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

[George Hatch]

The operative qualifier is "sometimes".

 

[Eli]

It's a matter of looking at the real property rights that your appraising. If "market value" is the definition of value, it's different from "use value" definition. Most of the time with Fannie your doing "fee simple" real property rights.

 

[George Hatch]

MV = $300,000

doesn't mean the same thing as

VIU = $300,000

nor does it mean the same thing as
FMV = $300,000
IV = $300,000
DV = $300,000
LV = $300,000

 

[Andrei Fin]

I have seen lots where the H&B use is only to be sold with house. You can't give them away. I have seen houses and 2 lots where you couldn't give them away. It cost more to demolish the house than the vacant sites are worth. In that scenario, the H&B use is to hold the property most times. A mentor of mine taught me that a long time ago. Sometimes, the highest and best use of a property is to hold it. That is just one scenario where the highest and best use might be to hold the property. But it is an example. A totally opposite scenario could be true like in situation where change is occurring.

Again, they are throwing H&B use out the window with a "use value" definition. Exposure time not required either with "use value"

They are not throwing HBU out the window, you are still required to properly develop and report the HBU.

But as someone else posted, by definition the Value in Use may or may not be the HBU.

This is not a HBU issue, it's a SCOPE OF WORK issue. Identify the subject property. The subject property is an improved and unimproved parcel sold together under one transaction, legal description, and loan. What is this property most likely to sell for? It's truly amazing how difficult this is for some people to grasp.

 

[George Hatch]

They are not throwing HBU out the window, you are still required to properly develop and report the HBU.

But as someone else posted, by definition the Value in Use may or may not be the HBU.

This is not a HBU issue, it's a SCOPE OF WORK issue. Identify the subject property. The subject property is an improved and unimproved parcel sold together under one transaction, legal description, and loan. What is this property most likely to sell for? It's truly amazing how difficult this is for some people to grasp.

All other attempts are not working here. Let's try a variation of the Socratic Method.

*Why* is it an appraisal standard that "you are still required to properly develop and report the HBU." in these assignments???

 

[Andrei Fin]

HBU is developed because it informs market value (although is not necessarily the same). There are other reasons depending on the scope of work, for example in a lending appraisal it also serves to inform risk, it can also help a client maximize return.

In our case we are valuing one component of the subject property in a way that may not reflect its highest and best use. Why is that? Because per the scope of work it is now part of a larger subject property with only one hypothetical market transaction and not two.

 

[George Hatch]

Why is SR1-3 entitled "MARKET ANALYSIS, AND HIGHEST AND BEST USE"?
What is the significance in this discussion of these 2 concepts being addressed under the same SR and sharing the same requirements?

 

[Lee Lansford]

They are not throwing HBU out the window, you are still required to properly develop and report the HBU.

But as someone else posted, by definition the Value in Use may or may not be the HBU.

This is not a HBU issue, it's a SCOPE OF WORK issue. Identify the subject property. The subject property is an improved and unimproved parcel sold together under one transaction, legal description, and loan. What is this property most likely to sell for? It's truly amazing how difficult this is for some people to grasp.

So, tell us...what do you do when the 'mortgage broker' asks for a single opinion of MV for a refinance of two properties? The loan is headed to the secondary market and the lender is (obviously) a regulated lender:

2 parcels.

1 SFR improved, 1 vacant.

The vacant parcel's H&BU is for SFR improvements (as is the SFR improved parcel).

Each of the two is separate and distinct from the other though under common ownership and side-by-side.

The MV of the land--for each parcel--is $350k.

The improved parcel (which, of course, includes the land) has a MV = $650k (and such is common in the neighborhood).

The market tells us that the buyer for one of these properties is not someone who is buying the two together in order to have additional "green" space for the improved property.

So...tell us...are you going to offer one opinion of MV for the two?

This will be interesting.

 

[Terrel L. Shields]

they have to be based on fundamentals which will hold up across all types of intended uses, for

So our intended users change every 2 years? Moving the cheese to keep everyone on their toes...

 

[Andrei Fin]

Why is SR1-3 entitled "MARKET ANALYSIS, AND HIGHEST AND BEST USE"?
What is the significance in this discussion of these 2 concepts being addressed under the same SR and sharing the same requirements?

View attachment 43253

Are you trying to imply that market value is always the HBU?