2 Parcels on One Appraisal?

[AlwaysLearning]

I am appraising a property with a house on it with a separate parcel adjoined to it. I appraised only the house and the parcel on which it sits. The lender wants the second adjoining parcel on the same appraisal. The 2 lots are deeded together under on loan. I have read all other threads on this site regarding this issue, but I have not found the “WHY” that explains why some would do it and some would not. The lender does not care if highest and best use is something other than appraised together. (Contributory value of additional land is worth less than if sold separately.) The 2 lots have their own legal descriptions, parcel numbers and legal interests. I have never appraised 2 separated lots like this regardless of how they were deeded due to having separate legal interests. Can anyone explain WITH REFERENCES why it would be OK to add the second lot to the appraisal? The AMC asked 5 of their appraisers if they would appraise the 2 lots together – and all said “NO.” The lender asked 3 appraisers if they would appraise the 2 lots together – and they all said “Yes.” I don’t need to hear, “I would do it,” or “I would not do it.” What I need is specific USPAP references or accepted appraisal practice references so that I can proceed with more than just your opinion. I have looked and looked but still find myself at a loss. Thanks!

The answer to your question is “YES” at least as far as USPAP is concerned. The above problem is no other issue but a “knowing your assignment” issue and in particular the “intended use “of the appraisal.

Your assignment appears to be no different than any other appraisal of a portfolio of similar properties owned in fee simple where the intended use of the appraisal is to secure a single loan and the collateral is the entire portfolio. (This is the situation when an owner would have to sell the entire portfolio to one buyer, if and when the owner decides to sell). Identifying the characteristics of the property that are relevant to the appraisal would be very important.
No wonder that (for the most part) the only good advice you are getting is from commercial appraisers. Well, when one does nothing else but filling out Fannie Mae forms this assignment might seem very complicated and confusing (but it is not).

Based on your info about your assignment, there is no need for hypothetical conditions and/or extraordinary assumptions. Also, your appraisal problem does not warrant an intensive highest and best use study. “Contributory value of additional land is worth less than if sold separately” – yes, the value of the subject property as a portfolio could be less than the sum of the values for each of the properties in the portfolio, but also it could be more or it could be same.

However, the next important issue to consider is the compliance with any other guidelines of the intended user of your appraisal. For example, if you have to comply with Fannie Mae guidelines and Fannie would consider the above an unacceptable appraisal practice then you would be in violation of the Competency Rule and/or Ethics Rule. I am not an authority on Fannie Mae guidelines so I personally do not know if Fannie has any guidelines addressing your problem - so, do your homework.

“What I need is specific USPAP references” - Standard Rule 1-2(e) and in particular Advisory Opinion 23

 

[Lee Lansford]

responding to post #41

You raise valid points, but what I've pointed out previously in this string--and paraphrasing here--"all things may be possible, but not everything is appropriate for a particular assignment."

What I suspect--having seen many such requests for appraisals for use in residential lending from unknowing or uncaring clients (often, in the past, a mortgage broker)--is that the client is making effort to place the proverbial round peg into a square hole. I might be wrong, but...I do suspect that if the appraiser approaches this appraisal problem as the client requests, and does so with full disclosure (including, but not limited to, stating NO to the question "Is the H&B Use of the subject property...the present use?"--based upon the very first post by the OP), all hell will break loose.

 

[AlwaysLearning]

You raise valid points, but what I've pointed out previously in this string--and paraphrasing here--"all things may be possible, but not everything is appropriate for a particular assignment."

What I suspect--having seen many such requests for appraisals for use in residential lending from unknowing or uncaring clients (often, in the past, a mortgage broker)--is that the client is making effort to place the proverbial round peg into a square hole. I might be wrong, but...I do suspect that if the appraiser approaches this appraisal problem as the client requests, and does so with full disclosure (including, but not limited to, stating NO to the question "Is the H&B Use of the subject property...the present use?"--based upon the very first post by the OP), all hell will break loose.

That is why knowing the assignment (all “the significant seven”: client, intended use, intended user,…) is so important. If one (or more) is not known, or if the client will not reveal adequate info, then an appraiser must refuse the assignment.

Only after knowing all of the “significant seven” comes the scope of work (and with it the appropriate H&B Use analysis)

 

[Pittsburgh Pete]

You raise valid points, but what I've pointed out previously in this string--and paraphrasing here--"all things may be possible, but not everything is appropriate for a particular assignment."

What I suspect--having seen many such requests for appraisals for use in residential lending from unknowing or uncaring clients (often, in the past, a mortgage broker)--is that the client is making effort to place the proverbial round peg into a square hole. I might be wrong, but...I do suspect that if the appraiser approaches this appraisal problem as the client requests, and does so with full disclosure (including, but not limited to, stating NO to the question "Is the H&B Use of the subject property...the present use?"--based upon the very first post by the OP), all hell will break loose.

