Excess land or surplus land

[Terrel L. Shields]

You need to confirm that it could be split.

Surplus land is land beyond what is necessary to support the highest and best use but cannot be sold off separately.​

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On the Fannie Mae/Freddie Mac appraisal forms, the question- “Is the highest and best use of the subject property as improved (or as proposed per plans and specifications) the present use?​

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As is - (improved) - does not imply a future survey and division of a singular tract of land. To me, it only applies if you are holding TWO or more tracts of land that are platted as such.

 

[sputnam]

As I understand it, FHA requires the excess lot NOT be included in the valuation $ number. However, that does not mean the parcel was separated !! ( the lot is not separated legally or physically. ) What it means is that for analysis purposes per the FHA assignment condition, the excess lot value was not included in the $ market value opinion.

There is no HC that the parcel was "separated." The HC is that the value of the parcel is not counted in the appraisal

That said, I have no idea per zoning if that front narrow lot for the subject along the road meets minimal zoning and can be legally its own lot. That is a zoning issue wrt whether you have a two dividable parcels each with enough with road frontage or just a big surplus odd shape lot)

An HC is not needed to appraisal a portion of a property. You just have to describe what you are appraising. There's a FAQ about it.

 

[Zoe]

Not the point. No reason for person to mortgage the whole property for a long term mortgage most likely. FHA, conventional or whatever. No reason.

That person has the other parcel free and clear to do as they wish with.

Give me 5 minutes with the homeowner. I know what I will be appraising.

 

[Zoe]

Always focus on market participants and typical motivations. Can you read between possible conflicting motivations between homeowner and lender/FHA?

Study it and get back to me.

 

[Mark K]

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As is - (improved) - does not imply a future survey and division of a singular tract of land. To me, it only applies if you are holding TWO or more tracts of land that are platted as such.

I think that I agree with this on relatively small lots like the subject. OTOH, if the subject has a lot of frontage that is crying to be split, that's different. A HBU is necessary to determine surplus/excess. I think the OP's subject could easily be considered surplus but in in SC, it apparently could easily be excess.

Example: My brother lives in NC but recently inherited a house w/2.4 ac. in SC near Ft. Bragg. It has a lot of frontage and the house is located at one end. He had a broker come out to it to list the house and the broker, saying there's a demand for SFR building lots, suggested splitting the lot. For a total of $2,500 in survey expenses he split the site and then sold off the 2nd lot to a builder for $50K and then sold the house for about $250K. That extra 1.2 ac. would have added very little to the value of the home as surplus. That type of split would be very unlikely in this area for numerous reasons. As usual, it depends.

 

[Sadie]

You need to confirm that it could be split. Zoning isn't the only issue.

Presumably, your assignment is to provide an opinion of the market value of the subject property. What the lenders do with that is a lender issue, not an appraisal issue. If you determine that is excess land then, the Highest and Best Use of the property may be to subdivide and build another residence. To accomodate HUD rules about that, you may need to provide multiple values in your appraisal report. The value of the entire property, the value of the portion of the property with the dwelling, and the value of the excess. If your Client tells you that you can't give value to the excess property then, your property description should only include the portion of the property with the dwelling.

If you do that you violate the SOW rule. By accepting an FHA appraisal, you need to provide an appraisal that conforms to FHA limitations and guidelines. If you decide to partition off the excess land for appraisal purposes, then you need to adequately describe both the portion with the improvements and the portion of the site you removed from valuation.

Also for those of you who forgot: Excess = Excellent (you can divide) and surplus = sucky (can't divide.)

 

[MKay Appraising]

So, just an update. This is a real assignment. I should have specified, haha!

But I've inspected the property and I asked a lot of questions. Turns out the septic tank for the home sits right behind the house and the field lines go off to the Left on the small area. The right side actually used to have a manufactured home sitting on it! There is a separate water meter, a utility easement on the additional acreage for electricity hookup, and an additional septic tank in the ground with field lines going further to the right side of the parcel. NOW I'm very confident that the right acreage is excess land, BUT I'm waiting on a call back from county zoning department to verify that the lot can still be split. If it can, then I'm not valuing the excess land and I'll notify the lender beforehand. If it can't, then I'll value the entirety of the land and account for the odd lot shape. Please let me know if anything here sounds wrong!!

Also, in the case that the lot can be split, how do I determine the acreage that is valued? Do I just ask county zoning what the minimum lot size requirement is for a septic system and take that, or do I just leave the split up to the lender?

All of your replies have been very helpful!

 

[TerryRohrer]

What is your legal description going to be after you personally subdivide the property? Will you have the correct plat and dimensions? I spoke with a homeowner the other day who purchased two adjoining lots and had them joined to form one legal parcel. I asked and he indicated the fee was a bit less than $5,000 for the surveyor and various fees. Hope you are getting a bit more.

How will you account for the odd lot shape?

 

[Dublin ohio]

BUT I'm waiting on a call back from county zoning department to verify that the lot can still be split

You stated in post #3 that it was not zoned. So now there is zoning. Which is it?

 

[TerryRohrer]

Per the OP's comment: "It's all one parcel AND there are plenty of homes in the area with more than 3 acres. It's just the shape that gets me. The lot to the right is a newer construction home on a large rectangular lot."

This is clearly a case of your bias against odd shaped tracts. What difference does it make in the value, as indicated by analysis of market data? Your opinion of it simply doesn't matter. Part of highest and best use analysis is developing an opinion of who the most likely buyer is. If there are "plenty of homes in the area with more than 3 acres", do they ever sell? Do they sell for more than homes with "typical" site sizes (whatever that means)? It seems to me you are tilting at windmills that don't exist outside your head. Go forth, Don Quixote de la Mancha!