Bad advice from Fannie--"Multiple Parcels" from Dec. 2019 'Appraiser Update'

[J Grant]

Do you want to take a crack at the scenario in my post #273?

I'm anxious to learn what you consider to be a proper approach to the appraisal problem.

I will understand if you prefer not to want to respond.

Lee I will respond later, am behind on a report (have 3 on my desk ) I saw it and intend to respond...

 

[Lee Lansford]

Lee I will respond later, am behind on a report (have 3 on my desk ) I saw it and intend to respond...

I anxiously await.

 

[J Grant]

You either will not respond to this scenario or will deflect from it because it shows the flaw in your approach:
2 parcels. Each with H&BU separate from the other.
One parcel is SFR improved. The second vacant ready for development with great demand by builders.
Each parcel of land has MV = $350k (each).
In passing, the SFR improved parcel has a MV = $650.
The market views these properties separate from the other (though one is adjacent to the other and under common ownership). The market tells us that the buyer for one is not the buyer for the other.
The owner wants to refinance.
The lender comes to you.
You tell the lender what?
BTW, a scenario that I have been--at one time--engaged to appraise. I'll tell you how I correctly did this after you share how you would respond to the lender.

This is a specific scenario ( as all appraisals are ) so I will address it specifically, the terms you state of market great demand by builders is not present in all or even many cases

Lender asks for an appraisal, of both together -if YOU as appraiser determines market would never buy them together or would pay much less for either property if bought together, or that the vacant lot shows such high demand the a HBU as of that eff date is sell today - then that is your conclusion. This is a specific appraisal scenario and I repeatedly said in posts each appraisal is a case by case basis.

However, aside from this specific scenario, a vacant lot could have a value in use in a market of low demand for such lots, where majority of typically motivated owners are holding them in hopes of a future appreciation.

 

[glenn walker]

When you bought up financing to me, note I said it can affect if properties are eligible or not for financing. And in another long ago post, I asked if fannie was creating more of a market for these properties bu offering res terms financing on a vacant lot if purchased with a house adjacent... the fact is there is not a lot of those scenarios .

The fact is in many areas this is not a factor and few are done BUT in other areas its more prevalent then what we know because there is no real way to extract the amount of sales that have two parcels or on sales which included two parcels combined. In my MLS service normally the Realtor will list a total lot size and then in the comments section say something like total lot size of X includes the adjacent lot. Whats the percentage ?

In the counties we work my best guess is between 1% to 2% so yes its not a large number but on a nationwide basis it may be larger. Also the percentage of eligible properties shrinks every year because as more and more combine lots that places the property out of an-interim use phase into a more permanent position and it will continue to be bought and sold that way through it's entire remaining physical and economic life cycle. Also as the physical and economic life cycles go on the owners tend to include additional improvements like adding additions , larger garages and shops , pools and other amenities and encroaching into and onto the separate or adjacent parcel making it very difficult to re-separate and use the property for a potential H & B use.

I think forum members are making a big deal about nothing. Fannie does not have it wrong there agenda is to purchase loans from lenders to facilitate liquidity into the system, USPAP is not there issue as it lays on the appraisers back and I highly doubt any State Board would make an-issue especially once the appraiser cited that haggis source was Fannie Mae Guidelines. I remember once having a discussion regarding FHA with a State Board investigator and I mentioned that I thought what they had in a guideline forced the appraiser to side step USPAP. The investigator laughed and said something like hey they are the Federal Government and if I had to fight with them or a USPAP issue I would learn to complain and join team HUD : ) LOL

 

[Lee Lansford]

This is a specific scenario ( as all appraisals are ) so I will address it specifically, the terms you state of market great demand by builders is not present in all or even many cases

Lender asks for an appraisal, of both together -if YOU as appraiser determines market would never buy them together or would pay much less for either property if bought together, or that the vacant such high demand has a HBU as of that eff date to sell today - then that is your conclusion. This is a specific appraisal scenario and I repeatedly said in posts each appraisal id an individual one.

A lot could be value in use with low demand and where owners/the market sees hold it for appreciation is the better use as of eff date.

In the illustration (my post #273) I appraised the improved parcel for its Market Value.

After I advised the lender of why the two could not have a single opinion of Market Value--and they understanding that a different definition of 'value' that had the two as one opinion would be useless to them--they accepted the opinion of MV on the improved parcel only.

This scenario illustrates why it is that Fannie's words in the "multiple parcels" article is imprecise (at best) as some will "understand" that Fannie is granting permission for that vacant parcel (in my post #273) to be considered as "value in use" for the improved parcel with the result of a combined opinion of "value" (which would not be MV).

For the vacant parcel to be a part of the MV of the improved parcel, the appraiser's conclusion as to H&BU of the vacant parcel would have to be as additional "green" space for the improved parcel. H&BU analysis is "boot-on-the-ground" as to what's actually happening in the market.

 

[Lee Lansford]

The fact is in many areas this is not a factor and few are done BUT in other areas its more prevalent then what we know because there is no real way to extract the amount of sales that have two parcels or on sales which included two parcels combined. In my MLS service normally the Realtor will list a total lot size and then in the comments section say something like total lot size of X includes the adjacent lot. Whats the percentage ?

