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

[George Hatch]

There's nothing wrong with a lender asking for a value in use, nor in an appraiser providing a value in use when that's the request.

But doing one thing (value in use) and calling it another (market value as defined) is dishonest and unethical regardless of who the user is.

 

[Andrei Fin]

value in use. The value of a property assuming a specific use, which may or may not be the property’s highest and best use on the effective date of the appraisal. Value in use may or may not be equal to market value but is different conceptually.

From the Dictionary of Real Estate Appraisal, 6th Edition

That's what I've been trying to explain all this time. Now let's jump to the final step. The market value of the subject property is the market value of the main home plus the value in use of the vacant parcel. This is literally the most probable price for the subject property (two parcels sold at the same time) given the typical buyer and seller. How is this a violation of anything?

 

[George Hatch]

That's what I've been trying to explain all this time. Now let's jump to the final step. The market value of the subject property is the market value of the main home plus the value in use of the vacant parcel. This is literally the most probable price for the subject property (two parcels sold at the same time) given the typical buyer and seller. How is this a violation of anything?

"Most probable" is never a problem if you do the work and can show that it actually is the most probable. It's when you don't do the work that you can end up calling a value something it isn't.

 

[Michigan CG]

market value of the main home plus the value in use of the vacant parcel.

So you would include the definition of Value in Use in your report and report both numbers separately?

 

[George Hatch]

So you would include the definition of Value in Use in your report and report both numbers separately?

We've been through this. Andrei thinks that

MV = $300,000
and
Value in Use = $300,000

mean exactly the same thing because the numbers are similar.

 

[Terrel L. Shields]

es. Your subject property is both parcels. There is one effective date and one exposure time. You are correct

Since land is fairly cheap here, I doubt the marketing time of a single lot with house differs substantially from that of 2 lots and house, or even a bare lot. I would expect any one of the options to sell within 60 to 90 days in Arkansas, maybe 60 to 120 days in Oklahoma.

 

[George Hatch]

Since land is fairly cheap here, I doubt the marketing time of a single lot with house differs substantially from that of 2 lots and house, or even a bare lot. I would expect any one of the options to sell within 60 to 90 days in Arkansas, maybe 60 to 120 days in Oklahoma.

And that's fine, both in the conclusion you have come to as well as the manner in which you have developed it. You have exposure and experience with these property types in this area, enough to have developed the informed opinion.

But if you lacked the exposure to one or more of these elements then you would have to take the steps to cover that. You wouldn't simply rely on a "fannie will accept" edict.

I liken this to Fannie's 6 month/1-mile guideline. I can't count how many times I've run across appraisals where the appraiser did like Andrei did earlier in this thread and ran a search off those maximum parameters and took the top 3 or 6 sale prices to present as their comps. But using those outer maximums as your default is not what a professional appraiser does. We work from closer to further; from more similar to less similar until we find enough comparables to do our thing. We don't get any more dissimilar to our subject than we absolutely have to in order to identify the prevailing trends.

 

[Mr Rex]

Lee explained earlier, its Immediate H&BU, It seems maybe he ignores the definition and analysis or of exposure in his H&BU analysis or simply is adding his own spin. Is that allowed? I thought I read through the new USPAP pretty thoroughly, but then again he and others read between the lines of the Fannie announcement and found stuff I for the life of me can't find. I guess I just don't understand H&BU analysis or basic "See Johnny run" reading comprehension. I readily admit I'm a dumbarse and the elitist hold the cards. Only except FNMA is going to come out with a jaw dropping/ball busting adjective filled adjustment to USPAPs formally strict "Best Appraisal Practice in Regards to H&BU" and the next USPAP update will look like a puppy rolling over revealing its throat or nuts looking for a belly rub. Wagers? Bueller?

 

[George Hatch]

"the next USPAP update will look like a puppy rolling over revealing its throat or nuts looking for a belly rub. Wagers? Bueller? "

I don't know why you're so hot to wager. Do you think I'll change my opinion if we each put up our firstborn?

Here's the thing about appraisal standards - they have to be based on fundamentals which will hold up across all types of intended uses, for all types of property uses and in all geographic areas, not just California and the great state of North Carolina. So we can't look at these requirements solely in terms of what we've personally seen in our local; we have to look at these issues in terms of what's possible. Anywhere and under any market conditions. If it's even possible for something to happen then we have to retain the fundamentals it would take to address that situation.

That's why the fundamentals for all areas of RE appraisal practice can't be dorked to fit a narrow - and likely temporary - interpretation of a single user. Even one as big as the federal gov't or a GSE. That's also why a user-driven requirement is most appropriately characterized and treated as a supplemental to the basics and not as a separate application which forms its own universe.

Besides, the concept of MV itself exists outside of USPAP. Changing USPAP doesn't change how MV works.

Lookit, you can bend a knee to expediency if you want and it's likely that nobody will ever hassle you for it. Nobody puts Baby in the corner and nobody tells Mr Rex how to appraise, least of all me. Lee and I and most of the others have been trying to make a sale here, but it looks like we're too late and you've already made your sale. So be it. Go do what you're going to do.

 

[Mr Rex]

USPAP will bend like a hot yoga instructor. I appreciate your allegiance to the "commandments" of appraisal so to speak, but yes even the most sacred of documents that address human fundamentals can and will be dorked. And yes its user driven. Murder is wrong and 100% against all standards, but abortion is a women's right issue. Not to try to send the thread down a political vein but if purity of thought and principals was so simple, USPAP would just say see 10 Commandments.