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Appraising 2 separate parcels included in the same contract

Mike Kennedy

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Sep 28, 2003
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Certified Residential Appraiser
State
New York
Any recent (1-2 yrs) closed SFR sales on larger than 1 acre lots??
 

J Grant

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Dec 9, 2003
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Certified Residential Appraiser
State
Florida
However, the client want them appraised as though they were one legal lot. The intended use is for mortgage lending purposes.

That is a different scenario .above the client wants 2 lots appraised as though they are one legal lot. The OP if I understand correctly is appraise the 2 lots not combined into one, but as they exist, 2 adjacent , legal lots, one has the improvement on it and the other vacant , total value for the whole. .
 
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Terrel L. Shields

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Certified General Appraiser
State
Arkansas
The extra lot is a non issue and you don't need "two appraisals" but you may need to evaluate the lot separately. Read the FNMA directive. It is plain. And what about the deed? Are both lots on the deed? Then it is one property with 2 lots. One.
 

Michigan CG

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Michigan
And what about the deed? Are both lots on the deed? Then it is one property with 2 lots. One.
WRONG!

A deed is only a way to transfer property rights. A deed can have 100 properties on it and a deed does not determine Highest and Best Use. The 100 properties can be miles apart.
 

Michigan CG

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total value for the whole. .
NO!

Adding the value of the improved lot to the value of the second lot, as a buildable lot is MISLEADING and not acceptable. One acre in my market is worth about $25,000. Two acres is worth about $35,000, maybe $40,000 on a good day. That does NOT equal $50,000.

If you want to appraise it as one economic unit then you would need to check the NO box for Highest and Best Use on the 1004 form.
 

CANative

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Jun 18, 2003
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Certified Residential Appraiser
State
California
There's no "always" in appraisal.

Zoning compliance and Highest and Best Use Analysis:

Specific zoning for this parcel is "R-R" RURAL RESIDENTIAL DISTRICT

Sec. 20.048.005 - Intent. This district is intended to create and enhance residential areas where agricultural use compatible with a permanent residential use is desired. Typically, the "R-R" District would be applied to rural or semi-rural areas where urban levels of service are not available and where large lots are desired. (Ord. No. 3639 (part), adopted 1987)

Partial list of Permitted Uses: The following use types are permitted in the RR District: Residential Use Types (See Chapter 20.016). Family residential single-family.

Minimum lot size in the RR:L(1) district is 40,000 sf. The subject conforms to the minimum lot size. The current improvements are a permissible use (use by right.) The subject lots, while included in one legal description, have not been merged. Each has the same RR:L(1) zoning, the two unimproved lots are not encumbered with improvements needed for the improved lots highest and best use, and each can be sold separately. The unimproved lots would each have their own highest and best use as stand-alone lots. In this regard, the additional lots would be considered excess land which is land not needed to support the highest and best use of the improved lot.

As there is little or limited demand for new construction in this market, at this time, due to market conditions and lack of adequate developer profit, the full potential sale price of these additional lots, when sold separately, is not the same in a combined sale. The subject property is included in the County's Commercial Cannabis Accommodation Combining District (Opt-In) which is intended to support continued operations by existing growers. Even at three acres, commercial cultivation is somewhat limited and it is not certain if the subject property could demonstrate any prior activity, which is a necessary component of entitling the property for a commercial operation and would likely have a positive impact on sale pricing in this market.

Highest and best use, as improved, is to continue the current use as an improved residential site of three acres with some consideration to potential for selling the secondary lots at some time, should market conditions improve.
 

Mr Rex

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Jan 12, 2004
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Certified Residential Appraiser
State
North Carolina
The appraiser’s highest and best use analysis of the subject property should consider the property as it is improved. This treatment recognizes that the existing improvements should continue in use until it is financially feasible to remove the dwelling and build a new one, or to renovate the existing dwelling. If the use of comparable sales demonstrates that the improvements are reasonably typical and compatible with market demand for the neighborhood, and the present improvements contribute to the value of the subject property so that its value is greater than the estimated vacant site value, the appraiser should consider the existing use as reasonable and report it as the highest and best use.
 

J Grant

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Dec 9, 2003
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State
Florida
NO!

