Appraisal Multiple Lots

[J Grant]

It's not 2 vacant lots, it;s an improved house on 1 lot being sold with excess land ( adjacent separate lot) We've already established the vacant lot has it s own HBU value as a lot with potential for development and done the apprsial for it as part of assignment. So the question remains, the lot is being sold as a package with the house , can the package be appraised? Why not? Do appraisers have the power to tell market participants, no, you can not do this, you are not allowed to buy or sell a house with an adajacent lot as a package? The lenders are willing to lend on it, a buyer is willing to buy it, so why ca't we appraise it?

Assuming the excess land is worth less as a package than alone, and assuming the house as a package sold with vacant adj site is worth more than the house alone, the problem is that the sale as a package subtracts value from the lot, yet the lot adds value to the house. For example, vacant lot 60 k as a lot ready to develop and house 300k by itself (on its primary lot ). Combine the 2, lets say the purchase price is 340k which might be an indicator. So as part of a package, the vlot is worth less than alone, yet the house is worth more than the house would be without vacant lot included in sale.

The house as an improvement still adds value, so therefore the HBU is still to retain the house, not to raze it. As part of the package, the vacant lot HBU is an interim use, hold for investment assumed at some future time the owner might wan to sell on it, or build a new home for themselves. I think it can be appraised as a package with all disclosures about HBU as vacant, as improved, contributory value of both, etc. It won't be an easy assignment because what is demand and marketing time for a house sold with an excess lot included as a package deal? What was the DOM for the lot and other vacant lots, if the market demand is supposed to be there for vacant lots, why wasn't it sold already? Why is it sitting there, and available to be sold, perhaps for lower $ to with a house in order to get it a buyer?

I find unless the spec home market is blazing hot, even in an active or high sale price market many vacant lots just sit there unsold , unless the price is dropped drastically (in my area )

One might want to look at the history of this adjacent vacant lot. Was it on the market a year with no buyers? Well maybe its HBU at present is sale as a package with improvement hold for future development if that was the case, buyers not falling over themselves to purchase it vacant were they....

 

[hastalavista]

There are two challenges in this assignment:
1. Valuing the property as requested. However, that challenge has been addressed. That challenge is an appraisal-development problem.
2. Reporting the value on the pre-printed form. I think the challenge here is how to report it on a pre-printed form that has with it a significant expectation that the market value identified at the bottom of page 2 is the value of a single site with its residential improvement.

It seems to me that the easy way to do that is to use the form's reporting options to report the expected components.

• The majority of the pre-printed form is going to be dedicated to valuing the site with house. I'd report this value at the bottom of page 2 because it is a value that needs to be reported and it is the value that is expected to be reported in that space (land + improvements, single-site).
  
• In the addendum, a separate valuation of the 2nd, vacant lot. I report this in the addendum.
• In the addendum, the bulk value is analyzed. This is what the transaction represents; a SFR and a separate lot, being sold together. I report this in the addendum.

I don't have a problem in the section above the value indication on pre-printed page two of summarizing the values. But I'd elect to report the SFR on the line-indication.

The lender has everything they need and everything is USPAP compliant.
No one can misunderstand what has been done because it is all explained in the report.

If we didn't have a form that had a specific expectation for its use, then we wouldn't be worrying about it. We do. We want to be sure that we don't unintentionally confuse anyone. So, report what's expected in the sections where it is expected and supplement the reporting of what's not expected in the addendum. A few sentences in this section...



... adequately communicates what the story is for the value at the bottom of page 2. The rest of the report needs to adequately explain in detail what the valuation and reporting process is.

I'm sure there is more than one way to skin this cat. But that's how I would do it (and I'd advise my client that's how I'm doing it).

Good luck!

 

[J Grant]

The sales contract is for subject house sold with with adjacent lot, and assignment from client is to provide a OMV for subject house together with adjacent lot ( and provide a second value opinion for the vacant lot . ) Therefore, the OMV on SCA should be for thee subject and vacant lot as one package $ amount, with any other value opinions as additional value opinions .

Either an appraiser believes they can develop an opinion for market value for subject and the vacant lot as a package, or not. If they feel they can not, then they should decline the assignment.

The overall HBU for assignment as a package sale is as improved, since the subject improvement contributes to value . The vacant lot as part of package has an interim use of hold for appreciation, which does not conflict with the package HBUt as improved. If subject were a wreck or a small cottage tear down it would be different, but that's not the case. . The fact that the adjacent lot has potential to be separated and if done would have its own HBU is disclosed , therefore assignment results are not misleading. . .

