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

[Andrei Fin]

FIRST: If one is appraising two parcels, one developed and one not developed AND there is a demand for vacant land that deems the Highest and Best Use of the vacant parcel to be for development then we have a Highest and Best Use issue. If the improvements on the improved parcel contribute value and are deemed to be the Highest and Best Use AND the vacant parcel has a SUPPORTED Highest and Best Use of being improved then what box does the Appraiser check when valuing these two parcels together?

I will answer this one. Most appraisers check NO, as would I. Because one component of our subject is dangling a financial incentive, out of an abundance of caution to CYA it is better to check NO. And Fannie Mae has said they have no problem with this. They even told us they will take a HC on this one. Because they frankly there is no extra risk.

Lee and George will wonder again how the HBU can be different from MV. And like J Grant and others have tried to explain, HBU consists of four tests that do not always take into account everything that factors into best interest of market participants. To further an example from another thread- In San Francisco, if a duplex + ADU is zoned for triplex, and you comp it with triplexes because you determine that is the HBU, you will have overvalued the subject by possibly millions because ADUs do not qualify for fractional TIC loans.

 

[Andrei Fin]

Folks, keep in mind as you read posts in this string that 2 of the posters for certain do not understand how it is that H&BU is integral to an opinion of MV .

Keep in mind folks, that there are two people on this thread who prefer to live in a textbook than join us in the real world. When you add their big ego to the mix, it's a dangerous cocktail called "overvaluation".

 

[Lee Lansford]

I will answer this one. Most appraisers check NO, as would I. Because one component of our subject is dangling a financial incentive, out of an abundance of caution to CYA it is better to check NO. And Fannie Mae has said they have no problem with this. They even told us they will take a HC on this one. Because they frankly there is no extra risk.

Lee and George will wonder again how the HBU can be different from MV. And like J Grant and others have tried to explain, HBU consists of four tests that do not always take into account everything that factors into best interest of market participants. To further an example from another thread- In San Francisco, if a duplex + ADU is zoned for triplex, and you comp it with triplexes because you determine that is the HBU, you will have overvalued the subject by possibly millions because ADUs do not qualify for fractional TIC loans.

Go ahead..."X" no as to "is the H&BU...as improved" and prominently make the appraisal SUBJECT TO your certain HC. Please, do it.

 

[Andrei Fin]

Go ahead..."X" no as to "is the H&BU...as improved" and prominently make the appraisal SUBJECT TO your certain HC. Please, do it.

No HC needed (although Fannie said they'll take it in this case, do your own DD).

A HC is contrary to fact. What fact is contrary here? There are errors in your scope of work (identify the intended use, relevant characteristics of your subject property).

 

[glenn walker]

I will answer this one. Most appraisers check NO, as would I. Because one component of our subject is dangling a financial incentive, out of an abundance of caution to CYA it is better to check NO. And Fannie Mae has said they have no problem with this. They even told us they will take a HC on this one. Because they frankly don't care, there is no extra risk.

Lee and George will wonder again how the HBU can be different from MV. And like J Grant and others have tried to explain, HBU consists of four tests that do not always take into account everything that factors into best interest of market participants. To further an example from another thread- In San Francisco, if a duplex + ADU is zoned for triplex, and you comp it with triplexes because you determine that is the HBU, you will have overvalued the subject by possibly millions because ADUs do not qualify for fractional TIC loans.

San Francisco is not a great example because up there a 2-Unit with an-Accessory unit that is located on a lot that is zoned for 3 units is often treated as 3 units by buyers and sellers. The shortage of land and extremely tight housing inventory has created a necessity to rent every nook and cranny in a property. A similar sized ADU and a 3rd unit if they are similar sized usually rent for a similar monthly rate, so from a buyers perspective and based on sales prices in many cases there is virtually little to no differences in value and using Triplexes as comparables does not over-inflate the value of the Subject . Its a case by case situation . Also San Francisco has made it very easy to even get a non-permitted ADU approved for rental purposes and so buyers and tenants rarely know the difference between a unit and an- ADU and treat them as just another rental unit.

IN SUMMARY: IF A HIGHER AND BEST USE is not recognized by the market participants then the appraisers H & B use is most likely flawed because it's the market participants WHO drive the market and not appraisers , and in spite of the chatter about uninformed buyers and sellers those are the folks that would never use it anyway because they would never recognize it or have the resources to take it to the next step anyway. In other words they were only 3 feet from the gold but used the mine as a wine cave for the next 35 years : ) LOL

 

[Terrel L. Shields]

one of the alternatives is as separate buildable site

Building is a future event, not as is. I can show you lots platted in the 1800s in the small town I live in and have never had a dwelling while lots nearby are developed with new construction.

 

[Andrei Fin]

Having extensive experience in the San Francisco market, I must say that Lee's post about multi-unit buildings is so grossly inaccurate that it almost sounds like he completely made it up just to argue a point.

 

[George Hatch]

Keep in mind folks, that there are two people on this thread who prefer to live in a textbook than join us in the real world. When you add their big ego to the mix, it's a dangerous cocktail called "overvaluation".

Since you're are unwilling to even look, I'll help you out. Your subject previously sold on 08/12/2016 for $414k after having been listed separately for $313k+$89k. Now as I said, I don't have access to the local MLS so I don't know if the two datasets below include all the sales in question in that area or not, nor do I know how any of these sales relate to this SFR. But I did take the effort to look, and this is what came up:



So, before you run your mouth about either me or Glenn somehow forgetting how to hack out an SFR appraisal on a dogbox lets look at these two groups. You tell me what you see. Your subject sold in the middle of the time frame covered by these sales, and more/less within the middle of this geographic range.

 

[George Hatch]

Do you know what I don't see? I don't see any obvious support for a large lot size adjustment in this area, and I don't see a single sale that even approaches the $414k at which those two parcels previously sold in 08/2016.

 

[Andrei Fin]

Do you know what I don't see? I don't see any obvious support for a large lot size adjustment in this area, and I don't see a single sale that even approaches the $414k at which those two parcels previously sold in 08/2016.

You're not even arguing in good faith anymore. It took me like five second to pull these comps. A modest adjustment for the subject's larger site utility and you've got your $414k.