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

[Carnivore]

This afternoon I have been researching my Commonly referred to Market Segment Plaza-Midwood in Charlotte. Its actually a bunch of smaller neighborhoods/SD that have all blended together into One Common Hood. I found lots of site sale. Lots of them.

Attached is a short list I made. What prompted me to do this was Terrell made the comment about Lots sitting around waiting to be sold with no Buyers.

This is in the Form of a CMA. Its a short list limited to R-5 five units per acre There are a lot of R-4 and R-3 sale

What i did not find was any sale with two lots or more using MLS. I am going to have to use GIS to find them if they exist. I do know of one, but I can't recall the address.

What I am learning here is this is not a hard process, no, but it is a time consuming process if you have one of these Double Lot assignments

Years ago and probably even now the Lenders used to get wrapped around the Axle when your Site Value exceed 30% of the Total improved site MV. Apparently FNMA does not care about that any more!

 

[djd09]

Fannie (or any client or intended user) can tell us what they want but they can't tell us how to appraise it.

you should read Cert 4.

 

[Lee Lansford]

you should read Cert 4.

Yet that does not trump USPAP.

 

[Lee Lansford]

Yet that does not trump USPAP.

I think that Fannie tired of seeing so many made-up out-of-thin-air Cost Approaches they thought "Why bother?". Seriously.

EDIT to add: Whatever Fannie might suggest, to exclude either (or both) the CA and/or IA require good explanation for the exclusion.

 

[George Hatch]

you should read Cert 4.

Cert 4 reflects the point that buyers and sellers and brokers and appraisers all rely primarily on the SCA to value SFRs. It doesn't create it. Nor does it prohibit the development of the other two approaches to value. What it does do is lay out the point that Fannie doesn't accept appraisals that aren't based primarily on the SCA.

 

[CANative]

It's because we're getting old lol... a 1990s home is 20-30 years old, it's short lived building components are already needing replacement. So if a home is recently updated, you compare it to other recently updated homes, and vice versa, regardless of what year the structure was built. It's like a car past 100 miles or 10 years, most of the depreciation is already behind it.

Check out the cost tables in AH 531 (The residential cost handbook from CA's board of equalization.) Two sets of costs - one for pre 1990 and one for post 1990. They differ for the very reasons GH mentioned (and more.)

 

[CANative]

I think that Fannie tired of seeing so many made-up out-of-thin-air Cost Approaches they thought "Why bother?". Seriously.

EDIT to add: Whatever Fannie might suggest, to exclude either (or both) the CA and/or IA require good explanation for the exclusion.

The CA and IA are not direct reflections of market activity and can be easily leveraged, especially the IA.

 

[George Hatch]

The word problem I posed either was this:


If our subject is a 2000yb home of 1900sf on 2 parcels totaling 15000sf, which will be more comparable?

A - a 2000yb home of 1900sf on a single parcel of 15000sf

or

B - a 2000yb home that's exactly like A and is located next door, but is on 2 parcels totaling 15000sf.


The subject itself - aka the appraisal problem to be addressed - falls under the B category, not the A category, so obviously the B-type sales are the ONLY sales that won't include an adjustment or consideration for the point that there are 2 parcels, each of which are separately marketable. If you use the A sales then you still have to figure out if there is a difference between the As and the Bs in order to make those As equivalent to your subject.


The property on Garfield we've been talking about has that B-style composition. Garfield would be a direct comparable for the subject in the word problem above. OTOH, the properties in the dataset that the appraiser used to value Garfield didn't include a single B-style property. These are all As:

4496 Edison
6040 Grant
6000 Van Alstine
5012 Kenneth (listing)
3346 Walnut (listing)

My problem with using all-"A" type properties to value a "B" type property like the subject of our word problem or the property on Garfield we've been talking about is that the sales of these "A" type properties indicate directly to the value of an "A" property, not necessarily a "B" property.

So unless the appraiser in the Garfield appraisal took their analysis one step further to figure out what the effect on value and marketability of the subject's "B" configuration is then they haven't valued it.

If that appraisal is based on the undisclosed assumption that the subject's "B" configuration is the same as an "A" configuration then that's a problem. At a minimum, that's a violation of SR2-1.c

"(c) clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the appraisal."

And that's the *best case* scenario because it assumed the appraiser was savvy enough to consider the fact that the subject was a "B" and that none of the "A" type sales included the additional element but simply didn't disclose what they were doing in their report. If the appraiser wasn't even savvy enough to recognize that they were making the assumption that the subject could be directly compared to the "A"s without any other consideration then that's an SR1-2.f violation.

 

[glenn walker]

Cert-4 Is kinda like a Minimum where the appraiser is certifying that he/she has enough Comparable Sale's and market data to develop a reliable and credible Sales comparison approach. It does not prevent the appraiser-from developing the Cost or Income approach- if he/she believes its required or relevant. Since Fannie-Freddie and lenders guidelines, require the $$-value based on the SC approach to be the only approach used to fund a loan. As "CAN" stated Fannie knows the Cost & Income approaches on residential properties are not based on market reaction and are easy to manipulate. In general most Fannie type properties will have Surplus Land: This is when the lot is larger in size and the extra land (or surplus) (cannot be sold off separately) This means the “Surplus” doesn't have a separate Highest and Best use-and is treated more like a Premium Lot Size on a residential property.

In my opinion some may have confused Surplus land "V" Excess Land: being larger in size and the extra land (or excess) "CAN" be sold separately from the existing lot. In other words, a portion of the lot can be broken off from the rest, sold separately, and have a different highest and best use from the rest of the lot, then " it's not a Fannie type of property " and the appraiser at this juncture needs to advise his/her client to see how they want to proceed ?

 

[J Grant]

In my opinion some may have confused Surplus land "V" Excess Land: being larger in size and the extra land (or excess) "CAN" be sold separately from the existing lot. In other words, a portion of the lot can be broken off from the rest, sold separately, and have a different highest and best use from the rest of the lot, then " it's not a Fannie type of property " and the appraiser at this juncture needs to advise his/her client to see how they want to proceed ?

Nobody is confused about surplus vs excess ( we all passed the same test, lol ) Fannie does lend on a house sold along with a lot of excess land as long as the lot (which can be build able ) is contiguous . Which makes it a "Fannie type of property" ( one they will accept for a loan ) Fannie has lent on these for years, the thread is reaction to fannie advice how to appraise it ....though I agree always prudent to advise a client on any atypical property just to double check.