Adding the value of the improved lot to the value of the second lot, as a buildable lot is MISLEADING and not acceptable. One acre in my market is worth about $25,000. Two acres is worth about $35,000, maybe $40,000 on a good day. That does NOT equal $50,000.

If you want to appraise it as one economic unit then you would need to check the NO box for Highest and Best Use on the 1004 form.
many times yes, adding two lots together into a larger site diminishes the value of each lot,(your example ). However, this is not combining 1 + 1 acre for a 2 acre parcel, this is a one acre site with a home on it and the second acre site remains vacant for building, thus the one acre build able site has the same value as any other one acre build able site in area. It would not be misleading if it is true for the market with support for it in the market.

Also disagree that the HBU box on 1004 must be NO. Because HBU is the entire property including the house, not the one acre alone ( I would disclose the one acre vacant lot can have its own HBU as a vacant lot ), and that it is assumed encumbered under one mortgage). The use of the one acre lot while encumbered under one mortgage is interim use to hold for later appreciation/sale.

Question, if the vacant lot has such demand as a build able lot why is it still vacant, why hasn't it sold in the past months or year? There is not always enough demand to show HBU is sell as vacant today, esp when market shows vacant lots sitting there with no for sale sign -some owners believe the lots will appreciate so they hold on to them. ( see Can Native post 76)
 
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Terrel L. Shields

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Arkansas
A deed is only a way to transfer property rights
READ the stupid FNMA guide. It clearly states you can include the lot if adjacent and similar zoning. Now go to USPAP and show me where every parcel has to be valued separately. As far as properties HUNDREDS OF MILES APART. Not only is this NOT 100 miles apart, but are adjacent tracts, I have appraised parcels HUNDREDS OF MILES APART under the same report not once not twice but dozens of times. I've appraised estates with dozens of parcels in various states. I have portfolio appraisals that include hundreds of parcels producing income over ten or more states.

You cannot show me one place in USPAP that prevents the appraiser from valuing multiple parcels. 9 of 10 ranches in the US with over 100 acres has multiple tax parcels. And you don't value each tract separately in separate reports. That is plain stupid.

Adding two small lots together might involve a different value but 2 small lots or 1 big lot, and the site used for X purpose generally are not priced per SF rather per site. And what town is so uniform that you don't have lots between 0,1 and 2 or more acres and generally that lot is valued per unit. A bigger lot may bring more but it is the utility of the lot that counts not mere SF. Same with a farm. Sure a 10 acre parcel is "worth" more stand alone, but if 10 acres is utilized as part of a larger 40 acres or 400 acres, it does not matter what the 10 acres would sell separately. You are valuing the whole property, not creating a hypothetical.
 

glenn walker

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Oct 11, 2006
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Certified Residential Appraiser
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California
Now we know why for many years residential appraisers checked the YES-BOX- give them a little rope and a simply single family home with and-adjacent lot turns into a big land appraisal. Truth is we have many double lots in my area and they are never developed because over the years the homeowner just keeps expanding into the adjacent lot and uses it for game courts, detached garages, shops, parking his work trucks , play ground for kids and grand-kids and growing a little garden. Also Fannie-Freddie all allow a SFR on a double sized lot to be appraised as one and combined on the deed to encumber their mortgage.

In high density areas people more and more want a buffer zone between them an there pesky neighbors and that is another factor. Based on the OP information the buyer-or current owner do not plan to try and build another home on the adjacent site and its probably encumbered by one loan now and when sold it will be encumbered with one loan again. A simple easy appraisal where the appraiser gets some comparables on larger lots and if none are available he/she can make a minimal lot size adjustment for the extra lot size.

In some areas I work once a lot size exceeds a certain size the remaining land drops down to almost no extra value except for utility. Anyway my advice to the appraiser is to stop and look at buyer motivations and actions, if this extra adjacent lot was so valuable and its H & B use was to build another home it probably would have been done by now or the owner and or new buyer would not keep encumbering it. Also when combining two SFR lot's the total site value is not the same as two separate sites. Buyers look at a home on a double sized lot as a big lot and can have a dream and tell their relatives that some day they are going to build a guest house for Uncle Billy. :) LOL
 
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