Appraisal Multiple Lots

[J Grant]

THE problem? Many an appraiser would fail (going back to the OP and referencing post #52) to recognize the correct approach and would instead lump-together the two as though one and report this as "Market Value" (which it is not).

Post # 52 suggested providing 3 different market value opinions for 3 different properties...1)MVO for a vacant lot 2) MVO a house on one lot 3) MVO for house on one lot and an adjacent lot as one combined property.

No matter how you keep objecting, even the people you agree with (Denis and Mich CG) said as part of assignment they would provide an opinion of market value for #3) house (improvement ) and a vacant lot.

To keep this in perspective, the client engaged the appraiser to provide a MVO of # 3 ( house and adjacent lot for one $ value), with an additional request for an appraisal and MVO of the vacant lot as part of the assignment. So if appraiser accepted the assignment, then they would provide a MVO for the house and lot.

"Market value " and what a property consists of are are two different things. Market value is an opinion and belongs to appraiser /appraisal, made about properties. You seem to say nobody could provide a market value opinion for a subject improvement together with a vacant lot? Are all properties neat and clean, aren't some of them mixed use or multi parcel, yet appraisers develop market value opinions for them ? Determining HBU is part of the steps of providing the MVO opinion and in this case is more complex than a SFR on one lot.

 

[Terrel L. Shields]

Since you're not familiar with this area or the local demand for large estate lots, your statement is really not accurate. Most ag use in this part of the county is an interim use with buyers standing in line for estate or mini-farm lots.

So is the Ozarks...but HBU does not create "scenarios" that is for feasibility studies.

Therefore, what is the present use (agri)
What was the previous use? (agri)
What are the owners intentions? (agri)
What is the legal use? (agri)
What has to happen before that agri use changes to smaller tracts? Survey, new deeds, county or local approvals, perhaps a zoning change. That isn't "as is". That is a future event determined by the END of that "transitional land" and that isn't what is on the ground here, now. It would be a future event - ASFMRA's Land in Transition class was very good about explaining that. HBU is what is here today, not some point in time in the future.

Agriculturalists via against developers for land in some areas, and land is, for the farmer, an investment not an expense. They understand the power of a reversion. When land gets worth "too much", they sell it. Selling 80 acres to a developer is not a bulk sale, it is the investment of the developer to parse into smaller tracts appropriate for the demand.

When land is taken for the construction of a new airport, the farmers are paid for their agricultural land, not paid for their land as if it were already part of an airport, or even if platted into "lots", the courts would never call them developed lots. Again, HBU is today, the value is today, not a future event.

 

[Lee Lansford]

THE problem? Many an appraiser would fail (going back to the OP and referencing post #52) to recognize the correct approach and would instead lump-together the two as though one and report this as "Market Value" (which it is not).

Post # 52 suggested providing 3 different market value opinions for 3 different properties...1)MVO for a vacant lot 2) MVO a house on one lot 3) MVO for house on one lot and an adjacent lot as one combined property.

No matter how you keep objecting, even the people you agree with (Denis and Mich CG) said as part of assignment they would provide an opinion of market value for #3) house (improvement ) and a vacant lot.

To keep this in perspective, the client engaged the appraiser to provide a MVO of # 3 ( house and adjacent lot for one $ value), with an additional request for an appraisal and MVO of the vacant lot as part of the assignment. So if appraiser accepted the assignment, then they would provide a MVO for the house and lot.

"Market value " and what a property consists of are are two different things. Market value is an opinion and belongs to appraiser /appraisal, made about properties. You seem to say nobody could provide a market value opinion for a subject improvement together with a vacant lot? Are all properties neat and clean, aren't some of them mixed use or multi parcel, yet appraisers develop market value opinions for them ? Determining HBU is part of the steps of providing the MVO opinion and in this case is more complex than a SFR on one lot.

Never mind. I've been around the circle here more than once.

 

[Lee Lansford]

...

No matter how you keep objecting, even the people you agree with (Denis and Mich CG) said as part of assignment they would provide an opinion of market value for #3) house (improvement ) and a vacant lot.

....

No, no, no.

Return to post #52.

There you will--or, you should--clearly see that the correct way to approach THIS scenario (note--I have in this string and in other similar strings explained how the two would be considered as a single whole...but, such requires correct analysis) is not by pretending that the 2 are 1. The OP's client wanted the OP to so pretend. BTW, don't tell me what I am objecting to. I have more than once here pointed out that post #52 (by Denis) lays out quite nicely how to approach this appraisal problem with the facts as known.

 

[J Grant]

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.

Good luck!