That is a determination for an UW or a loan officer to make, i.e. whether allhell breaks loose or not. I've seen "all hell break loose" for a plethora of reasons after submitting appraisals, none at all related to the appraisal's quality or thoroughness.

I am an appraiser--if the assignment is completed competently and thoroughly my work is done. If the intended use is for mortgage underwriting, the ball (once the appraisal is completed) is in their court. I know my business and I assume (oftentimes incorrectly) that they know their's. At that point there is no appraisal issue, only an underwriting issue.

 

[Mark to market]

Been on the road.
Concerning doing two parcels. This is from FHLMC MRI guide. I think Fannie is the same.

22.30: Blanket Mortgages (06/07/02)
When the Mortgaged Premises consist of more than one parcel of real estate, the parcels must be adjoining and the Mortgage must be a valid First Lien on each parcel. In addition, only one parcel may contain a residence. For example, the Mortgage may be secured by one parcel of real estate with a residence and an adjoining parcel which contains either vacant land or a garage; but the adjoining parcel cannot contain another residence.

 

[Lee Lansford]

Been on the road.
Concerning doing two parcels. This is from FHLMC MRI guide. I think Fannie is the same.

22.30: Blanket Mortgages (06/07/02)
When the Mortgaged Premises consist of more than one parcel of real estate, the parcels must be adjoining and the Mortgage must be a valid First Lien on each parcel. In addition, only one parcel may contain a residence. For example, the Mortgage may be secured by one parcel of real estate with a residence and an adjoining parcel which contains either vacant land or a garage; but the adjoining parcel cannot contain another residence.

Again...a lending issue, not an appraisal isssue.

 

[Terrel L. Shields]

Lee is right. 1 lot or 20. same answer.

 

[AlwaysLearning]

Blanket Mortgage

Been on the road.
Concerning doing two parcels. This is from FHLMC MRI guide. I think Fannie is the same.

22.30: Blanket Mortgages (06/07/02)
When the Mortgaged Premises consist of more than one parcel of real estate, the parcels must be adjoining and the Mortgage must be a valid First Lien on each parcel. In addition, only one parcel may contain a residence. For example, the Mortgage may be secured by one parcel of real estate with a residence and an adjoining parcel which contains either vacant land or a garage; but the adjoining parcel cannot contain another residence.

Each lender might have different loan conditions in a loan that they define as a blanket mortgage (a loan that covers more than one property).

One needs to keep in mind that a typical blanket mortgage would usually have loan conditions that would allow each individual property to be released from the blanket mortgage on its own as they are sold.

Considering the original post, it is rather unlikely that the lender is going to do such a typical blanket mortgage (given the appraisal request). Unless, we are dealing with a very confused lender, in which case the appraiser should know better. This is why “knowing the assignment” (and in this case in particular the intended use) is so important.

However, if this lender does intend to use the appraisal to secure a blanket mortgage (that would allow each individual property to be released on its own) then the two properties (as described by the OP) have to be appraised separately (two appraisals communicated in one report or two separate reports, no difference) In this case one needs to think - one seller, two different buyers (not one seller, one buyer – as described in my post #41).

The above is a good example how the assignment (with all “the significant seven”: client, intended use, intended user,…) affects an appraiser’s scope of work decision and the appraisal – and not the H&B Use analysis as implied in some posts in this thread.

Read carefully Advisory Opinion 23

 

[Webbed Feet]

However, if this lender does intend to use the appraisal to secure a blanket mortgage (that would allow each individual property to be released on its own) then the two properties (as described by the OP) have to be appraised separately (two appraisals communicated in one report or two separate reports, no difference) In this case one needs to think - one seller, two different buyers (not one seller, one buyer – as described in my post #41).

<.....snip.....>

Very thought provoking! Question. In your "one seller, one buyer" senario, are you alluding that by virtue of being encumbered by a blanket mortgage, that does not allow release of collateral, that a property owner cannot market all the pieces individually and arrange for simultaneous closings of several sales and have title pay off the single mortgage?

 

[AlwaysLearning]

Very thought provoking! Question. In your "one seller, one buyer" senario, are you alluding that by virtue of being encumbered by a blanket mortgage, that does not allow release of collateral, that a property owner cannot market all the pieces individually and arrange for simultaneous closings of several sales and have title pay off the single mortgage?

The one seller, one buyer scenario is for the life of that single loan (as discussed in my post #41) and is meant to show how one should analyze the market for the subject property (in this case a portfolio consisting of two properties). I thought this was obvious.

But since you are so picky (nothing new here) then the answer to your question is yes, the owner can actually market all the pieces individually (and sell to different buyers) but this single loan (as discussed in my post #41) has to be paid off in full, when one or all pieces are sold. This should be obvious to most people who have anything to do with Real Estate.

I am fairly new to this forum, so I just wonder do we get a prize for a high number of posts? Am I missing here something?