2 Houses 1 Lot

[J Grant]

duplicate

 

[J Grant]

I can't understand why some believe the solution to a complex appraisal is to do it as a narrative report. Whether the appraisal is communicated on a form ( which can have as much narrative as you want), or pure narrative, it still needs to have a credible HBU, cost approach and typically a sales comparison approach and/or income approach.

The questions I see on this board about complex/oddballs typically show the poster needs to communicate with client and then solve the HBU and figure out how to find comps etc. I fail to see where doing it as a narrative solves any of that. I have done many complex appraisals on a form and all I did was add as many comments or as much narrative as needed. A form is nothing other than a format to organize information. Regarding if it is GSE work, the form has certain certifications, but the form still is just a format to report the information on.

How would a narrative with incorrect HBU or using bad comps solve anything? An appraiser needs to be solve the problem , the reporting is the easier, if time consuming part. Choosing between narrative and form for reporting does nothing to solve the essential appraisal problem.

 

[Overimprovement]

I can't understand why some believe the solution to a complex appraisal is to do it as a narrative report. Whether the appraisal is communicated on a form ( which can have as much narrative as you want), or pure narrative, it still needs to have a credible HBU, cost approach and typically a sales comparison approach and/or income approach.

The questions I see on this board about complex/oddballs typically show the poster needs to communicate with client and then solve the HBU and figure out how to find comps etc. I fail to see where doing it as a narrative solves any of that. I have done many complex appraisals on a form and all I did was add as many comments or as much narrative as needed. A form is nothing other than a format to organize information. Regarding if it is GSE work, the form has certain certifications, but the form still is just a format to report the information on.

How would a narrative with incorrect HBU or using crazy comps that make no sense solve anything?

You may ask a fair enough question. So lets take this basic example and assume you have performed a solid HBU. Which form would YOU use to report your 2 houses on one lot that will not be divided?

 

[J Grant]

You may ask a fair enough question. So lets take this basic example and assume you have performed a solid HBU. Which form would YOU use to report your 2 houses on one lot that will not be divided?

I'd have to find out the intended use ...if it was lending and client wants it on a 1004 or non lending on a GSE form of which there are several options. The form selected needs to appropriate , all it offers is a way to organize information.

The appraiser needs to solve the HBU aka what the property is ( or made HC to ). Two houses on one lot can be ...two houses on one lot, odd but if legal /HBU so be it, or it could be a duplex or it could be a main house with an ADU. After appraiser solves that , the selection of what kind of form is the easy part.

 

[Overimprovement]

I'd have to find out the intended use ...if it was lending and client wants it on a 1004 or non lending on a GSE form of which there are several options. The form selected needs to appropriate , all it offers is a way to organize information.

The appraiser needs to solve the HBU aka what the property is ( or made HC to ). Two houses on one lot can be ...two houses on one lot, odd but if legal /HBU so be it, or it could be a duplex or it could be a main house with an ADU. After appraiser solves that , the selection of what kind of form is the easy part.

I've stated the intended use--mortgage financing. HBU is no longer the issue. Where/how do you report the characteristics of TWO separate houses on one form? Your other questions have been answered as well. It IS a legal use, the costs to split lot per a HC would not be HBU so I will not appraise it that way.

I see a lot of "this guy just doesn't know how to do this". OK--you are right. You are the better appraiser. HOW WOULD YOU REPORT IT?

 

[J Grant]

I actually do not see the HBU analysis I do see conclusion splitting it up into 2 appraisals is not an option

HBU analysis might be is it worth more as a duplex or as two houses...assuming the HBU is residential / 2 houses on one lot lot, I'd report it on a SFR form .. I doubt a GSE would accept it for lending purposes but that is a lender issue not an appraisal issue. If for non GSE use I would use a general purpose residential form.

 

[Rocky777]

2 houses on one lot would be difficult, what about the income approach? If it was a multi-family each house could be considered a separate unit.

 

[Carnivore]

Assuming HBU is residential single/multi family then, like i said before it could be completed on a 1025. Boom! Nothing says a duplex has to be attached. Same goes for condo's they dont have to be attached either. Assuming the multi or condo's are on the same site.

If you think about it a little more. Ask yourself why wouldn't the income approach be applicable? That would be difficult to explain why you didn't develop the income approach.

 

[DWiley]

Assuming HBU is residential single/multi family then, like i said before it could be completed on a 1025. Boom! Nothing says a duplex has to be attached. Same goes for condo's they dont have to be attached either. Assuming the multi or condo's are on the same site.

If you think about it a little more. Ask yourself why wouldn't the income approach be applicable? That would be difficult to explain why you didn't develop the income approach.

Correct. There are areas where it is not uncommon at all for a 2-4 unit property to be composed of multiple buildings.

 

[J Grant]

This is an interesting valuation problem. One that, coincidentally, I was on a conference call today in regard to having topics for an upcoming residential conference: for the conference, we are trying to find real world issues that, while complex, pop up with what may otherwise be considered more or less a typical/potential residential assignment.
[your situation; 2 homes on a single lot... may be a bit more complex than is found in other markets... but the underlying issue boils down to excess vs. surplus land; with the added complexity of having an improvement on what may or may not be the excess portion!]

I'm a firm believer of two things:
1. What may appear to be a plain vanilla assignment can quickly include, upon investigation or based on the specific valuation request, a complex element.
2. That many appraisers who have these types of assignments also have the skill set to solve them, but are reluctant to go forward for (a) fear of liability (something I think can be fully mitigated... providing the appraiser has a basic level of competency) or (b) the lack of an appropriate fee given the discovered complexity (nothing I can do about this!).

In this situation, there are at least three parts which take some level of competency to address:
A. How to properly analyze H&BU
B. Excess vs. surplus land, along with the feasibility analysis to determine if splitting the lot (or subdividing for new development) is a real option... arguably part of "A" above
C. When an HC vs. EA is necessary/prudent given the SOW and intended use

Separately, most of us can address the above. Combined, it may appear a bit daunting.
For this upcoming program, we are trying to find the right balance: How can we deliver tools/techniques that will solve these problems without spending hours going through the underlying fundamentals?

When we can figure out how to deliver the answer succinctly, I think we will have developed an ideal presentation.

In light of your conference/proposed solutions for why some appraisers seem daunted by complex/unusual...imo it goes back to HBU. The issue I see with courses is HBU presented as "dry" aka following the formula ( legally permissible physically possible etc). While the formula must be applied, what finding out and identifying the HBU really accomplishes is that it guides the appraiser in how to solve the appraisal problem.

Because once the HBU is identified, it means the typically motivated buyer for that property is identified, and once the typically motivated buyer is identified, then the kinds of alternate properties that buyer would consider ( the comps ) can be identified. Once the kind of comps needed are identified, it is just a matter of finding them. For a unique/oddball property, the search for comps might be further back in time or distance etc, but once it is focused is time consuming but achievable.

If comp search is not achievable, aka similar property comps are not found or not found in the subject area, all or part of the subject may be turn out to be an over improvement or super adequacy This is something the appraiser can't decide that at the outset the market decides that.