Lee, above is post # 52, open attachment 35959, right there, as one of the 3 market value opinions, he states a market value opinion of $350,000 for the bulk value of subject improvement and vacant lot . So I have no idea why you keep saying this is not the case.

It has nothing to do with "pretending" they are one....the assignment is appraise them together and in fact that is what Denis did in the above , that he also provided 2 additional market value opinions does not change the fact that he provided a market value opinion on the two combined to one property in the sale.

 

[timd354]

No, no, no.

Return to post #52.

There you will--or, you should--clearly see that the correct way to approach THIS scenario (note--I have in this string and in other similar strings explained how the two would be considered as a single whole...but, such requires correct analysis) is not by pretending that the 2 are 1. The OP's client wanted the OP to so pretend. BTW, don't tell me what I am objecting to. I have more than once here pointed out that post #52 (by Denis) lays out quite nicely how to approach this appraisal problem with the facts as known.

Looks like you are taking another lap around the same circle...good luck to you!

 

[Lee Lansford]

Looks like you are taking another lap around the same circle...good luck to you!

Yeah. Glutton for punishment I am.

 

[Lee Lansford]

Lee, above is post # 52, open attachment 35959, right there, as one of the 3 market value opinions, he states a market value opinion of $350,000 for the bulk value of subject improvement and vacant lot . So I have no idea why you keep saying this is not the case.

It has nothing to do with "pretending" they are one....the assignment is appraise them together and in fact that is what Denis did in the above , that he also provided 2 additional market value opinions does not change the fact that he provided a market value opinion on the two combined to one property in the sale.

Returning to well-plowed ground, a regulated lender is obligated to obtain an opinion of Market Value AND and that this is the scenario that the OP presents: Market Value would NOT be the 2 as though 1. Understanding this, to offer ONE opinion of MV--pretending the two are one--would be in great error. Denis is correct--in making certain that the lender receives what the lender must obtain: MV opinions for each of the two properties. An incompetent--unable to analyze and not aware or caring of what the regulated lender must obtain--appraiser would have lumped-together the two as though one and have been done with it.

I have communicated--in a situation very similar to what the OP presents to us--more than one opinion of "value" in a report. Instead of "Bulk Transfer" value, I opined to "Value in Use". Regardless, the regulated lender was required to obtain an opinion/opinions of Market Value (and Bulk Transfer value or Value in Use are not the required Market Value).

As to your "I have no idea why you keep saying this is not the case", I have no idea whatsoever to what it is you are referring to.

 

[Michigan CG]

To keep this in perspective, the client engaged the appraiser to provide a MVO of # 3 ( house and adjacent lot for one $ value), with an additional request for an appraisal and MVO of the vacant lot as part of the assignment. So if appraiser accepted the assignment, then they would provide a MVO for the house and lot.

Let us go with this. Appraiser gives an opinion of the two properties together and therefore has to IGNORE Highest and Best Use. Now let us change the Scope of Work to litigation (divorce or something). An appraiser working for the "other side" would have the appraiser giving the opinion you suggest discredited in three minutes. It is a pretty major violation of USPAP to ignore Highest and Best Use.

Does that make sense?

 

[J Grant]

Returning to well-plowed ground, a regulated lender is obligated to obtain an opinion of Market Value AND and that this is the scenario that the OP presents: Market Value would NOT be the 2 as though 1. Understanding this, to offer ONE opinion of MV--pretending the two are one--would be in great error. Denis is correct--in making certain that the lender receives what the lender must obtain: MV opinions for each of the two properties. An incompetent--unable to analyze and not aware or caring of what the regulated lender must obtain--appraiser would have lumped-together the two as though one and have been done with it.

I have communicated--in a situation very similar to what the OP presents to us--more than one opinion of "value" in a report. Instead of "Bulk Transfer" value, I opined to "Value in Use". Regardless, the regulated lender was required to obtain an opinion/opinions of Market Value (and Bulk Transfer value or Value in Use are not the required Market Value).

As to your "I have no idea why you keep saying this is not the case", I have no idea whatsoever to what it is you are referring to.

I agree an appraiser can provide several different opinions of value for the different properties as part of assignment, but how can you deny the fact that Denis ( and Mich CG) gave an opinion of market value for the subject improvement and combined lot? ( as a third OMV ) .

I have no idea why you keep introducing bulk transfer value as a concept since it is not a recognized market value definition , nor value in use...both Mich CG and Denis, in their posts, gave an opinion of market value for the (bulk property) of the subject improvement and adjacent lot ( Denis was 350k as his example ). The fact that they placed it as a third , instead of a first value in report does not change the fact.