 

[Terrel L. Shields]

Terrel, the problem with combining the 2 parcels--1 having all of the improvements and the 2nd vacant with a H&B Use ready to go for residential development--is the that combining of the two as though one results in a price that is less than would market would yield if the two were marketed separately

Perhaps, perhaps not. My small town has a lot of lots of 7,000 SF, many have 2 lots, some straddle the boundary, some are on one or the other. In the 50s half of them or more would have a garden on the adjacent plat. But even now, for the life of me, I cannot and have not seen these selling for any premium. In fact, they are more likely to sell cheap and the value of the improved lot is diminished. The market wants a lot wider than 70'. Simply assuming a lot has some diminished value in plottage has to be justified by the market data, not some blanket assumption that it must be valued as excess land. Further, once again, the same areas above are often zoned to allow for duplexes. And a duplex normally would require 2 lots. A single lot duplex ends up being long and narrow "shotgun" style, because the setbacks limit the 70' frontage to 40 usable width. A typical duplex will require 2 of these 70' wide lots.

The issue to me, is who is the lender and do they have (stupid) rules saying "excess" lots cannot be included.

 

[hastalavista]

...The overall HBU for assignment as a package sale is as improved, since the subject improvement contributes to value . The vacant lot as part of package has an interim use of hold for appreciation.

Please review the definition of "interim use" because based on what has been presented, I'm not sure the use is interim.

 

[J Grant]

perhaps interim use is not the best description as a package for the vacant lot..., but the point is the HBU for the package sale of house and adjacent lot is as improved, since the subject improvement contributes more to value than to tear it down. And there is no need to tear it down for the excess lot to have its own HBU...it's that the other possible HBU of lot as vacant is subordinate to the HBU of as improved for the sale and value as a package.

 

[J Grant]

• In the addendum, the bulk value is analyzed. This is what the transaction represents; a SFR and a separate lot, being sold together. I report this in the addendum.

Denis, in above scenario you are providing a MVO or the SFR and lot together...so now it's just a matter of where to put it. You are electing to put it on the addendum, but its a MVO nonetheless... so why not put it on SCA page in the URAR?

 

[J Grant]

https://professional.sauder.ubc.ca/...es/courses/content/452/452_R1ARE10_chap12.pdf

Of interest...addresses interim use, I will read it again in depth later only had time to skim it now, great stuff though!

 

[Michigan CG]

Post #52 is the ONLY way to do this correctly using only the form in my opinion. Another correct way would be to write two reports.

 

[Lee Lansford]

There are two challenges in this assignment:
1. Valuing the property as requested. However, that challenge has been addressed. That challenge is an appraisal-development problem.
2. Reporting the value on the pre-printed form. I think the challenge here is how to report it on a pre-printed form that has with it a significant expectation that the market value identified at the bottom of page 2 is the value of a single site with its residential improvement.

It seems to me that the easy way to do that is to use the form's reporting options to report the expected components.

• The majority of the pre-printed form is going to be dedicated to valuing the site with house. I'd report this value at the bottom of page 2 because it is a value that needs to be reported and it is the value that is expected to be reported in that space (land + improvements, single-site).
  
• In the addendum, a separate valuation of the 2nd, vacant lot. I report this in the addendum.
• In the addendum, the bulk value is analyzed. This is what the transaction represents; a SFR and a separate lot, being sold together. I report this in the addendum.

I don't have a problem in the section above the value indication on pre-printed page two of summarizing the values. But I'd elect to report the SFR on the line-indication.

The lender has everything they need and everything is USPAP compliant.
No one can misunderstand what has been done because it is all explained in the report.

If we didn't have a form that had a specific expectation for its use, then we wouldn't be worrying about it. We do. We want to be sure that we don't unintentionally confuse anyone. So, report what's expected in the sections where it is expected and supplement the reporting of what's not expected in the addendum. A few sentences in this section...

View attachment 35950

... adequately communicates what the story is for the value at the bottom of page 2. The rest of the report needs to adequately explain in detail what the valuation and reporting process is.

I'm sure there is more than one way to skin this cat. But that's how I would do it (and I'd advise my client that's how I'm doing it).

Good luck!

I'll wager that the OP's client does not want a report with 3 values. The client likely wants this done the wrong way.