In the counties we work my best guess is between 1% to 2% so yes its not a large number but on a nationwide basis it may be larger. Also the percentage of eligible properties shrinks every year because as more and more combine lots that places the property out of an-interim use phase into a more permanent position and it will continue to be bought and sold that way through it's entire remaining physical and economic life cycle. Also as the physical and economic life cycles go on the owners tend to include additional improvements like adding additions , larger garages and shops , pools and other amenities and encroaching into and onto the separate or adjacent parcel making it very difficult to re-separate and use the property for a potential H & B use.

I think forum members are making a big deal about nothing. Fannie does not have it wrong there agenda is to purchase loans from lenders to facilitate liquidity into the system, USPAP is not there issue as it lays on the appraisers back and I highly doubt any State Board would make an-issue especially once the appraiser cited that haggis source was Fannie Mae Guidelines. I remember once having a discussion regarding FHA with a State Board investigator and I mentioned that I thought what they had in a guideline forced the appraiser to side step USPAP. The investigator laughed and said something like hey they are the Federal Government and if I had to fight with them or a USPAP issue I would learn to complay and join team HUD : ) LOL

See my posts #s 273 & 285.

Yeah, have to tell you...Fannie does not issue licenses to appraisers .

Something to consider when citing bad advice as a reason why a certain course was chosen.

 

[Michigan CG]

the AI form is what you get when a really competent appraiser designs a form.

All of my private work is on the AI form. By Sunday night I will have used that form about 100 times this year. If it is filled out in its entirety it forces the appraiser to explain a lot more.

 

[glenn walker]

In the illustration (my post #273) I appraised the improved parcel for its Market Value.

After I advised the lender of why the two could not have a single opinion of Market Value--and they understanding that a different definition of 'value' that had the two as one opinion would be useless to them--they accepted the opinion of MV on the improved parcel only.

This scenario illustrates why it is that Fannie's words in the "multiple parcels" article is imprecise (at best) as some will "understand" that Fannie is granting permission for that vacant parcel (in my post #273) to be considered as "value in use" for the improved parcel with the result of a combined opinion of "value" (which would not be MV).

For the vacant parcel to be a part of the MV of the improved parcel, the appraiser's conclusion as to H&BU of the vacant parcel would have to be as additional "green" space for the improved parcel. H&BU analysis is "boot-on-the-ground" as to what's actually happening in the market.

I agree with you but your example makes sense and many others in this thread seemed like emotional rants just because they disagree with Fannies guidelines. My question is since so few of these are done anyway why do appraisers care what Fannies Guidelines will or will not do -- Of course Fannie is granting both there lenders and appraisers to "value in use " BUT unlike the appraiser Fannie is not regulated or under the constraint of USPAP and therefore the appraiser is the one who has to Develop A Scope of Work that is credible.

If the appraiser determines that he/she cannot develop a credible market value unless appraised separately then the appraiser should contact the client and see if they want to proceed ? The truth is in most of these scenarios the lender has advised the borrower that he needs the property to appraise for at least X-$$$ and usually without combining the separate parcel the transaction cannot be done because its needed to increase the OMV. So the lender usually tells the appraiser to not proceed. Actually I have never had a lender tell me to proceed if I refused to do both as one. Then the lender shops around for a more compliant appraiser until they find a slippy that will do whatever he/she is instructed to do. If the Skippy puts up any objection the lender sends him/her a copy of Fannies Guidelines and says see you are making a big deal out of nothing because you have our Big-Bank USA and Fannie Mae's blessing. The Skippy not understanding the appraiser develops the scope of work was trained that the lenders engagement letter is who is in the Wheel House and so he completes the appraisal and-unintentionally inflates the value. The deed is drawn combining both parcels as one and the loan is funded encumbering both parcels and then it's sold to Fannie or Freddie and all goes well as long as the Borrower never defaults.

The Skippy sleeps well because he/she never had any idea the property may have had a higher or better use or what effect any of this had and so its just another $500 day and on to the next one. The professional appraiser once he/she starts mumbling about H & B use or confusing the Bigger Bank regarding definition of market value there heads are spinning and that's when they scream why can't the stupid appraiser just tell me there worth together. Next step manager of lenders appraiser roster sends over that classified E-mail that says move Walker down to number #999 on the fee panel and place a ***note that he does not do complex properties : ) LOL

 

[Meandering]

Ethics rule.

An appraiser must not accept an assignment, or have a compensation arrangement for an
assignment, that is contingent on any of the following:
1. the reporting of a predetermined result (e.g., opinion of value);
2. a direction in assignment results that favors the cause of the client;


Let's undervalue the second and third and forth lots, cause the lender wants one mortgage and it's just easier for the lender to have a UAD form with one value and pretend all the properties are one property, without using an HC, because the lenders can't work with an HC, and the form does not allow for that type of HC. Screw USPAP. No one reads it anyway, that's why they teach FAQs.

.

 

[Econobot]

Ethics rule.

An appraiser must not accept an assignment, or have a compensation arrangement for an
assignment, that is contingent on any of the following:
1. the reporting of a predetermined result (e.g., opinion of value);
2. a direction in assignment results that favors the cause of the client;


Let's undervalue the second and third and forth lots, cause the lender wants one mortgage and it's just easier for the lender to have a UAD form with one value and pretend all the properties are one property, without using an HC, because the lenders can't work with an HC, and the form does not allow for that type of HC. Screw USPAP. No one reads it anyway, that's why they teach FAQs.

.

Yeah forget USPAP...highest and best what??? Let's give them market, no wait. value in use.... maybe the lender can just tell us the value to "use". Is that "value in use"...haha so dumb