Call it HBU as is or interim use?

[Fred]

I guess one would have to concur with Fannies definition of Highest and Best Use .. wouldnt they?

Fannie-schmannie. The HBU is the HBU. The client is the first intended user. It may never get to Fannie and if they don't like the collateral, then they don't have to buy the loan.

Supplemental standard? That sounds familar. Didn't that used to be something that couldn't "dminsh" USPAP? Like dumbing down HBU to the point where the appraisal is not credible for the client?

 

[PropertyEconomics]

Fannie-schmannie. The HBU is the HBU. The client is the first intended user. It may never get to Fannie and if they don't like the collateral, then they don't have to buy the loan.

Supplemental standard? That sounds familar. Didn't that used to be something that couldn't "dminsh" USPAP? Like dumbing down HBU to the point where the appraisal is not credible for the client?

While I agree with you Steven ... those doing work under Fannie guidelines would not be doing much work if they concurred. Sad isnt it? A good reason not to do residential work for lending purposes. And another reason competent ethical appraisers turn down lending assignments.

 

[Pat Butler]

Fannie wants you to analyze the property as improved. It seems pretty clear that the subject property is not improved to its HBU because of its small size which is atypical for its market. In that case, Fannie won't purchase the mortgage anyway.

The HBU box is interesting in that if you check "No" then the mortgage gets declined. So does that still mean you are suppose to finish the appraisal?

 

[Abzntminded]

While I agree with you Steven ... those doing work under Fannie guidelines would not be doing much work if they concurred. Sad isnt it? A good reason not to do residential work for lending purposes. And another reason competent ethical appraisers turn down lending assignments.

I don't know if I concur. Heck, I can hardly get my mind around the discussion. But now it seems that if I ever check "yes" on the 1004 re HBU I'm incompetent and unethical? Or is this another day of "everything you know is wrong"?

 

[CANative]

It's only an underimprovement (too small) if you think of it as the permanent, primary residence. It's the perfect size for the eventual accessory unit it will become if they follow suit with others who have built small then took their time with the dream house (the owners contractor states that there are already plans to build the larger main residence.... for some reason they're building a larger version of the metal kit house).

The fannie treatment of HBU makes checking the yes box so easy even a caveman could do it. I don't think a simple yes box answer is appropriate for this assignment.

And as soon as I'm done I have to start on the other 160 acre with new tiny house appraisal on the coast... 60 miles from the subject but I'll be using the same comps. LOL At least that parts easy.

 

[Fred]

I don't know if I concur. Heck, I can hardly get my mind around the discussion. But now it seems that if I ever check "yes" on the 1004 re HBU I'm incompetent and unethical?

It's going to be yes almost all the time. Greg's case is the exception.

What drives the answer to that yes/no question is usually whether it is more profitable to leave the house there than it is to tear it down. Even though Greg's case is not a teardown, putting on a second improvement is still a substantial alteration.

"The highest and best" is probably a confusing term for the as improved property, because the semantics are absolute and the principle is relative. There may be nothing great about the current improvements, but leaving them alone is better making significant alterations.

 

[Abzntminded]

Thanks for clarifying - the HBU of HBU is interesting.

 

[PropertyEconomics]

I don't know if I concur. Heck, I can hardly get my mind around the discussion. But now it seems that if I ever check "yes" on the 1004 re HBU I'm incompetent and unethical? Or is this another day of "everything you know is wrong"?

Abznt .. I never meant to infer that anyone was incompetent and/or unethical but more pointedly showing that in this instance the Fannie guidelines seem to be in conflict with conventional appraisal theory regarding development and determination of highest and best use. I would suggest to you if you check YES on the 1004 for HBU you have the analysis documented in your file showing that as your conclusion.
I think one should also disclose in the scope of work that Fannie requires H&BU as improved, quote the Fannie requirements, and state that the appraisal has been performed in conformity to the guidelines as established by the client, if those guidelines are acceptable to you.
Im not sure that one is specifically stating the improvements on the subject represent the ultimate highest and best use, are among the highest and best uses for the property, or merely that the "use" itself (ie residential) is the highest and best use, ignoring that different improvements of the same type could result in a higher value to the underlying land. Such analysis would typically be required in a thorough highest and best use analysis ... but it seems to me the Fannie requirements call for analysis of Legally Permissible and Physically Possible but may ignore Finanically Feasible and Maximally Productive as part of the analysis ... to suit their needs.

 

[Carnivore]

PE,

I dont see where residential appraisers completing a residential reports are allowed to deviate from HBU analysis and HBU reporting requirements on the current Fannie Mae ver 3/05 forms.

Would that be a diminishment of USPAP requirements of 1-3(b)?

 

[PropertyEconomics]

PE,

I dont see where residential appraisers completing a residential reports are allowed to deviate from HBU analysis and HBU reporting requirements on the current Fannie Mae ver 3/05 forms.

Would that be a diminishment of USPAP requirements of 1-3(b)?

Actually Carnivore I think it would be and is.
It is my understanding that Fannie says that if an improvement contributes to the value of the underlying land then the property is to be considered developed to its highest and best use. Clearly Gregs case shows that may not be true in the conventional sense but it would be true under the Fannie guidelines.