2 lots in one appraisal? Please help.

[Carnivore]

Exactly. Another scenario would be two neighbors agreeing to a lot line adjustment. If neighbor A agrees to sell 2 acres of their land to neighbor B the two acres acquired by neighbor B would get its own APN for tax purposes but this does NOT create a third legal parcel. Before anyone pipes in with "that just created another third legal parcel" it does not...the majority of minimum lot size requirements in my county are 10 to 160 acres.

I agree. Except in my county, NC it would indeed create a new parcel. I had finished a report in April with that situation. What the County Deed Room did was put both parcel legal description(Metes & Bounds) on one deed. Each Parcel still had a separate metes & Bounds description using one Deed Book & Page. What was strange about it is the smaller site was on 50x60. The other site with improvements(house) was approx. 1.64 acre. Both Tax ID #'s are on the consolidated Deed. Realtor tried to explain what happened. He was a city boy, so I knew he was wrong. What happened in the past the neighbor put a couple of out buildings along what he thought was his eastern boundary.
BZZZZZT Wrong! So here we are today. It's fixed and the buyers got what they paid for.

 

[Airstream]

As I was thinking about this thread and a lender encumbering a vacant site with a house; What happens if the homeowner in the future builds say a garage on the lot line or something; essentially making it one site? This is actually what I did at one time. That would then make it a one site property. Therefore, it is technically possible when that happens for the overall value of the property to actually go down if the final site value is significantly less than when there were 2 separate sites. And as I was thinking about this, it may be why some lenders want that extra site valued as surplus land, even though at the time of the report the extra site wasn’t surplus land. Maybe they have been burned in the past by such a scenario. Just thinking out loud here. Anyone ever come across something like this? In my 26 years it hasn’t happened, but it must have occurred.

 

[J Grant]

As I was thinking about this thread and a lender encumbering a vacant site with a house; What happens if the homeowner in the future builds say a garage on the lot line or something; essentially making it one site? This is actually what I did at one time. That would then make it a one site property. Therefore, it is technically possible when that happens for the overall value of the property to actually go down if the final site value is significantly less than when there were 2 separate sites. And as I was thinking about this, it may be why some lenders want that extra site valued as surplus land, even though at the time of the report the extra site wasn’t surplus land. Maybe they have been burned in the past by such a scenario. Just thinking out loud here. Anyone ever come across something like this? In my 26 years it hasn’t happened, but it must have occurred.

I have never seen a lender "want that extra site valued as surplus land." That is not an instruction I have ever seen and imo would be an unacceptable assignment condition

FHA does not want the value of the excess value excluded, not to contribute to the market value opinion of the appraisal. That is a specific assignment condition unique to them

If you value the two lots and one improvement and cite one as excess land and later an owner builds something that straddles the lot lines that is not our concern, and whether doing so increases or decreases the value in the future is not our concern, Though imo putting a garage over the lot lines does not automatically make it one big piece of not divisible surplus land. A garage can be demolished

 

[Airstream]

1. I have never had that scenario been asked of me as well. That doesn’t mean it hasn’t been asked.
2. I realize it is not our concern. But I would think it could be the concern of the lender. In fact this may be why lenders DO NOT want to encumber a vacant site adjacent to a house.
3. Yes a garage could be demolished. Any improvement can be eliminated. But if someone is marketing a house to sell and they have spent thousands putting up a new garage, do you think they would demolish it? I don’t think so. UNLESS of course the site was incredibly valuable, and in my market that just wouldn’t be the case for a typical urban site. Might be the case for something like a lake lot. But even at that there are many scenarios that I can think of where people would NOT want to demolish the garage; especially for example if the present house’s lot is not large enough for a garage.

Let me give you a scenario where I found something like this could happen. I did an appraisal on a crappy house on a lake. The property sold for 1.2 million. The next door neighbor bought it. I gave no value to the present house because in my opinion most people buying that expensive of a site would tear the house down. It was in terrible shape. HOWEVER, the person who bought the site was the next door neighbor who to my surprise remodeled the house and put in an really nice pool. Go figure. The old house became a large pool house. He had to have spent nearly 300,000 to 400,000 to do what he did; probably more. And what made this lot especially valuable is that it had a natural inlet that created a perfect spot for a protected pier. And in this market concrete protective piers are no longer buildable due to zoning requirements. But this was a natural pier situation created by the topography. Plus the next door neighbor had a high end home probably in the 3 to 4 million range.

So in this case, if the next door neighbor wanted to appraise his house, and none of those improvements encroached on the site with the pool and pier, would you include the site with the pool and pier or not with the value of the house next door taking into consideration the utility of the extra site with the natural pier and the pool, etc? Would you see it as one large site? Or as two site with improvements?

And I can tell you that the extra site included with the house would definitely not be as valuable as vacant any longer by a considerable amount if you combine the two sites into one. In other words 400’ of frontage and one site, would not be as valuable as two sites of 200’ of frontage. That I definitely know. Now the question becomes does the next door site become so valuable to the overall marketability of the site with the house that a person buying that house would not consider doing so without the site with the pool and pier?

