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

[George Hatch]

Inasmuch as one of the elements of HBU is feasibility and another is maximally productive the issue of properties selling with 2 parcels is already covered. Doing the HBU analysis doesn't mean the appraiser WILL conclude that the additional parcel would most commonly be sold off separately, it only means that the appraiser considered (instead of ignoring or proceeded with a user-determined instruction) the issue and subsequently developed their opinion.

 

[Lee Lansford]

Inasmuch as one of the elements of HBU is feasibility and another is maximally productive the issue of properties selling with 2 parcels is already covered. Doing the HBU analysis doesn't mean the appraiser WILL conclude that the additional parcel would most commonly be sold off separately, it only means that the appraiser considered (instead of ignoring or proceeded with a user-determined instruction) the issue and subsequently developed their opinion.

I truly believe that many...many...appraisers don't understand this. Many...and I mean "many"...appraisers cannot (or, will not) correctly apply much less compose a thoughtful and market supported explanation of their analysis. If folks work a market and know the market, this isn't all that difficult of a task.

 

[George Hatch]

Meh, people know how to do what they normally do. Which IRL means if the clients routinely demanded it everyone would already be in that groove. If every SFR appraiser had been compelled to spell things out in their reports all along it wouldn't look like such a daunting task to some of them.

Just the fact that the question doesn't come up that often speaks to the point that it's seldom an issue. The thing is that when it does pop up it is an issue. It's like External Obs. We don't often run into it, but when we do it will become hazardous to just blow it off. If we can see the dangling thread then we need to pull on it until we can tie it off.

Truly , this sort of thing is an example of something we can see and deal with which the machine can't be depended upon to emulate. Job security for us.

 

[Lee Lansford]

Inasmuch as one of the elements of HBU is feasibility and another is maximally productive the issue of properties selling with 2 parcels is already covered. Doing the HBU analysis doesn't mean the appraiser WILL conclude that the additional parcel would most commonly be sold off separately, it only means that the appraiser considered (instead of ignoring or proceeded with a user-determined instruction) the issue and subsequently developed their opinion.

Yes, that's it, isn't it?

Too simple...too difficult.

 

[gregb]

Here is a little puzzle for curious ones. Two adjoining ocean front lots, labled Main Lot and Second Lot. Zoning is 1-E-1, one acre minimum for newly created sites. Main lot is improved with 7,000sf residence, guest house and the adjoining, smaller lot has a tennis court. Main lot is 2.54 acres, adjoining lot is .51 acre. Historically both legal sites have transferred together. Note the flag lot configuration of the smaller site, which makes it not currently buildable as a separate site due to not enough room for a fire truck turn around within the requisite feet from the street.

 

[CANative]

Main lot is improved with 7,000sf residence, guest house

No kitchen though... ?

Looking over the top of my monitor at the property across the street. 50 x 150 lot with a little bungalow build in the 30's. Same size lot next to it is vacant and under the same ownership. Zoning is now Heavy Industrial with no residential uses permitted now. The lot with the house is grandfathered and can stay there forever. The lot next door is too narrow for the permissible uses in the C2 district. I suppose if someone bought both and demolished the house they could build a self-storage property or something. But this is an old neighborhood and the industrial type properties are being developed on the north end of town and all sort of work well together. No demand. But if the guy (or his family) sold the house I'm sure they would want the other lot to go with it. Probably at any price or even no price.

Right now it's being used for cats to play in and poop.

 

[gregb]

Yep, real world reality that bring the theoreticians off their high horses, if they ever get in the appraisal trenches.

 

[Andrei Fin]

Facts- 1. there is nothing in USPAP that limits "subject property" to one parcel, and 2. there is no USPAP requirement to value the "subject property" in its highest and best use. The appraisal problem at hand is the MV of the subject property (the improved and unimproved parcel when sold and encumbered together). This is NOT the same thing as "combined into one lot" as in the USPAP FAQ.

 

[Lee Lansford]

Facts- 1. there is nothing in USPAP that limits "subject property" to one parcel, and 2. there is no USPAP requirement to value the "subject property" in its highest and best use. The appraisal problem at hand is the MV of the subject property (the improved and unimproved parcel when sold and encumbered together). This is NOT the same thing as "combined into one lot" as in the USPAP FAQ.

"Standards Rule 1-3 When necessary for credible assignment results in developing a market value opinion, an appraiser must: (b) develop an opinion of the highest and best use of the real estate."

A vacant parcel adjoining the improved parcel may--if the market so tells us--have a H&BU as additional "green" space for the improved parcel.

H&BU is fundamental to market value.

You are correct in that there is "no USPAP requirement to value the 'subject property' in its highest and best use". Where there are 2 parcels--each having its own MV and each with a H&BU separate from the other--the appraiser may certainly opine to Bulk Value or Value in Use when offering an opinion that does not incorporate H&BU.

 

[George Hatch]

Facts- 1. there is nothing in USPAP that limits "subject property" to one parcel, and 2. there is no USPAP requirement to value the "subject property" in its highest and best use. The appraisal problem at hand is the MV of the subject property (the improved and unimproved parcel when sold and encumbered together). This is NOT the same thing as "combined into one lot" as in the USPAP FAQ.

You need to get your facts straight.

When using the mortgage lending definition of MV you cannot get to the MV of a property outside of its HBU. What do you think the bolded assumption below means?


DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.


Meaning, buyer and seller know - among other things - what they're doing WRT the property attributes.