Fannie Mae and "Multiple Parcels"

[Econobot]

That's still not how it works. There's nothing hypothetical about a property owner holding and using multiple parcels. Nor is there anything hypothetical about putting an opinion of value on the assemblage. Nor is there anything hypothetical about a lender being willing to encumber them all at a 95% loan if that's what they want to do.

Nor is (invariably) calling the value of the assemblage MV as it relates to each parcel a hypothetical - it's just dishonest.

I disagree, valuing together IMO requires they are merged or the HC that they are merged. The HC is the assemblage of the parcels, so the appraiser values the property as one. Assemblage would be valuing the two seperately and then adding together. Merged as one basically gives almost no contributory value to the 2nd parcel as it's only value in the appraisal is the contributory value of the additional square footage which could be hundreds of dollars or even a few thousand dollars above the single, improved lot value. Developing the MV this way basically ignores the 2nd parcel but more importantly, gives it the true and accurate contributory value of additional land (minimal). IMO value in use is a way to justify the price a homeowner wants to get for their holdings (2 parcels). Valuing under HC would make the additional parcel worth peanuts which is ultimately what is probably the most equitable to the public trust as like you said someone is trying to get vacant land for 5% down, which is unheard of.

Going about it this way can more than likely lead to an opinion of value below the contract price as the additional parcel is valued far less than what the agent is trying to get for the package deal. Which bolsters more reason for those involved to value separately... IMO this is playing ball by your rules when the game is being influenced, and it is, Fannie is trying to pave the way for certain folks to borrow on vacant land at unprecedented rates...

 

[Andrei Fin]

Now to be sure, if we went back 5 years and identified *every* example which occurred in that area we'd both have a better foundation upon which to develop our opinions. Can we at least agree on that?

The more data you look at, the better. But IMO having two sales of the subject within the past 3-4 years under similar market pressure are superior to your outside data in this particular case. Some appraisers have this weird aversion, but it's often said "the subject is its own best comp" since it is an IDENTICAL property after all. That is a discussion that could fill an entire thread. But looking at Walnut you're getting an average house and nice lot, Garfield has nice house and below average lot. Btw I commute up Walnut every day at freeway speeds, while Garfield is two lanes with a stop sign at every block. Which brings up another interesting point. Lots of appraisers here clutching their pearls about out-of-state reviewers, or geographic competency on hybrids, but have no problem offering opinions about markets where they know nada.

 

[Econobot]

Sorry, but appraisers can't just HC our way out situations where the client is asking us to do one thing and say another. There are certain conditions that are applicable to the use of an HC, and "my client wants me to ignore HBU so I can call the result the MV" isn't one of them.

In this case there is no legitimate reason for ignoring HBU in a MV assignment, and doing one thing (FannieValue) whilst calling it another (Market Value) doesn't meet any aspect of credible, even when Fannie is a user. Not when the real fix -which won't mislead anyone - is to just call it FannieValue in the first place.

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Valuing under HC as merged is "clearly required for reasonable analysis and comparison"... I don't have comparable sales with additional parcels, so I can't analyze this kind of sale and I don't have anything for comparison. I should however in the market find a sale with a larger site size which would allow me to compare this sale to... Like I said, it's going to result in a lower value than if the two were seperate and I'm stating that in the report by checking NO on HBU and summarizing it. How is stating that I can't compare this package of property rights in any other way misleading especially when I say this is not the HBU. That statement alone should tell the user, "if I want to know the actual value of the two parcels I need to value the residence and then value the 2nd lot".

 

[Econobot]

Using a HC as one parcel to me is no different than the farmer who slices off 3 acres around his house from the larger farmed acreage so he can get a secondary market loan. If it were up to me I would make the owner merge the two lots, if that had consequences later then too bad, if they want to keep a buildout option for the parcel later then do like everyone else and get a land loan for the additional lot. Ultimately and IMO this is what this is all about, paving a way for people to finance vacant land at unprecedented low rates. I don't buy into it, don't think it's fair and equitable to the public and appraisers should not be engaging in it with "value in use". Excess land should be given peanuts of contributory value if it has to be valued and based solely on the additional contributory value of the larger site size and explained that it's not the HBU. This whole checking the NO box on the HBU question is new to me but I think if it's explained and rationalized an appraiser can provide a credible report. Again, it may also force the hand of the parties involved to understand that you can't get an additional parcel of vacant land at 95% LTV...too bad so sad.

 

[CANative]

We're appraising the interest in a real estate holding. One parcel, 100 parcels, 1,000 little pink houses in Oakland, all rented.

Don't forget the adage regarding the sum of the parts.

 

[J Grant]

But the homeowner and there buddies claim it's for privacy and maybe to build on one day.....

