An Open Letter to Fannie Mae RE: multiple parcels

[Andrei Fin]

and encouraging the owner to actually replat the 2 lots as one,

Appraisers don't dictate to the market, they reflect the market. Your job in a lending appraisal is to reflect the market to help your client manage risk. The result is credible if the data supports it.

The lack of understanding is not HBU, everyone agrees that the second parcel has its separate HBU, the lack of understanding is Scope of Work. Most probable value of (A+B).

Your HC scenario is an absolutely correct way to handle the problem. However there is no HC needed because the lots are already owned and transferred (and appraised) as one economic unit. The reason for this is because of the real world difficulty involved for the owner to sell a decent house plus marginal lot at the same time for max profit.

 

[Lee Lansford]

Can you weigh in on my method of using the HC as merged? When in fact this is what is happening, the 2nd lot is kept for privacy and considered a part of the improved lot? Thanks in advance.

I understand the approach that you are considering.

To solve a particular appraisal problem, it can be appropriate. The problem with using it in the situation under our discussion here is that it goes counter to H&BU and counter to MV. That is...we can do it, but, why ?

[EDIT to add]: We may opine to many definitions of value in a report as long as we are careful as to how we define each value.

 

[Eli]

Fannie has tons of sites that have an estimated exposure time of years. You have to consider that. You can't ignore it. Sites setting between two parcels. etc etc.

There is no stereotype. Just do narrative. HC's and/or EA's. Fannie takes it or leaves it. Make sure you provide a "use value" definition if that is what the client wants and the source of the value definition.

 

[George Hatch]

Appraisers don't dictate to the market, they reflect the market. Your job in a lending appraisal is to reflect the market to help your client manage risk. The result is credible if the data supports it.

The problem here isn't appraisers dictating the market. The problem is Fannie presuming to dictate the market.

Fannie is not the market. The definition of MV we use doesn't say one word about the lenders being a participant in the market. That's the crux of this whole discussion.

And no, it's not my job to help the client manage risk. It's my job to observe/report the market. I am aware that my client will use my appraisal in managing their risk but that doesn't make me a risk manager - I'm still just a reporter.

If you work for a bank and I'm appraising a property for your use then I AM NOT A MEMBER OF YOUR TEAM. I am the outside party who literally doesn't care what decisions you choose to make with the information I provide. I care about being right, I care about answering your questions, and I care about readers not misunderstanding what I say in my report. My allegiance is to my role. I appraise - the users decide. The users do not appraise, and I do not decide.

May it ever be so.

 

[Terrel L. Shields]

the 2nd lot is kept for privacy and considered a part of the improved lot?

To me, that is the issue. Is it a whole separate lot that might as well be a mile away? Or, more likely, it is managed identically with the lot that contains the house.

 

[Lee Lansford]

Can you weigh in on my method of using the HC as merged? When in fact this is what is happening, the 2nd lot is kept for privacy and considered a part of the improved lot? Thanks in advance.

When we opine to a value that is dependent upon special requirements or interests of the client (any and all Intended Users) as to what constitutes the subject property and contrary to H&BU, we can be certain of one thing: The value being opined to is not MV.

 

[CANative]

Typical SFR buyers, who purchase for the amenity benefit rather than the income benefit, don't want to buy an extra lot. Typically, in my experience, they "take it" because the seller wants to divest and move on with his life and won't sell one without the other.

They're flukes. Fannie is trying to "dumb it down" so even the weakest appraisers think they can deal with the situation.

 

[Andrei Fin]

The problem here isn't appraisers dictating the market. The problem is Fannie presuming to dictate the market.

Fannie is not the market. The definition of MV we use doesn't say one word about the lenders being a participant in the market. That's the crux of this whole discussion.

And no, it's not my job to help the client manage risk. It's my job to observe/report the market. I am aware that my client will use my appraisal in managing their risk but that doesn't make me a risk manager - I'm still just a reporter.

If you work for a bank and I'm appraising a property for your use then I AM NOT A MEMBER OF YOUR TEAM. I am the outside party who literally doesn't care what decisions you choose to make with the information I provide. I care about being right, I care about answering your questions, and I care about readers not misunderstanding what I say in my report. My allegiance is to my role. I appraise - the users decide. The users do not appraise, and I do not decide.

May it ever be so.

The crux of the issue here is Scope of Work. There is no reason to argue about your job because it is laid out therein.

INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the
subject of this appraisal for a mortgage finance transaction.

 

[Andrei Fin]

Typical SFR buyers, who purchase for the amenity benefit rather than the income benefit, don't want to buy an extra lot. Typically, in my experience, they "take it" because the seller wants to divest and move on with his life and won't sell one without the other.

They're flukes. Fannie is trying to "dumb it down" so even the weakest appraisers think they can deal with the situation.

Agree 100% with everything here. That doesn't make the instructions for these fluke assignments somehow a USPAP violation etc.

 

[CANative]

Agree 100% with everything here. That doesn't make the instructions for these fluke assignments somehow a USPAP violation etc.

I don't think Lee was saying Fanne Mae is violating USPAP

But unwary appraisers who just forge on, thinking this is a piece of cake, CAN violate USPAP.