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

[glenn walker]

#Post 319-- H & B use on these situations is a not a big deal because the adjacent parcel is only Non-Buildable lots or land and be the same zoning so that quickly eliminates almost any potential higher and better use and in these Fannie situations. Since this entire thread started about Fannie-Mae Guidelines it has gone off the rails and the issue is really what effect does surplus land have on the value ? The definition of surplus land is it cannot be sold off separately. This means the “surplus” doesn't have a separate highest and best use, and in Fannie Situations the Subject properties Highest and Best Use has to be its existing use and that holds true for both the Primary property or any adjacent property that is going to be secured by the lender.

The H & B use analyses for a non-federally regulated lender or owner could be much more extensive especially when two adjacent parcels have different zoning. On a Fannie situation they made it easy for the appraiser because if they secure the surplus or separate parcel essentially the owner has 30 year handcuffs on and even if a better potential use became available the owner can do nothing until he pays that bad-boy off in full. THIS IS much different than a Non-Fannie lender where the borrower can negotiate Release Clauses on multiple parcels based upon certain events or actions. The way Fannie did it prevents the residential appraiser from valuing the adjacent parcel or surplus land as a separate parcel which keeps the appraiser from over-inflating the Primary properties value in use.

 

[George Hatch]

If this were true then why is there a check box for HBU YES/NO on page 1 of the URAR?

HBU has four tests, the text you bolded is not one of them. You yourself said that there are economic considerations beyond HBU. Yes, the appraiser must develop an opinion of HBU. Yes, HBU is fundamental to market value. Yes, in most cases Fannie Mae will not accept a property where HBU is NO. None of that matters to the task at hand.

If you're referring to buyers and sellers being well informed or advised, the property's physical, legal and economic attributes are most definitely are included in that. If you've ever taken an HBU course it will say so directly in the text.

Since you seem committed to the idea that a property's MV can be disconnected from its HBU then let's test that.

Give us an example of a scenario where the property's MV can be based on a use that's different than it's HBU/as improved. Let's see what you've got.

(hint: you will not be able to provide such an example)


As for what Fannie will accept, I don't consider that a persuasive argument in a discussion involving HBU analysis. I wouldn't take appraisal instruction from BankAmerica or Wells Fargo or any other client or user, either. I'm the appraiser, which means I am the one that's teaching them about appraising.

 

[Andrei Fin]

Give us an example of a scenario where the property's MV can be based on a use that's different than it's HBU/as improved. Let's see what you've got.

An unimproved parcel, where the HBU is to develop the parcel, but it is currently being conveyed from a well informed seller to a well informed buyer for its value in use, as part of an economic unit that includes an adjacent developed parcel, both being included under the same prelim and loan.

 

[Lee Lansford]

An unimproved parcel, where the HBU is to develop the parcel, but it is currently being conveyed from a well informed seller to a well informed buyer for its value in use, as part of an economic unit that includes an adjacent developed parcel, both being included under the same prelim and loan.

Wrong.

And wrong for the many reasons previously given throughout this string.

Good luck with your Value in Use OR Bulk Value that you are working with (your example above).

 

[George Hatch]

An unimproved parcel, where the HBU is to develop the parcel, but it is currently being conveyed from a well informed seller to a well informed buyer for its value in use, as part of an economic unit that includes an adjacent developed parcel, both being included under the same prelim and loan.

Okay. Give me an APN and lets look at such an example.

(No, I'm not going to allow you to get away with regurgitating the Fannie line as if it is actually an argument)

 

[glenn walker]

Parcels must be adjoined to the other, unless they comply with the following exception. Parcels that otherwise would be adjoined, but are divided by a road, are acceptable if the parcel without a residence is a
Non-buildable lot (for example, waterfront properties where the parcel without the residence provides access to the water).

Evidence that the lot is Non-buildable must be included in the loan file. (Applies only to DIVIDED lots - do you get that? It does not apply to adjoining lots.)

No J-GRANT you are wrong and misinterpreting what Fannie is saying so put that Red-Sharpie down because Fannie will loan on both situations but neither can be buildable. Adjoining requires a connecting boundary, while Divided for Fannies use means one part has been separated by either a natural thing like river, water , or something man-made like the City or County ran a road through a portion which physically divided one portion from the other. In 90% of all Fannie situations the appraiser encounters a single family home where the owner also has an-adjoining and separate lot or land that also has its own distinct and separate legal description , it own APN number or tax card and can be sold off or developed . A DIVIDED parcel is normally one lot or parcel of land which has something running through it like ( River-Road Etc ) and normally is not a legally separate piece of land BUT IT CAN BE.

The term adjacent is often used interchangeably with the definition of Adjoining all though that is not really correct because adjacent can also mean close or nearby, but the public and the Realtors in California mostly don't know the difference. The word Divided to the public or Realtors is also used when a parcel of land has been subdivided or split into separate lots or parcels of land. In States where there are a lot of Lakes, rivers, water front etc I assume DIVIDED parcels are common. 2 acres with pond separating on part from the other and Fannie will loan on those.

