Appraise House Combined With Extra Lot?

[Dave Smith]

Here is the scenario: The order called for an appraisals of the house on 1.41 acres and a second appraisal for the adjoining 0.62 acre lot. The $330,000 purchase contract did not allocate between the house parcel and the the vacant parcel.

However, the house was listed for $310,000. The lot was listed for $65,000.

I appraised the house for $285,000 with comps typical for the market area. The vacant lot appraisal came in at $61,000 with excellent comps, one of which was three lots away, 0.57 acres, virtually identical to the subject lot, closed 9/01/04 for $61,000. The other two lots were almost the same as the subject but a little further away. They sold for $62,500 and $60,000 within the last four months.

Subsequent call on Tuesday, from president of a good mortgage company client: "Can you give us a higher value on the house?

I said NO! I gave the appraisal my best shot when I prepared it." He said "OK."

Second call, from processor this morning, message on answering machine: "We want you to do a new appraisal, combining the house and the vacant lot into one parcel, based on the contract price of $330,000. I hope that won't create too much of a problem for you. "

Advice please! I know I have excess land. The two parcels are taxed separately. They are both legal, buildable lots, in compliance with the zoning code.

I am holding off calling them back until the experts here give me their usual good advice.

 

[Otis Key]

Dave - same song and dance but to a different tune. Read here.

http://appraisersforum.com/forum/index.php?showtopic=21507

 

[Dave Smith]

Otis: I realize it is a new assignment. That was not what I was asking about.

My question has to do with including the vacant (excess land) lot with the house parcel. I remember something from the AI 101 course about excess land but I don't remember the details.

I know that I will not be able to find any sales in the subject's price range that had a second lot included. I have a hard enough time finding decent comps, without complicating things with a separate legal lot being involved. I can't see how I can just combine the two lots into a single parcel and ignore the fact there are two lots.

What to do? What to do?

 

[Jerry Bone Jr]

The value of the subject & the extra land ($300-330K) will be less than the value of the subject ($285K) + the extra lot ($61K). Therefore the H&BU is subject + extra lot ($346K).

 

[REGINE SCHUTT]

Let them know the value will most likely be less if you combine them. I bet they will then go with your original two appraisals.

 

[Pamela Crowley (Florida)]

Uhm... "No"

Two separate parcels, the vacant lot can be sold separately and is a building site in it's own right.

"No"

Sheeeesh.... the combined total is already $346,000 which is $16,000 above the contract price. What is their problem???

 

[Jerry Bone Jr]

Originally posted by Pamela Crowley (Florida)@Oct 21 2004, 05:42 PM
What is their problem???

It doesn't fit in to a typical package, with two parcels.

 

[Wally Jones]

Make the report subject to combining the lots into one legal parcel. Of course, your client won't go for that, either. ("Why can't you just do what we want?") Sigh.

 

[Timothy Wixted]

Dave-

Here's a different view.

Your client is not asking you to combine the parcels. He is asking for you to take two appraisals and combine into a single appraisal report. Big difference. As far as having separate legal descriptions, the commercial guys on this forum do it all the time. It's not a big deal, you will not need new comps and it will not change the value of either parcel.

It will take some typing on your part as the 1004 format (as Austin so eloquently stated in a previous post), does not lend itself to such reporting.
Your two legals and two HBUs will probably have to go on an addendum. So will your land comps for the vacant parcel. In fact, you will have lots of addenda but there is no reason why you could not deliver a USPAP compliant report.

Your grid, I grant you, will not look pretty. You will have one line with an across the board adjustment of $61,000 for the vacant lot. You have the market support for it. Just explain it.

The lender may want a single mortgage to encompass both properties. It has nothing to do with market value or your assignment.

It comes down, as always, to Highest and Best Use. The improved property is at it's HBU and your opinion of market value at $285,000. The vacant parcel is still available to be developed to it's HBU and your opinion is $61,000. If the owner wanted to build a house on it tomorrow, he could. If he wanted to sell it, he could (subject to the mortgage, but again, that has nothing to do with value). Your estimate of market value for the two parcels is still $346,000.

Furthermore, it is NOT, IMSHO, a new assignment (collective gasp) . The client asked you for two opinions of value which you provided. The only thing that has changed is that he is asking that these opinions of value be communicated in one report. (I didn't say don't charge him).

Dave, I would urge you to use this opportunity to expand your thinking and step outside the limitations of the 1004 format. It will take some work, but you can deliver two appraisals on one report with one value that is well-supported and USPAP compliant. Have some fun with it

Good Luck,

Tim

 

[Jerry Bone Jr]

Most of the points that Tim made are right on. But...
The two appraisal on one report would not be FNMA acceptable, therefore not USPAP acceptable (assuming the appraisal is done for a conventional loan).