Or do you appraise the two separately? And what do you think a bank would want? It’s not a cut and dry answer. Although it would be a very interesting appraisal problem to think through.

 

[J Grant]

Lenders DO want to encumber an excess lot as long as Fannie/Freddie will UW i! What does the freaking lender care, they want to make loans!!!

I have done several of these assignments and they are time-consuming but not rocket since An adjacent or contiguous lot ( excess land ) is being sold as a package along with a house and its primary lot. Figure the vacant site value alone and then its contributory value and find as good support and comps as you can for your market value opinion which is as the property sold as a package deal.

If an appraiser can't figure it out then don;t do the assignment. I did the best I could on the few I did and seems it was fine because never heard any pushback on them..

THE END

No need to speculate on what will happen in the future if the borrower does this or that, we can not control what happens to any of the properties we appraise after our eff date. If the house burns down the next day the property is worth less and if they add a pool and remodel later it will be worth more. All future events are out of our control.

 

[Terrel L. Shields]

HOWEVER, the person who bought the site was the next door neighbor who to my surprise remodeled the house and put in an really nice pool. Go figure. The old house became a large pool house. He had to have spent nearly 300,000 to 400,000 to do what he did; probably more. And what made this lot especially valuable is that it had a natural inlet that created a perfect spot for a protected pier. And in this market concrete protective piers are no longer buildable due to zoning requirements. But this was a natural pier situation created by the topography. Plus the next door neighbor had a high end home probably in the 3 to 4 million range.

We often cannot predict what people will do, absurd as it often appears. My parents owned a small cabin on the lake with the lot being lakeside and next to the the boat ramp. Maybe 700 SF plus a garage back in the 70s. And it sold and resold and several years ago a party built a huge 3 story house with a lower level as garage, even has an elevator, which blocked the view of the houses above (i'm sure they were thrilled.) I drove by and thought they had torn the old cabin down. Nope, it looked like a dog house behind the new structure...maybe a guest house or something. The next 3 largest houses in this very rural area would fit in it.

 

[Airstream]

Lenders DO want to encumber an excess lot as long as Fannie/Freddie will UW i! What does the freaking lender care, they want to make loans!!!

I have done several of these assignments and they are time-consuming but not rocket since An adjacent or contiguous lot ( excess land ) is being sold as a package along with a house and its primary lot. Figure the vacant site value alone and then its contributory value and find as good support and comps as you can for your market value opinion which is as the property sold as a package deal.

If an appraiser can't figure it out then don;t do the assignment. I did the best I could on the few I did and seems it was fine because never heard any pushback on them..

THE END

No need to speculate on what will happen in the future if the borrower does this or that, we can not control what happens to any of the properties we appraise after our eff date. If the house burns down the next day the property is worth less and if they add a pool and remodel later it will be worth more. All future events are out of our control.

Not always. I can remember specifically a few instance where they DID NOT want that vacant site included.

THE END

 

[Airstream]

We often cannot predict what people will do, absurd as it often appears. My parents owned a small cabin on the lake with the lot being lakeside and next to the the boat ramp. Maybe 700 SF plus a garage back in the 70s. And it sold and resold and several years ago a party built a huge 3 story house with a lower level as garage, even has an elevator, which blocked the view of the houses above (i'm sure they were thrilled.) I drove by and thought they had torn the old cabin down. Nope, it looked like a dog house behind the new structure...maybe a guest house or something. The next 3 largest houses in this very rural area would fit in it.
View attachment 76401

I would agree you can never predict what people will do! I had an opposite experience. 2800sf house. Good shape. Just a bit different of a design. Did an estate appraisal on the house. Thought it should sell for $750,000. It was on the market a long time for a higher price. Then sold for $580,000. I was shocked. Called up the agent and asked what happened. Came to find, that no one wanted the house! Just wanted the site. They tore down that house and put up a $2 million house. I did the appraisal on the construction loan. Go figure. You are definitely right on the unpredictability of people.

 

[J Grant]

Not always. I can remember specifically a few instance where they DID NOT want that vacant site included.

THE END

That is different than what you said, which was that the lender wants it valued as surplus land, (when it is excess land)
"And as I was thinking about this, it may be why some lenders want that extra site valued as surplus land, even though at the time of the report the extra site wasn’t surplus land."

Excluding the vacant lot from value is an assignment condition/ HC and then the appraisal is easy, one house on a lot.

 

[Airstream]

That is different than what you said, which was that the lender wants it valued as surplus land, (when it is excess land)

Excluding the lot is an assignment condition HC and then the appraisal is easy, one house on a lot.

1. I would never appraise a buildable site as surplus land. I would tell the lender that is not an acceptable appraisal practice, unless as you say they want it to be a HC.
2. I‘m just saying that lenders often have various reasons for why they don’t want something done; whether those reasons are credible or not is beside the point.

The point of my post was to wonder why lenders who do want it included also don’t see the possible or potential pitfalls. Yes, they want to make loans, but as we know they often aren’t very discriminating.