 

[J Grant]

Glenn walker, post: 2952708, member: 98178"]
No J-GRANT you are wrong and misinterpreting what Fannie is saying so put that Red-Sharpie down because Fannie will loan on both situations but neither can be buildable. Adjoining requires a connecting boundary, while Divided for Fannies use means one part has been separated by either a natural thing like river, water , or something man-made like the City or County ran a road through a portion which physically divided one portion from the other. In 90% of all Fannie situations the appraiser encounters a single family home where the owner also has an-adjoining and separate lot or land that also has its own distinct and separate legal description , it own APN number or tax card and can be sold off or developed . A DIVIDED parcel is normally one lot or parcel of land which has something running through it like ( River-Road Etc ) and normally is not a legally separate piece of land BUT IT CAN BE.

No, you are wrong.. Ask Fannie if an adjoined lot conveyed can be build able (nothing in their verbiage says it can not be.

What you posted in one section only refers to lot being not build able where the second lot is not adjoined to the improvement and is divided ( by a physical barrier/location Such as across the road from the improvement, ).

The term adjacent is often used interchangeably with the definition of Adjoining all though that is not really correct because adjacent can also mean close or nearby, but the public and the Realtors in California mostly don't know the difference. The word Divided to the public or Realtors is also used when a parcel of land has been subdivided or split into separate lots or parcels of land. In States where there are a lot of Lakes, rivers, water front etc I assume DIVIDED parcels are common. 2 acres with pond separating on part from the other and Fannie will loan on those.

Adjacent /adjoin terminology may be used interchangeably not in a correct manor, but the proof is in the pudding - the vacant lot is contiguous /next to the subject improvement , on the plat map and walking the property.

 

[Andrei Fin]

Okay. Give me an APN and lets look at such an example.

(No, I'm not going to allow you to get away with regurgitating the Fannie line as if it is actually an argument)

I was personally in contract on this one (backed out for unrelated reasons). The second parcel was approved for an SFR. https://www.zillow.com/homedetails/3002-Garfield-Ave-Carmichael-CA-95608/26085923_zpid/ And as an aside, the appraiser treated it as per Fannie guidelines.

 

[George Hatch]

I was personally in contract on this one (backed out for unrelated reasons). The second parcel was approved for an SFR. https://www.zillow.com/homedetails/3002-Garfield-Ave-Carmichael-CA-95608/26085923_zpid/ And as an aside, the appraiser treated it as per Fannie guidelines.

Seriously?

By any chance did you even bother to look at site sales data in that area? I can't believe that you did because if you had you'd have found the same thing I found - several sales of 8000sf parcels within a mile or so of this site selling at prices between $160k - $225k. The lower end of that range involved parcels sharing a common driveway, just like the subject's SFR parcel. Add that to the value of the SFR on it's own lot of 7834sf - for which I have several sales on the smaller parcels within 1/2 mile selling at prices between $386k - $415k.

I don't even have MLS access to that area and this was a very shallow 10-minute dive, but by my count $440k for both is way less than ~$400k (SFR) + $150k (adjacent vac parcel). Unless there's some reason both parcels would be required to sell together - like maybe the existing SFR encroaches on a setback requirement - it would be more profitable to sell them separately.

If I were reviewing that appraisal I'd have kicked it back to the appraiser to come up with a value for each parcel individually. Let the reader decide. I mean, before I did that I'd be sure to check up on the zoning and development criteria and such - moreso than I did here - so I'd already know the answer before I asked it of the appraiser, but in no case would I allow the apparent disconnect in the retail values of each to slide by without comment or consideration.

 

[Andrei Fin]

Seriously?

By any chance did you even bother to look at site sales data in that area? I can't believe that you did because if you had you'd have found the same thing I found - several sales of 8000sf parcels within a mile or so of this site selling at prices between $160k - $225k. The lower end of that range involved parcels sharing a common driveway, just like the subject's SFR parcel. Add that to the value of the SFR on it's own lot of 7834sf - for which I have several sales on the smaller parcels within 1/2 mile selling at prices between $386k - $415k.

I don't even have MLS access to that area and this was a very shallow 10-minute dive, but by my count $440k for both is way less than ~$400k (SFR) + $150k (adjacent vac parcel). Unless there's some reason both parcels would be required to sell together - like maybe the existing SFR encroaches on a setback requirement - it would be more profitable to sell them separately.

If I were reviewing that appraisal I'd have kicked it back to the appraiser to come up with a value for each parcel individually. Let the reader decide. I mean, before I did that I'd be sure to check up on the zoning and development criteria and such - moreso than I did here - so I'd already know the answer before I asked it of the appraiser, but in no case would I allow the apparent disconnect in the retail values of each to slide by without comment or consideration.

I agree completely, it would be much more profitable to sell them separately, hence the HBU is not the current use. But lo and behold, the local market participants are not doing so, and this is actually quite common. My plan was to keep the site as extra yard area for the foreseeable future, so both the seller and myself were knowingly leaving money on the table. This doesn't mean we are uninformed or atypical, it means that HBU is only four tests but in real life there are all sorts of other considerations.