a " That is based on the Value In Use House & Lot + Extra Lot contribution."

I will give you three choices

Can you Place that Value in use amount on page two at the bottom of the when you check AS-IS

A. Yes
B No
c Maybe

I really want to know your learned Answer! You don't even have to explain, just answer A, B, Or C.

My answer is B - NO. The ONLY place a value in use occurs in one of these appraisals would be for the analysis of the vacant lot contribution ONLY, the appraisal provides one single market value opinoin on bottom of page two.

How can people not understand , it is not that difficult- Anyone can agree or disagree with it as a methodology, but what fannie is asking for is clear - one market value opinion on page two for the combo property of two parcels conveyed , with value in use as the analysis only applying to the vacant site only contrition.

They are not asking for a value in use on page two in lieu of a market value opinion.

 

[George Hatch]

IMO, the form works for the appraiser. The appraiser doesn't work for the form.

I have always had zero qualms about writing around the limitations of the form to first say what I need to say; and then to the extent I'm able, to also phrase things in a manner that even a Fannie clerk can understand. I don't mind drawing in crayon or providing separate answers to separate questions.

 

[George Hatch]

I always agreed with the additional work part , as well as a separate value for each , then one value for the whole...not an easy assignment but doable .

What indeed is "market value" for this combo is the question....(the other will be lower; and that lower cannot be considered the MV for those property rights)- since market value as defined is the most probable price ( not the highest most probable price ) why can not a "lower" price also be the market value in some cases ? Such as when the two are conveyed together sees a lower $ amount as the most probable price market returns for the lot component..

I know you enjoy debating theory as much as I do! The most probable price is not a rote average, it is whatever end of the range the market credibly supports. Sometimes the most probable is the lower, other times the middle , other times the higher price.

I didn't want to let this question pass by without addressing it because I think it's a valid question.

"why can not a "lower" price also be the market value in some cases ?"

On the conceptual level that is one of the possibilities. Examples of it occurring IRL might be harder to come by, but maybe such an example would be that if the difference between the two is too small to trigger the alternative. If in Andrei's example the value together was $440k and the value if sold separately was $450k then how many sellers would even bother?

Another example might be if there's little or no market demand for the extra lot and the exposure time necessary to get that price was too long to justify waiting around for it. If it takes the seller 2 years to get the sale then some of them will take the bird in the hand. Even moreso if the seller thinks the pricing in the market segment for that lot might be in decline or go into decline during that marketing time. \

Or maybe the factory in the 1-factory town just closed and the sellers anticipate that everyone is going to leave so they're highly motivated to make the sale ASAP and don't think they can afford to deal with any complications.

So I'd definitely say it's possible for the lower value to be the "most probable price" under certain conditions. I would not fail to consider that possibility in my HBU analyses, either.

BUT......

The assumption in the definition of MV doesn't just refer to buyers being well informed. In the next breath it also includes the "and acting in their own interests". So isn't just the one element - it's both elements acting together. And while (as Andrei noted) there are more ways to define someone's interests than in purely monetary terms, we nevertheless express value in monetary terms; and with MV it will be the actions of the many which define what is "most probable" not the actions of the few....or the one. (thanks, Spock). Or the pending sale contract. Or "what Fannie will accept"

 

[J Grant]

Gh
So I'd definitely say it's possible for the lower value to be the "most probable price" under certain conditions. I would not fail to consider that possibility in my HBU analyses, either.

Thank you for that agreement - and it should be a sticky. Too many assume the most probable price is a default average or middle price. It is supposed to be what market returns as the most probable price for a specific property , and that price is also influenced by a market cycle and interest rates. A down market / high interest rate will typically yield lower probable prices and a hot market /low interest rate yield higher prices as the most probable.
Superior properties have credible support for a higher price as most probable , inferior properties for a lower price as most probable. When reviewing appraisals it stands out like a sore thumb when there was a disconnect -

These threads yield gold when people stick to the appraisal issues instead of getting derailed by bickering/ insults/condescending lectures .

My New Years wish for the board would be for people, no matter what their status, to stop doing that. ( Or do it in the water cooler. ) Every appraisal topic thread would be half as long and twice as interesting

 

[George Hatch]

Just to reiterate for other readers - past present and future - "most probable" speaks to the actions of the many. That means the process is to identify the many in that situation (1st), and what their various actions are (2nd) before coming to the opinion of what most of them are doing (3rd). It doesn't mean skipping that analysis and deferring to what the contract price is or what a lender will accept.

 

[Terrel L. Shields]

HBU...can actually be more than 1 single use. Period. There are interim uses. There are uses as is, or as if vacant. Two lots identical zoning. Both legally permissible. As is both are the most productive use, feasible use, ( no cheating with what could be in some scenario of future development) and maximally productive use of each lot. Their HBU is identical. NOTHING in the test of HBU says anything about the nature of the improvements. In my opinion the HBU is their current use. The fact one lot is improved and one is not is meaningless. The vacant lot is not impaired by not having improvements. The improved lot likewise is not so impaired that the value is less than the value "as if vacant."