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

[George Hatch]

No it doesn't. The point I'm trying to make is that HBU may or may not be to sell the parcel separately, however most people here have chosen to turn off their brain after performing just the first test (legally permissible). There is no "one size fits all" approach to these assignments, but that doesn't negate the fact that the second parcel can always be valued "in use" (what value does it contribute to the whole) and that figure applied to the market value of both parcels when sold as one subject property.

Fannie isn't allowed to lend on VIU appraisals. But even if they were allowed to do it, them requesting appraisers do VIU without disclosing it as such in their reports amounts to an unreasonable assignment condition. The same for skipping the EA that the 2-parcel assemblage is worth the same as the 1 parcel properties, and for not even disclosing the various other elements of HBU which are of effect on this property. None of that meets our minimum standards of conduct for an appraiser.

As for the value of the house+extra, appraisers who don't provide even 1 comparable with that attribute and just pull whatever reconciliation they're using for that - if any at all - out of thin air, that's even worse than skipping the remainder of an HBU analysis. There are ways to actually analyze for that attribute and develop the opinion, so there's no reason to make the unsupported assumption.

To repeat, not one of the sales transactions in the dataset you posted for the appraisal on Garfield was a house+extra, which means not one of them was directly comparable to the Garfield property in terms of that particular attribute. Garfield is a "B" type property that was apparently appraised as if it was an "A" type property. Probably out of expediency. We have no way of telling *from those sales* what the value of a "B" property is in that market.

 

[Lee Lansford]

But Fannie Mae never said that you can't check the NO box for HBU in these cases.

And what about the examples where the lot actually fetches more when sold with the property - a marginal lot that provides a valuable amenity to a desirable property, such as beach access, water rights, trout stream etc?

"X" the NO box when appropriate.

Well, you do understand--or, do you?--that when that little NO box is X'd, that Fannie does not buy that mortgage, right?

 

[George Hatch]

"X" the NO box when appropriate.

Well, you do understand--or, do you?--that when that little NO box is X'd, that Fannie does not buy that mortgage, right?

If it's a problem then that's a Fannie problem, not an appraiser problem.

 

[Mr Rex]

"X" the NO box when appropriate.

Well, you do understand--or, do you?--that when that little NO box is X'd, that Fannie does not buy that mortgage, right?

So why the hue and cry? Appraisers appraise, lenders lend or they don't. The groundbreaking announcement you keep talking about from Fannie is likely to say exactly that they do loan on property if the H&BU NO box is checked. Then when the next USPAP update (or perhaps monthly update) comes out, it will indicate how appraisers are to handle the issue.

 

[J Grant]

I highly doubt the fannie announcement will be they loan on a property if HBU is NO , they will likely explain the assignment is for appraiser to opine a single MV for the two properties, not opining a VIU value for the two...will see when it comes out..the suspense OMG

OF course if appraiser finds the HBU is a NO, as in any other assignment than mark it no and explain why

 

[Andrei Fin]

"X" the NO box when appropriate.

Well, you do understand--or, do you?--that when that little NO box is X'd, that Fannie does not buy that mortgage, right?

Usually but not in this case (do your own DD). And it makes perfect sense, if you can think like a lender in terms of risk. Because usually in the case of excess land there is a risk they could lose a portion of their collateral. But in this case, in order to split off the lot the owner would have to pay off the loan first. Not very complicated. That's why 95% of their instructions are actually describing the qualifications of the collateral and not how to appraise it.

 

[George Hatch]

One reason I would always do separate values of the components regardless if I applied a value to the assemblage is to enable a lender to split the excess off later if that comes up.

The most effective way of demonstrating the effect on value of this situation on the whole is to show it both ways.

 

[Lee Lansford]

So why the hue and cry? Appraisers appraise, lenders lend or they don't. The groundbreaking announcement you keep talking about from Fannie is likely to say exactly that they do loan on property if the H&BU NO box is checked. Then when the next USPAP update (or perhaps monthly update) comes out, it will indicate how appraisers are to handle the issue.

It seems that Mr. Fin does not understand this nicety.

 

[Mr Rex]

Fannie isn't allowed to lend on VIU appraisals. But even if they were allowed to do it, them requesting appraisers do VIU without disclosing it as such in their reports amounts to an unreasonable assignment condition. The same for skipping the EA that the 2-parcel assemblage is worth the same as the 1 parcel properties, and for not even disclosing the various other elements of HBU which are of effect on this property. None of that meets our minimum standards of conduct for an appraiser.

As for the value of the house+extra, appraisers who don't provide even 1 comparable with that attribute and just pull whatever reconciliation they're using for that - if any at all - out of thin air, that's even worse than skipping the remainder of an HBU analysis. There are ways to actually analyze for that attribute and develop the opinion, so there's no reason to make the unsupported assumption.

To repeat, not one of the sales transactions in the dataset you posted for the appraisal on Garfield was a house+extra, which means not one of them was directly comparable to the Garfield property in terms of that particular attribute. Garfield is a "B" type property that was apparently appraised as if it was an "A" type property. Probably out of expediency. We have no way of telling *from those sales* what the value of a "B" property is in that market.

I hear there is a major announcement on the way...

 

[Terrel L. Shields]

We just want them to refrain from writing appraisal methodology on the fly because that's not in their realm of expertise or purview.

I donno. They've managed to pretty much do that for 30 years.

50% of them confuse a higher and better use as a future event.

The ideal improvement for a site is not a given for that site. HBU relates to here, now, today. Not what is ideal. And, at least in my neck of the woods, 99% of these lots sell (be it surplus or excess) with the houses whether 1 tax card, or 20; whether 1 deed or 2; and they sell for their value to the property. Value in use is a nothing burger. And the properties do not have to be appraised separately, nor treated in isolation from each other. And, the ideal comp is another house with a similar site size. The buyers here look at these as a part of the site and the idea of trying to arbitrage some value out of the lot never enters their mind...and that I surmise is largely because they figure a new house next to their old one is not a plus for their property value. If you borrow money on 2 lots, then later sell the vacant lot, the money goes to the lender and (likely) they make you reappraise and redo the loan. Not much incentive to sell unless your LTV is really low, since you see nothing of the proceeds.