Big House On 31 Acres, What To Do?

[LesPaul59]

I feel bad about turning this guy away so I am racking my brain trying to figure out how to appraise his property. 3,500 sqft house on 31 acres outside of the city limits. There are absolutely no comps of that kind in the area as most folks around here that have that kind of acreage have it separate from the house, but his is all together. I could possibly find a comp or two with 10 acres but that's about as good as it gets unless I go 20 miles away. Have any of you run into a similar situation? If so, how did you handle it? Tell the guy sorry but I can't help you?

 

[CANative]

What's wrong with going only 2 minutes away? Is it a competing market? Would a buyer interested in the subject property be just as interested in the properties 20 minutes away?

Edited: Ooops! 20 minutes = 20 miles.

If you're driving 60 miles an hour I suppose it's the same.

 

[Mountain Man]

Is the highest and best use residential?
If so, go 20 mile to bracket and support any land value adjustment.

But if the highest and best use is not residential.... IE, developers are salivating just waiting to get a hold of it.... then you many have a more complex assignment.

 

[wyecoyote]

Something like that look for similar comps. Different type of buyer than a 5 acre piece or 10 acre piece. One thing to know for certain is whether it is flat land, treed land, or mountain land. Different types of buyers in my market. Something like what you have described I would probably consider the entire county.

 

[jay trotta]

ifn yer having that much trouble in your own mind about the comps. - how would a UW understand what your tryin to splain..... :question:

probably betta off not gettin involved, seems ta me...


h34r:

 

[Robert Dunkle]

The appraiser that appraised my ranch for refinance had to go out of the county and up to 50 miles away. Mine is a fairly urban county and there had not been any sales of over 60 contiguous acres in the previous two years. With 300 acres, they had to travel a "fur piece" to find comps.

You go where you have to to find reasonable comps. The UW's may yell, but I always cut them off at the pass by including verbage to the effect that this is not typical for the area so there were no sales available, but this is an attractive (valuable) property! Assure them that you looked and there were no close comps (assuming that you did).

The UW's must think that we like to drive the wheels off our vehicles and burn up $2.00+ per gallon gasoline just looking for those "far off comps".

Jay got in while I was typing and he makes a good point. We don't know what your expertise level is so I hope you have considerable experience or a good mentor. This is not a residential appraisal. If your only experience is residential, you should pass or "buddy up" with an appraiser with some additional experience! Doing appraisals over your head will get you into deep trouble.

 

[Roger R. Patzold]

Perhaps this will work.

In my area near Houston, Texas I consider several counties as suburban to Houston because the majority of the local residents commute to Houston on a daily basis. Additionally, the local residents do not make their living from agriculture.

In this area a SFR can be on 0.5 acres, 1.0 acres, 10 acres, or 30 acres. Sometimes even more acreage. Some of the smaller ones are in subdivisions, some not.

I have done several properties over the years without any great problem from underwriters, lenders, etc.

Usually, I can not find sufficient comparable sales for a given house on larger acreage equal or similar to the subject property.

What I usually can find is similar houses on smaller acreage, 5 to 20 acres. I can also find similar acreage with no improvements or improvements of limited value. Camp houses, deer stands, etc.

Once in a great while I manage to find similar homes on similar acreage. When I do, I just giggle.

If there are sufficient land sales to establish a value for the land of the subject property I use that established value to adjust the value of the smaller sites with houses similar to that of the subject property. The site adjustment is a value adjustment only. Perhaps not the best way but it works when satisfactory sales are not available.

If your area is zoned or otherwise restricted, you will have to deal with that.

If development is so heavy that similar land only sites are being gobled up by developers you have a highest and best use to deal with. Also, if that is the case perhaps you have a subject with highest and best use of development and not SFR. There are some areas in southwest Montgomery county that has such a situation. Development of small subdivisions is rampant. Parts of northeast Montgomery county do not have that problem.

Good luck.

 

[Ramon Tate]

Don't know if this would be kosher for your appraisal for "financing", but in my appraisal niche of eminent domain, we're required to pay "market value of the part taken". So, with situations like yours, we sometimes delineate two Highest and Best Use areas, one for the actual residence area and one for the acreage that is over and above what is typical for the area. Of course I'm approaching the value issue from a slightly different perspective but, bottom line, the VALUE is there.

I also live in a growing suburban area. Properties like the one you describe regularly get sold in two transactions because that maximizes the return to the owner - one for the residence portion and one for the developable acreage. For properties like that, the "single purchaser in a single transaction" criteria works to diminish the total value that actually exists. Yours sounds like one that might merit some discussion over the definition of market value and whether or not TWO appraisals might better serve the situation.

 

[LesPaul59]

The main problem here is the house and the land being one parcel. This is not typical as far as any homes that have sold in the area, but it is typical for this area for homeowners to own large parcels of land and build a house on it. It is in fact residential and there isn't much chance of this land being developed anytime soon. Even if it was, I doubt this guy would sell any of his land. People have that kind of property for a reason. To be away from everyone else and not have neighbors as close as they are here in the city limits. These types of properties don't sell on the open market because most people plan on keeping them forever.

In most cases I would turn the guy away but the guy is a lawyer and for some reason I have this fear of pissing off lawyers

 

[LesPaul59]

Originally posted by Ramon Tate@Mar 21 2005, 11:42 PM
Don't know if this would be kosher for your appraisal for "financing", but in my appraisal niche of eminent domain, we're required to pay "market value of the part taken". So, with situations like yours, we sometimes delineate two Highest and Best Use areas, one for the actual residence area and one for the acreage that is over and above what is typical for the area. Of course I'm approaching the value issue from a slightly different perspective but, bottom line, the VALUE is there.

I also live in a growing suburban area. Properties like the one you describe regularly get sold in two transactions because that maximizes the return to the owner - one for the residence portion and one for the developable acreage. For properties like that, the "single purchaser in a single transaction" criteria works to diminish the total value that actually exists. Yours sounds like one that might merit some discussion over the definition of market value and whether or not TWO appraisals might better serve the situation.

If the mortgage companies were allowed to accept 2 appraisals that would be great. Unfortunately with this being one parcel they want all or nothing. But you are right, that is how most properties of this type sell.