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Appraising 2 separate parcels included in the same contract

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Certified Residential Appraiser
State
California
I've noticed some Real Estate agents marketing multiple lot SFR's with the total land area and then exclude the additional lot(s) from the contract or write a contract addendum including them in the sale. They think including additional lots will bollocks up the financing and that the appraiser will just hit the contract price even when those lots are not included. The lender is complicit in this "scheme" because when I don't hit the value I instantly get the addendum which is dated the same as the contract then sent to me.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
I've noticed some Real Estate agents marketing multiple lot SFR's with the total land area and then exclude the additional lot(s) from the contract or write a contract addendum including them in the sale. They think including additional lots will bollocks up the financing and that the appraiser will just hit the contract price even when those lots are not included. The lender is complicit in this "scheme" because when I don't hit the value I instantly get the addendum which is dated the same as the contract then sent to me.
Interesting ?
 

KHS445

Member
Joined
Aug 20, 2011
Professional Status
Appraiser Trainee
State
Michigan
I am amused sometimes how those of us on this forum that are a little longer in the tooth than others take a much more kicked back realistic look at issues similar to this. While others tend to tie themselves in knots, making the assignment a lot more difficult than it needs to be.

The assignment in question is to value the subject property, house on one lot plus a vacant adjacent lot. The value being sought is "AS IS" and the appraisal will be used for lending purposes. It sounds like at this particular moment (including the listing exposure time) all four of the HB&U scenarios would result in a determination of residential. If not, wouldn't an investor have jumped in and purchased the combined package then split the house and lot and marketed them separately? It would be interesting to compare the number of days on market for the subject and also for the potential comparables, both improved and vacant sites. As far as which box to check under HB&U, I would check the yes box and then instead of indicating residential (or whatever) I would note to See Reconciliation Comments. Then make sure to capitalize and bold your Reconciliation Comments regarding your complete analysts of valuing "AS IS" and "FULLY DEVELOPED". Bottom line you would explain that the subject has three values; "AS IS" house and both lots, "FULLLY DEVELOPED" would include separate values for the house and one lot and the vacant lot.

In your Cost Approach analysts you should already be doing a vacant land valuation. This is the perfect area for you to explain that it is possible to separate the two lots and if vacant, ready for development and marketed separately each lot would have a value of $XX,zzz. Make sure that when estimating the standalone value of the vacant lot that you consider; marketing time, survey costs, title insurance costs, transfer stamps, real estate commissions, marketing expense, etc. Just because the gross sale price of similar vacant lots is $XX,zzz doesn't mean that is what the owner is going to net. In fact depending on the individual circumstances and all things being considered the net contributory value of the vacant lot may actually be very similar to its contributory value arrived at in the "AS IS" valuation.

Also if at all possible one should consider the seller and buyers motivation and ask yourself why hasn't the seller marketed the lots separately and why is the buyer willing to pay what I assume is some sort of premium for obtaining the second lot. Not all sale/purchase decisions are made from a purely financial standpoint, sometimes the beauty is in the eye of the beholder and the setting is just what they are looking for and they are not concerned about realizing the last penny of potential profit.

Couple of misnomers that have appeared in this thread and others;
- Not all assignments will fit neatly on a typical form report and some will not fit regardless of how hard you work and how messy you want to be.
- Not all properties can be made to conform to secondary market imposed regulations/guidelines.
- Multiple properties and non-continuous properties can be transferred via a single deed.
- One appraisal can include multiple properties and non-continuous properties.
- Even parcels with a single Tax ID# can include excess/surplus land and can be split, subject to required approvals.
- If financed by a local lender the vacant lot could be sold off and a partial discharge of mortgage recorded rather than having to payoff the entire mortgage. It would be quite simple to do for an inhouse mortgage. If sold to the secondary market the local lender could repurchase the loan and complete the partial discharge. In doing so they would be stuck honoring the remaining terms of the original note.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Please read the posts, surplus land is not what's being discussed and being told by a lender, homeowner, borrower, or agent how to do an appraisal or what needs to be in the appraisal is what a form filler, liar for hire, burger king "have it your way" appraiser does with zero regard for their role and responsibilities as an appraiser. Is it not? I sure as hell won't be valuing two parcels on one form as a 2 for 1 deal.... I'm not going to promote summation either by completing a 1004 form with an addendum for a 2nd lot and I'm not going to be putting the two lots together because of my HBU analysis. So this assignment is dead to me and like I said, go find the skippy appraiser who doesn't know better and will turn in whatever they need to submit to hit the contract price. I'm not sure why you feel that what conveys in a contract determines how you do your job as an appraiser but I'm not engaging in it. I determine what I sign my name on and I develop what I sign based on my best efforts to not mislead the client, present factual information, and comply with applicalble laws/regulations. I think the fact that this topic keeps coming up on the forum is clear sign that not only is there a lack of information but probably alot of bad information exists.

Ultimately what's happening is a borrower/lender trying to force on the secondary market a sale that probably isn't going to work, simply because most lenders would order a land appraisal and a 1004 period. The fact that they want the two together and they can't have two seperate appraisals proves this. So we aren't talking about appraisal theory, we're talking about people trying to game the system and as an appraiser I'd rather not be complicit in the scheme. More or less entitlement culture, and for my strong stance has been learned from phone calls with chief appraiser's at banks and AMCs as well as conversations with very experienced appraisers working in high end markets.

"lenders would order a land appraisal and a 1004 period."

based on the lengthy debate above - the ree-lators can simply execute 2 separate contracts and the lender can order 2 appraisals in ONE assignment >> 2 (two) separate appraisals -

or .........decline the assignment.
 
