Advice needed on encroachment issue

[Zoe]

The property I live on has a shed that is encroaching property next door. I didn't put it there. I found out by survey. The next door neighbor don't care because it is back in woods and has no impact on their property. I am about to demolish it soon. The prior owner put it there. The next door neighbor lot narrows to a small section of woods where nothing could be built there.

 

[Zoe]

Just concluding to [HBU/as is = land value] might kill the assignment.

HBU analysis is part of the "problem identification" phase of the assignment. It technically occurs prior to forming a SOW decision about what it will actually take to complete the assignment. If the HBU conclusion goes one way, you appraise for a house. If it goes the other way, you appraise for land value. How the lender ordered the appraisal is not an element of HBU analysis. What they initially thought the property was doesn't factor into your conclusion.

That's why the sequence for HBU analysis logically occurs after the site and improvements analyses (including the subject's relationship within the immediate neighborhood), and not solely as an elaboration of the zoning identification.

Yeah, they better communicate with client.

 

[Surf Cat]

A for sale transaction, the adjoining property's entire garage and portions of the primary structure are encroaching onto the property that is for sale.

So the property next door, even after the subject is torn down, is still going to be encroaching on to the subject's Site Area? If I have that right, go with Mr. Roher's suggestion.

Once again, if I have that right, a survey is going to need to be conducted to find out how much of the neighboring property is encroaching onto the subject's site area. I'm assuming there's setbacks required in the zoning as well.

Lastly, if you weren't informed on the particulars of this assignment and it's from an AMC.... you're not getting paid enough even to do it as Terry suggested.

 

[Zoe]

If H&B use is demolish improvements, it changes things for the client. You can't get a 30 year fixed rate mortgage on vacant site.

Do these properties adjoin in family? Assemblage could be H&B use. You need survey and new legal description and do "subject to".

 

[George Hatch]

Even if the HBU is for the existing use, the presence of the dominant encroachment onto this parcel might kill the deal.

All of this is just another example of why the number on the bottom line isn't always the most important piece of info relative to the lender's decision making. And an example of a factor that an AVM (or an untrained PDC) would invariably miss.

 

[Zoe]

I don't know if they adjoin if the vacant site will add more to the family member or be considered excess land and be worth more sold separately from the family member.

 

[Surf Cat]

How can you put a number on;

The percentage and utility of the encroached area.

Whether the encroachment is removable.

Whether it blocks redevelopment plans.

Whether the buyer can obtain title insurance and financing.

Whether the adjoining owner’s promise is legally enforceable or merely informal.

Decline, live to fight another day....

 

[KHS445]

I am sure the neighbors idea of correcting the encroachment issue will be to either adjust the property lines or have the buyer agree to allowing the encroachment to remain. Lots of potential issues; unencroached land area, setbacks not only from lot lines, but also between buildings, street frontage, minimum lot width. How does the encroachment impact the buyers plans?

One of my first steps, before looking for comps, would be to research all zoning requirements, setbacks and restrictions. Then I would talk with the zoning administrator to see what his/her thoughts are and what if any approvals are needed. My guess is the lender will cancel the order when informed of the issues, unless they are planning on it being a vacant land loan, which will eventually convert to a construction loan.

Also, if the plan is to remove the existing improvements, not only is the purchase price part of the cost, but so is the removal of the improvements. Not a huge deal regarding the subject, but it could be if you find my comps where an existing structure was removed soon after purchase.

 

[Elliott]

So is there a mortgage on the 'other' property? I see a requirement for a survey and a conference with a title company so it can be conveyed with no issues, including set backs. Good luck.

 

[ZZGAMAZZ]

In other words, the property is being marketed as land value. I.e., the seller allegedly thinks the property is worth more as land value than in the existing SFR usage.

If the property actually is worth more as land value then THAT is the "HBU/as is" and you are engaged in a land appraisal assignment, not an SFR assignment. Your comps will consist of other land parcels, some of which might also have existing structures which are not adding to the value of the whole. The typical buyers of these properties will be contractors and developers, not end users operating off of conventional financing terms.

This is a situation where your analysis really does start at the neighborhood and community level and is in search of redevelopment trends, recent construction (and how the site acquisitions occurred) trends, the supply/demand for land sales and how the other improved properties in "tear down condition" are being marketed, sold and financed.

If the other tear-downs are being purchased to remodel and flip then they indicates those buyers attributed some value to the existing improvements in fair or poor condition. If they're being scraped and redeveloped then that indicates they really were sold for land value.

You're not looking for HBU/as vacant. You're looking specifically for HBU/as is, inclusive of the existing structures.

Did the original post indicate that the encroaching unit is the tear-down, or does an additional DU exist on the property listed for sale?