2 Houses 1 Lot

[Overimprovement]

Surprisingly, I've not had this come up before. Basic scenario--there are two dwellings on one parcel and deed, and client wants separate appraisal reports. Local bank, portfolio loan, so no Fannie issues at play, and they are very flexible in their expectations, but of course I want to be USPAP compliant.

Borrower is very unlikely to split up into two parcels, and there is no zoning where dwellings are, so it is a legal use at present.

Any thoughts?

 

[Flakey]

I'm dealing with 2 houses on one parcel right now. The property is a legal non-conforming use (been there since 1955). Zoning will not allow them to be legally separated (one can be torn down or moved). I have informed my client that an Extraordinary Assumption will not cut it since it is clearly not gonna happen. Contributory value only for the second dwelling. Looking for sales of 2 dwellings to extract the adjustment. I would at least get them to provide you a survey you can place in your report indicating how it COULD be divided .

 

[Terrel L. Shields]

Hypothetical condition. You have to assume a lot split and so I would require the lender or borrower to state where they want that lot split...won't touch it otherwise. Also if no split in water and sewage, then require and or assume a shared utility agreement.

 

[Tom4value]

Surprisingly, I've not had this come up before. Basic scenario--there are two dwellings on one parcel and deed, and client wants separate appraisal reports. Local bank, portfolio loan, so no Fannie issues at play, and they are very flexible in their expectations, but of course I want to be USPAP compliant.

Borrower is very unlikely to split up into two parcels, and there is no zoning where dwellings are, so it is a legal use at present.

Any thoughts?

If the borrower is unlikely to split up the parcels, why do they want two appraisals? Even though there is no zoning, you should check with the Building inspector or other legal authority with the community to see if it can legally be separated. If it is not allowed, than you can't do a hypothetical condition, anyway and two appraisals are not only not required but not allowed.

 

[J Grant]

There is the word NO- I agree with post # 4 above. How large is the lot? If it is a double size lot, I could see making a HC , but if it is 2 homes on a typical single size home lot, (whatever that is for area ), regardless of lack of zoning, the question would be if it can be split into 2 sites. .

There must be a county appraiser office or some office that assess taxes or accepts building permits, a source you can check with if it is legally possible /physically feasible to split it into each home now has its own legal lot that could get title. For example, what about road egress to the second house? And sewer or septic /electric service to it etc..

 

[DWiley]

The first question is, what is the intended use?

Then the next question is, what is the highest and best use? Answering that question entails, among other things, examining what is physically possible and legally permissible (concepts that others have touched on). Without knowing the HBU and the IU, no one can provide good guidance on how the situation should be handled.

 

[Deleted member 130081]

It doesn't add up. Has the bank provided you with a rationale for appraising a partial interest? The first thing I would do is make sure the form was not a GSE form. The second thing I would do is provide a narrative report, however I might include some standardized pages as exhibits. Then I would clearly state what exists, clearly state what parts were being appraised and clearly state which parts were not being appraised. I would include the client request/rationale for appraising a partial interest. The problems I see are in disclosure and familiarity. You must disclose all. You ought to be cautious using a familiar form/format, that would not be expected to report such a circumstance. Other than that, it sounds like a double-dip two appraisal assignment, which you ought to be charging for accordingly.

Speaking of fees, I am getting a survey of my property done. One firm wants $1200, the other only wants $550, but will only write up the lot corners. Point is, appraisers are cheap.

 

[hastalavista]

I can see a bank wanting the value of the whole (as-is, no EAs/HCs) and then maybe asking for the value of each improvement as-if (HC) it were on its own site.
But without further explanation by the client, I cannot see why it would want the two split up (HC).

Here's my opinion: To use an HC, a number of things are required but the catch-all is "for purposes of reasonable analysis". Valuing a property with two homes as-if they were split into two improved sites may have a reasonable analysis purpose, but the appraiser should know why and (IMO) identify that in the report.

Danny points out the other obstacle: Can the current site be split with the two improvements such that each has its own H&BU? Because an HC must also result in a credible analysis. I can see for a certain intended use (litigation, let's say) that making that assuming each has its own H&BU when it doesn't might be reasonable. But I cannot see it being credible for mortgage lending purposes.

My advice: Find out exactly why the lending client insists on getting the property appraised under the conditions they've outlined; then make the decision if it is reasonable and credible results can be concluded.

Good luck!

 

[Overimprovement]

Appreciate everyone's insight thus far! I will address several posts at once here.

Intended use is mortgage financing. I believe their un-stated rationale for going this route is the cost difference between two residential appraisals and one commercial appraisal. I would only take this on if I feel credible results can be reached with the HC's I apparently would have to include.

The current use is completely legal. A division of the existing lot into two separate lots would violate no existing county zoning ordinance--there are no minimum lot sizes, setbacks, etc in this area. It would need to be voted upon, but that honestly seems like more of a formality.

Each dwelling does have its own utilities already.

The lot is larger than most in the immediate area, and 1/2 of each lot could easily support each dwelling.

HBU is clearly residential, fairly well off any beaten path, and all surrounding uses are residential, and too small for any commercial development.

I am about ready to submit to lender that they are likely better off with a commercial appraisal, which would be cleaner, and not have any HC's in it, as Denis mentions. If they insist on residential reports, I am preparing a list of HC's to include, and seriously thinking about what type of reports these would be.

 

[hastalavista]

I don't see why this would need a commercial appraiser/appraisal (am I missing something: always a possibility!)?