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

[Lee Lansford]

It's not one specific incident, in fact this incident is so common that Fannie Mae addresses it not just in their Selling Guide but felt compelled to address it again in a newsletter.

There is no market evidence to the contrary in any of my scenarios. If the properties were worth more, a well-informed buyer would have bid higher and snapped them up. Unless you provide comps that sold adjoining and simultaneously you're simply overvaluing the subject property by failing to consider all the factors that constitute best interest.

The market is larger than what you assert in "Unless you provide comps that sold adjoining and simultaneously..." Perhaps that is the reason for your roadblock on this issue.

 

[Andrei Fin]

Perhaps you don't understand "subject property". The "subject property" is not an improved lot and vacant lot. The subject is an improved lot and a vacant lot adjoining each other and would be sold/marketed with the same effective date and exposure time. If you perform two separate appraisals you are simply not comparing "apples to apples".

 

[Michigan CG]

Here is a real life example. In 2018 I appraised a hypothetical (new construction) home. The owners bought two parcels so their kids cold have a big yard. The Highest and Best Use is CLEARLY for the second parcel to be developed with a single-family home.

The lender said they needed both parcels valued as one and I told them no. Had a long discussion with the Chief Appraiser and in the end he told me he had been doing this for 30 years and learned something new.

 

[Andrei Fin]

The Highest and Best Use is CLEARLY for the second parcel to be developed with a single-family home.

Clearly, because the parcel was just sitting there until the owner bought it so their kids could have a big yard.

 

[George Hatch]

Along with half the other parcels on that block

 

[Lee Lansford]

Perhaps you don't understand "subject property". The "subject property" is not an improved lot and vacant lot. The subject is an improved lot and a vacant lot adjoining each other and would be sold/marketed with the same effective date and exposure time. If you perform two separate appraisals you are simply not comparing "apples to apples".

If one does not understand how it is that H&BU is integral to MV, then one can do whatever one wants (you know, "one size fits all").

I suppose if the only tool that I had were a hammer, every 'solution' to every appraisal problem would require the use of the hammer.

 

[George Hatch]

Perhaps you don't understand "subject property". The "subject property" is not an improved lot and vacant lot. The subject is an improved lot and a vacant lot adjoining each other and would be sold/marketed with the same effective date and exposure time. If you perform two separate appraisals you are simply not comparing "apples to apples".

Do us a favor and read the following out loud to yourself:

The "subject property" is not an improved lot and vacant lot. The subject is an improved lot and a vacant lot adjoining each other

 

[Lee Lansford]

Clearly, because the parcel was just sitting there until the owner bought it so their kids could have a big yard.

Your casual response seems to assert that this is the only way that you consider this matter.

So...if the market displays great demand for that vacant parcel to be developed with a new SFR, you would what...?

 

[George Hatch]

The "adjoining" element has nothing to do it it, either. The subject *can* consist of 2 adjoining properties but it also *can* consist of properties that are not adjoining, so "adjoining" is not the dividing line.

Regardless of the adjoining issue, even if I bought 2 adjoining condo units and operated them both as rentals that doesn't preclude me from subsequently selling either or both off individually. Prior operation and occupancy of the property is not part of the HBU analysis.

 

[Carnivore]

Yesterday I was going to bring up the "exposure time' as a very important element in this FNMA valuation problem. FNMA is looking at this in several ways. The reason they want the Improved lot and unimproved lot Valued as a whole is in the event of a foreclosure is they intend to dispose of the non-performing asset as a whole in typically under thirty days to sixty days exposure time

I agree that DOM/exposure time is an important factor in our opinion of MV (on any property).However, how do you "know" Fannie intends to dispose of it as a whole ? There is no edict for them to do so, They can offer it as an either or listing, which is how I often see them listed and sold on MLS

As far as the combo sold together, don't assume it is a white elephant , If your market shows that , it does, but what I see is they often sell as a combo in reasonable marketing time - because since they are usually offered as an either choice menu on MLS, ( example below ) unless the seller is desperate, they won't take a big loss or wait a year to sell together - if a buyer comes along for house, they sell it first and keep the lot to hold or offer it for sale separate. Therefore, when a buyer does want to purchase them together, I often see the two sold in typical marketing time for houses.

Typical MLS lists these when avail as combo under two categories: under land for sale, the lot is listed , with an option to purchase the house next door , and under houses for sale the house is listed along with an option to purchase the lot next door.

Unless the seller is desperate, they would not take a loss on either the house or the lot just to get them sold together. Perhaps a small discount,... And the seller would also not keep them on MLS a very long time simply to get them sold together. Typically, if no buyer comes forward to purchase both, I see the house sold and then the lot remains listed on MLS.

When I do see the lot and house sold together , them sold together. I rarely see a big discount or very long marketing times. That applies my area for MLS listed open market with the house in good condition not demolition bait houses which is a different market.

You know I am sorry I made the post above. Stupid me....

I should have known and anticipated you would mix Normal market sellers and buyer in with FNMA Disposition of non-performing assets. Stupid ....Stupid ...Stupid me!

I'done wrestling with a pig in a mud hole. The more you do..the muddier you get ,,,the Pig is loving it.