20 acres vacant land

[SunbeltAppraisals]

I received an order to appraise a home on a site with 20 acres.

The client requirement states:

"Appraise the subject dwelling and up to 5 acres only. Provide full acreage on the first page of the report and only up to 5 acres on the sales grid. Provide a contributory value for the balance in the addendum."

I have appraised acreage for years without a strange request like this.

Can someone give me some insight on the best approach?

Should i use 5 acres+/- sales to compare?

how do I give a true opinion of value on half the truth?

(i know its the assignment)


Thanks always for all your help.

 

[stefan olafson]

Well, if you've appraised acreage for years this shouldn't be too difficult. Find sales of five acre tracts and fifteen acre tracts, use the five acre tracts to establish your value for the 5 acres with the improvements, use the fifteen acre tracts for the 15 acres separate from the 5 acres and improvements.

Go to the county and find out if it's legal to value a house and five acres and if it's legal to sell a fifteen acre tract.

If the answers to these two questions are 'yes', then you do two appraisals, one on the five acres and one on the fifteen acres.

OR


Find sales of dwellings on 20 acre tracts and then find sales of similar acreages and derive a price per acre for these sales. Determine the value of the improvements with five acres and a separate contributory value of the fifteen acres.

That's two ways, check with a mentor in your area for further insight.

 

[Mr Rex]

114. Appraising physical segments (5-Acre Portion)

Question:
A local lender has asked me to appraise only a 5-acre portion of a 62-acre parcel, stating that Fannie Mae will lend on no more than 5 acres. Am I permitted to comply with this request?

Response:
Standards Rule 1-2(e)(v) states that the subject of an assignment may be a physical segment of a property. However, appraisers must also comply with any laws, regulations, guidelines or other assignment conditions that might apply.


If the assignment requires compliance with assignment conditions published, for example, by Fannie Mae, the appraiser must be aware of the current guidelines (or regulations, if applicable). As stated in the Fannie Mae,Handbook for Appraisers:



"Some appraisers report that they have been asked to appraise only a portion of a larger site: for example, the borrower owns a 30-acre site and you are asked to appraise only five acres and the property improvements. Fannie Mae considers this an unacceptable appraisal practice."


Failure to recognize this assignment condition would be a violation of the ETHICS RULE or COMPETENCY RULE

 

[stefan olafson]

Correct me if I'm wrong, but the OP didn't specify Fannie or Freddie? We get too bound up in our thinking, Fannie; Freddie; FHA; VA: and forget this is still the appraisal of property. We can't limit our knowledge just to a form!

When you have a twenty acre parcel and are asked to value it differently, just don't forget that when you put your value on those five acres, there are still fifteen in the property that deserve a value also.

I've seen appraisers split off the five acres and forget the balance and that's wrong...

 

[Mr Rex]

He didn't say it wasn't Fannie or Freddie either, and I am willing to bet what form the lender will require. As they use to say on Hill Street Blues "Lets be careful out there"

 

[Jerry Lieb]

Sunbelt:

Just a couple of thoughts.......

If you do it by "assuming" a 5 acre parcel, you'll have a Hypothetical Appraisal because it will be "contrary to what presently exists".

Also, it would seem appropriate to deduct for the cost of surveying, engineering and mapping to create the hypothetical parcel(s). In some jurisdictions, this can be a significant expense.


Jerry

 

[Mike Boyd]

My solution would be similar to Stephan's except that you cannot separate the acreage.

The client has agreed to the 20 acre to be noted on page 1. In my market area, the typical home on acreage would be 2.5 to 5. So, I use comps that are on 2.5 to 5 acres. I also run comps on 20 acres in order to ascertain the contributory value of the extra land.
In the grid under site size I would type in 5 AC typ.+15 contrib. and adjust accordingly.

However, if it is typical in your market area for homes to be on 20 or more acres, then there would be no adjustment for site size.

Whether it is Fannie or Freddie or any other lender you cannot separate the land value unless it can be subdivided off and then the report would be subject to recordation of a legal lot split or subdivision.

In affect, you almost have to do 2 appraisals to find the contributory value of the additional acreage. Make sure you charge for the extra work and also explain what you are doing in your scope of work. Also, provide an explanation that the typical homesite in this market area is X acres.

 

[Michael Tipton]

What is the purpose of the appraisal? Did the client request use of the FNMA form? Has the client referenced specific guidelines if the request is for lending purposes?

 

[jay trotta]

Mr Rex......dit toe

In my 20+ years of recieveing requests, I have yet to see any Lender or Anyone else specify, other than FNMA guidelines.

as me old boss used to say, you never know where these lil puppies will end up so, we'll just set em all up to meet FNMA requiremints. To this day, I have yet to hear from any Lender asking for anything other than a FNMA compliant report. I believe USPAP is the combination drug that makes the whole mess become Gray Matta.

My question would be; when did the missing 15 acres become worthlesss ? If you follow the request of the "Lender" to put the 20 ac on the Front page and only 5 acre's on the Rear page - you are providing a "misleading report" and the Trouble you will be in will rest on Your shoulders ONLY.......see Mr Rex comments on the "Ethics & Compitency" issue.

 

[TEL2002]

Ask them to tell you which specific 5 acres they want appraised (not all 5 acre parcels are of equal value)? (Where does the 5 acres start and stop.)

Do not use a Fannie/Freddie form for the report. Use a GP form where you can hypothetical the living daylights out of the report.