The intended use must be established first because assignment results must be meaningful to the client and analyses of the market for the subject must reflect the intended use.
If the client intends to use the appraisal to secure a single loan secured with both properties held by the client’s loan applicant, the subject property is the entire holding (i.e., the portfolio). In this situation, the appraiser must include research and analyses to address the impact of all of the subject’s individual parts appearing in the market at the same time, to be sold by one owner to one buyer. The highest and best use may be as is for a portion of the portfolio and to develop (or not develop) the other portion. The question is how much does the market pay when the only choice is to buy two lots at the same time? This is a single appraisal.
Alternatively, if the same client intended to use the appraisal to secure one loan under loan conditions that would allow each property in the holding to be released (sold) on its own, the assignment is actually for several appraisals communicated in one report or possibly in several reports. In this configuration, each individual property is a subject property to be sold by one seller in the same time frame to (potentially) different buyers. The analyses must still address the potential impact, if any, of having all of the properties in the loan applicant’s portfolio on the market at one time but without the necessity of selling to one buyer in one transaction.
The intended use of the assignment results alters the characteristics of the subject that are relevant to the appraisal and clearly alters the appropriate scope of work. In the first instance, the relevant data about the subject and about its market must reflect the subject’s characteristics as a property portfolio rather than as an individual property within a community. In the latter case, the relevant data must address the relevant characteristics and market conditions for each individual property. Analyzing a portfolio of properties as if each property were a separate element or increment of value when the subject of the assignment is the portfolio fails to recognize distinct differences between the markets for individual properties and portfolios. Specifically, the value of the subject, as a portfolio, is not necessarily the sum of the values for each of the properties in that portfolio; it could be less or it could be more.
