"As Is" or "Subject to"???

[pgerarde]

I am doing an appraisal of a new home and five acres (supposely). Per the lender, this parcel was originally ten acres with a new home and has recently been divided into a house with 5 acres and a bare 5 acre parcel.

The lender supplied me with a written legal description from a preliminary title report. The legal description talked about 'Parcel 1". (No address or APN#) The lender also says, at this time, that the new APN#s from the split are not available.

Ok, all that said. I inspected the property (well at least the house and saw where some survey stakes were in the ground. I have written a great "CYA" paragraph in the addendum addressing the provided legal description and the lack of a APN# and current plat map.

i.e. Lender supplied paperwork... can not be verified...appraiser understands....appraisal value base on information supplied...intended user should know that specifications of subject property could possibly impact final estimate of values stated in this report....etc

My question is, if I am stating in my addendum that this information should be verified in the title report, should I be appraising this "AS IS" or "Subject To"??? Seems like it should be "Subject To" but....?? Help!!

Thanks for your help,

Patti in Chino Valley, AZ

 

[Pamela Crowley (Florida)]

Sounds like it's a 'Hypothetical Condition' as of the effective date of the appraisal.

 

[bradellis]

Patti-

AS IS.

Do not use the hypothetical condition as these are for situations in which you KNOW the data is wrong. In this case, you really do not know yet. Appears that they are actually subdividing in this case.

So, use an Extraordinary Assumption that the parcel has been split already.

Brad Ellis, IFA,RAA

 

[Pamela Crowley (Florida)]

Brad,

Your answer is better than mine.

 

[Jo Ann Meyer Stratton]

Patti:
Due to the scheduling of the tax year in Arizona, the parcels will not be split into different assessor parcel numbers until at least the 2003 tax roll. The deeds would need to be recorded prior to September 15, 2002 for them to take effect on the 2003 tax roll. Or if there is not a transfer of ownership, just a split for mortgage purposes, the property owner will need to go into the assessor's office with the legal descriptions for each parcel and request a split for the 2003 tax roll. September 15 is the cut off date for all construction and splits of legal descriptions. Check out my paragraphs in my master addendum. Has the house been constructed or is it proposed construction as well as proposed split of the legal?

 

[pgerarde]

Thanks guys for all your feedback. Jo Ann, I went back and checked your Text Addendum templete and did find the "Extraordinary Assumption" clause. Thanks, I used it for the header and opening paragraph for my previously written "CYA" paragraph.

Never had these sort of conditions appraising for 14 years in California...I know "Welcome to rural Arizona"...

Thanks again to all of you.

Patti in Chino Valley, Arizona

 

[Ben Vukicevich SRA]

Brad,


Me, I'm a "subject to" kinda guy on this one. Only because you have the legal description already but you aren't really sure if it is approved (could be a preliminary subdivision plan and thus a hypo condition).

So, I'd "subject to" like this:

"Appraised value is based on the legal description provided/attached but is subject to borrower providing a copy of an approved subdivision issued by the municipality."

So, no funds are lent until the condition is met.

Also keeps the appraiser fuzzy and warm, if they go ahead and lend without the approved subdivision plan in their hands. I'm covered in any event and I don't care what they do.

Ben

 

[Farm Gal]

Ben

I like your logic! And plan on implementing it soonest. I have always hated these things when I can see it makes sense to run with it, buuuut I don't have that cover over my exposed rear!

Thanks!
Lee Ann

 

[Jo Ann Meyer Stratton]

Ben, you are use to the neat and tidy big city bureacracy. Out here in the wilds of Arizona, a subdivision is not required unless there are six or more splits of a single parcel by single land owner. Then if the lots are less than 36 acres, streets, utilities, etc has to be designed by an engineer, subdivision plans approved by the county supervisors or city council, etc, etc, etc. Then even if the officials approve the subdivision, it gets recorded, which then changes the legal description from a metes and bounds to a lot number, the roads still might not be acceptable to the county or city road department, which means the streets have to be maintained by the home owners. But then a lot of people also just split parcels right and left without bothering with all that technical stuff and there isn't any recorded easements for access or utilities available. And if the six or more splits are each 37 acres or more, a subdivision map can be recorded, but nothing has to be provided or approved by anybody.

Arizona people are very independant and they do what they want with their land and nobody tells them what to do!! Counties and cities are starting to recognize all these problems and now are at least refusing to issue building permits if there isn't recorded access and utilitity available disclosed. But the splits continue and there are a lot of properties split into five parcels by owner A, with one parcel very large. The new owner of the large parcel then splits into five parcels with one very large. The new owner of that new large parcel splits into five parcels with one very large, etc, etc, etc. And because all are five parcels or less, no roads, no utilities, no easements, etc, etc.

It sounds like Patti's problem is a home owner with ten acres that met up with a lender who has a bug about only five acres or less. At least this home owner will only have the five acres encumbered by having the five acres split out with a new legal description. Some lenders will encumber the full ten acres and want the appraiser to have only five acres in the appraisal. Subdivision rules and regulations do not apply to her situation. By the way is the original ten acres a metes and bounds description or is a single lot in a recorded subdivision? If a single lot of ten acres, then problems arise because zoning and subdivision CC&Rs might not permit any splitting into several parcels.

We have lots of fun out here in Arizona!!! Huge land fraud occured in the 1970s, a reporter was killed by his car being blown up when he started writing an expose of all the land fraud. But lots of fraud got done and there are still reprecussions with titles, roads to no where, subdivisions that cover miles without any lots staked, roads bladed in, no utilities for miles, etc.

So Patti needs to describe everything and anything--and then let the underwriter sort it out. She will need to have discussions with the county assessor, planning and zoning department, recorder's office, county engineer, etc before all the description she needs to have in her report.

 

[Doug Walters]

Ben:
We had a similar situation come up in our office and the appraiser conditioned the report on the successful subdivision of the parcel. Wouldn't you know, two years later the appraiser was required to give testimony after performing multiple appraisals addressing value before the subdivision and what the value of each lot would be after the subdivision before any house had been built. Seems when the owner took possession of the property the subdivision had not been completed (recorded). Their contention was "its all mine since I took possession of the undivided parcel at the time of settlement". That little statement regarding the subdivision in the "subject to" area saved the appraiser a ton of grief. The lender's attorneys wanted to go in totally prepared which subsequently resulted in mulitple assigments on the same property. The reason for the confusion, development restrictions. The application for subdivision got hung up at the local municipality due to the property being locate within 1000 feet of protected wetlands. Good file documentation kept the appraiser out of the litigation process.
Doug Walters