What do you call a homeowner who lives with a hole in their roof? Do you complete the appraisal and state, the owner is fine with the hole in the roof; no negative impact on marketability or valuation?? Ignoring appraisal methodology in an effort to justify homeowner behavior is owner advocacy and that's a stark contrast to the role of an appraiser as I understand it. That's what you're doing with this "value in use" garbage, I'll ignore the HBU and allow the owner's current use to dictate how I appraise this property.... I don't care what an owner does, it's my job to sort out HBU and then establish a value based on that. I don't value based on what a owner does/did/or wants to do. The HBU class is calling you...answer the call...

Lol when you stopped ranting about me and tried to address the topic with your concoction of HC George Hatch showed you how wrong you are...funny!

 

[George Hatch]

The more data you look at, the better. But IMO having two sales of the subject within the past 3-4 years under similar market pressure are superior to your outside data in this particular case. Some appraisers have this weird aversion, but it's often said "the subject is its own best comp" since it is an IDENTICAL property after all. That is a discussion that could fill an entire thread. But looking at Walnut you're getting an average house and nice lot, Garfield has nice house and below average lot. Btw I commute up Walnut every day at freeway speeds, while Garfield is two lanes with a stop sign at every block. Which brings up another interesting point. Lots of appraisers here clutching their pearls about out-of-state reviewers, or geographic competency on hybrids, but have no problem offering opinions about markets where they know nada.

The subject's sale history is obviously better than nothing, but it's no substitute for actually looking at comparables. Moreover, the choice here doesn't ever come down to an either-or. The correct answer is always "both". Which you didn't do even though this example is apparently personal for you.

Face it, you had no idea about the recent vacant land sales in relation to the more recent $440k transaction until I pointed them out. You never even looked, and you obviously don't expect your appraisers to look. Likewise, you never bothered to look for 2-parcel transactions, either; but I did because I always do that whenever some variation occurs in my subject property attributes. If you had actually known what you were talking about when you first cited this example then none of the other data I noted would have surprised you the way it did.

I comment all the time in my appraisals about where the subject's prior sale was in relation to the market conditions at that time. Sometimes that prior sale looks low in comparison to those trends, sometimes it looks high, but usually it's right in the middle. I also do that when any of my comps has a prior sale that occurred in the same time frame as the subject's prior sale because sometimes THAT relationship speaks to where the subject might compare this time. The point is that I always look - even though it's not "required". The 12-month limitation in Fannie's program means nothing to me. It never has.

 

[George Hatch]

Valuing under HC as merged is "clearly required for reasonable analysis and comparison"... I don't have comparable sales with additional parcels, so I can't analyze this kind of sale and I don't have anything for comparison. I should however in the market find a sale with a larger site size which would allow me to compare this sale to... Like I said, it's going to result in a lower value than if the two were seperate and I'm stating that in the report by checking NO on HBU and summarizing it. How is stating that I can't compare this package of property rights in any other way misleading especially when I say this is not the HBU. That statement alone should tell the user, "if I want to know the actual value of the two parcels I need to value the residence and then value the 2nd lot".

You should stop digging because if you have vacant land sales and you have SFRs on single lots you can compare whether that sum is higher or lower than the SFR on the single large lot. That's not the optimum way to do it, either; but it's better than making the unfounded assumption that the vacant parcel is worth more as a lawn for the SFR than as it's own marketable site.

You really don't want to get into it with me on the valuation of vacant land until you've completed at least a dozen land appraisals on your own - which I know you haven't done yet. I've got 4 land appraisal assignments going right this minute, and you're not qualified/licensed to appraise any of them.

20 acres or raw land with a potential yield of 100 SFR parcels
6-lot assemblage consisting of a small SFR subdivision parcels that were recently mapped
195-acre assemblage to yield 14 estate-sized lots
20-acres of hillside avocado grove that's good for a 4-way lot split+remainder.

 

[Andrei Fin]

[QUOTE="George Hatch, post: 2954648, member: 66065"

You never even looked, and you obviously don't expect your appraisers to look.
[/QUOTE]

I was never asked to appraise the property, it was an example of how and why the market can view a second parcel as value in use. As a prospective buyer, I had no interest in pulling such comps because <see prior sentence>.

The appraisal is based on the comps. If the market viewed the site as separate HBU and not value in use, then the sales grid would make no sense and the appraisal would be poorly supported. The proof will be in the pudding.

 

[Mr Rex]

Fun and giggles, but why does H&BU not consider if 2 parcels can be legally combined with as much consideration that as 2 entities that may have a higher value? The remaining question, regardless of USPAP doctrine, is where is the public trust undermined in this scenario? Is infringement on property rights in the Public Interest? Isn't the scenario presented an infringement? Isn't the OP suggesting that a lender can not lend on a property fully supported (or more) by market value, due to a USPAP dictated H&BU protocol that is not one size fits all and never was intended to be?