Last edited:

jturner01

Thread Starter
Junior Member
Joined
May 13, 2008
Professional Status
Certified Residential Appraiser
State
Florida
Any recent (1-2 yrs) closed SFR sales on larger than 1 acre lots??

Yes, there is a 4 acre lot that sold with a home (the home is possibly a little inferior effective age/condition) that sold in line with the list price of the subject property with the home site. When I expanded my search to other areas with similar historical market reactions, I am seeing similar reactions to the larger lot sizes as well. I have not been able to find one multiple parcel sale (that was noted to be sold that way in the MLS).
 

CANative

Elite Member
Joined
Jun 18, 2003
Professional Status
Certified Residential Appraiser
State
California
Try running a few additional searches but also filter for agent marketing comments - "includes" "included" "additional" etc.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
Yes, there is a 4 acre lot that sold with a home (the home is possibly a little inferior effective age/condition) that sold in line with the list price of the subject property with the home site. When I expanded my search to other areas with similar historical market reactions, I am seeing similar reactions to the larger lot sizes as well. I have not been able to find one multiple parcel sale (that was noted to be sold that way in the MLS).
? urban, suburban, or rural market? Visit the local Assessor - often times multi parcels are not sold via MLS
 

jturner01

Thread Starter
Junior Member
Joined
May 13, 2008
Professional Status
Certified Residential Appraiser
State
Florida
? urban, suburban, or rural market? Visit the local Assessor - often times multi parcels are not sold via MLS

Suburban market with some rural tendencies.
 

Econobot

Junior Member
Joined
Aug 9, 2019
Professional Status
Certified Residential Appraiser
State
Colorado
"lenders would order a land appraisal and a 1004 period."

based on the lengthy debate above - the ree-lators can simply execute 2 separate contracts and the lender can order 2 appraisals in ONE assignment >> 2 (two) separate appraisals -

or .........decline the assignment.
You've hit the nail on the head, too often certain appraisers become lender slaves and they just have to get the appraisal into a secondary market-friendly format. Not only is this completely wrong but it's a testament to an appraiser having zero understanding of their job and responsibilities or the willingness to defraud clients for a few hundred dollars (pathetic). I relate it to entitlement culture and it's sickening, I've started to make it known to certain lenders that try this crap, to not even bother me about it because I determine what I appraise and how I do it. If they don't like it I have made them fully aware of the exact appraisal office that not only confirms sale prices but will overlook HBU analysis (especially local zoning) and fill in the forms for them. I haven't been in the business long but I've seen enough to spot fraud and that is exactly what it is. Doing an appraisal to benefit the borrower for the secondary market, no wonder the county I'm in has exponentially more foreclosures than surrounding counties...
 

Econobot

Junior Member
Joined
Aug 9, 2019
Professional Status
Certified Residential Appraiser
State
Colorado
I am amused sometimes how those of us on this forum that are a little longer in the tooth than others take a much more kicked back realistic look at issues similar to this. While others tend to tie themselves in knots, making the assignment a lot more difficult than it needs to be.

The assignment in question is to value the subject property, house on one lot plus a vacant adjacent lot. The value being sought is "AS IS" and the appraisal will be used for lending purposes. It sounds like at this particular moment (including the listing exposure time) all four of the HB&U scenarios would result in a determination of residential. If not, wouldn't an investor have jumped in and purchased the combined package then split the house and lot and marketed them separately? It would be interesting to compare the number of days on market for the subject and also for the potential comparables, both improved and vacant sites. As far as which box to check under HB&U, I would check the yes box and then instead of indicating residential (or whatever) I would note to See Reconciliation Comments. Then make sure to capitalize and bold your Reconciliation Comments regarding your complete analysts of valuing "AS IS" and "FULLY DEVELOPED". Bottom line you would explain that the subject has three values; "AS IS" house and both lots, "FULLLY DEVELOPED" would include separate values for the house and one lot and the vacant lot.

In your Cost Approach analysts you should already be doing a vacant land valuation. This is the perfect area for you to explain that it is possible to separate the two lots and if vacant, ready for development and marketed separately each lot would have a value of $XX,zzz. Make sure that when estimating the standalone value of the vacant lot that you consider; marketing time, survey costs, title insurance costs, transfer stamps, real estate commissions, marketing expense, etc. Just because the gross sale price of similar vacant lots is $XX,zzz doesn't mean that is what the owner is going to net. In fact depending on the individual circumstances and all things being considered the net contributory value of the vacant lot may actually be very similar to its contributory value arrived at in the "AS IS" valuation.

Also if at all possible one should consider the seller and buyers motivation and ask yourself why hasn't the seller marketed the lots separately and why is the buyer willing to pay what I assume is some sort of premium for obtaining the second lot. Not all sale/purchase decisions are made from a purely financial standpoint, sometimes the beauty is in the eye of the beholder and the setting is just what they are looking for and they are not concerned about realizing the last penny of potential profit.

Couple of misnomers that have appeared in this thread and others;
- Not all assignments will fit neatly on a typical form report and some will not fit regardless of how hard you work and how messy you want to be.
- Not all properties can be made to conform to secondary market imposed regulations/guidelines.
- Multiple properties and non-continuous properties can be transferred via a single deed.
- One appraisal can include multiple properties and non-continuous properties.
- Even parcels with a single Tax ID# can include excess/surplus land and can be split, subject to required approvals.
- If financed by a local lender the vacant lot could be sold off and a partial discharge of mortgage recorded rather than having to payoff the entire mortgage. It would be quite simple to do for an inhouse mortgage. If sold to the secondary market the local lender could repurchase the loan and complete the partial discharge. In doing so they would be stuck honoring the remaining terms of the original note.
This type of assignment is definitely far too complex for a trainee....good luck getting your credential, the sooner the better grasshopper... It proves your skillset...
 
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