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Can of worms, AKA, High value, multi parcel

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Tony in Ohio

Thread Starter
Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Ohio
Hi Guys and Gals!

I have a pretty odd one here I’m trying to think out and would like your input.

Background:

Guy bought 10 acres in an upscale community that has 2 older (1950’s with no updating) houses on it. He plans to several Hundred Grand in remodeling and additions to main home, and keep the other as a guest house. The market will support this, although guest houses are rare, they do exist in the high end market. Neighborhood is mostly small acreage lots, with values ranging from 200,000 for small ranches/capes to a few Mil for estate type homes.

Assignment:

Value property subject to completion for owners own info, although he may try to use appraisal to obtain financing. I already made it clear to owner that lenders need to order their own appraisals, but some may accept mine.

Problem(s)

It turns out that the 10 acres was recently split into 2 parcels with the “guest house” being on a landlocked 3 acres at the rear of the site. Access is only by easement allowing use of (shared) drive. To make it worse, back lot is titled into a relative’s name.

I don’t think situation has much affect on value at current value levels, but the separate back lot may impede marketability of the front lot after improvement.

Possible solution:

I have some freedom in format because it is a private assignment, but would like to try to keep it close to bank underwriting criteria, in case he is able to get a banker to accept it. I am thinking I should value the main home/parcel on a URAR, with a line item adjustment for the contributory value of the second home/parcel and about 5 pages of addendum explaining what I did and why. This way the owner gets a number for it all, and the bank can take the line Item out if they just want to loan on the main parcel.

My main worry on that is that it could be considered misleading because I think the contributory value could be different with separate ownership. I am a residential appraiser, and don’t do too many multi-parcel deals, so I definitely want some feedback on the issue of the “Larger Parcel”.

Finally, I have a few weeks, so time is not a problem, though I would like to keep it simple, because I thought my fee was good, but it is not going to be as nice as I originally thought.

Thanks for your help.
 

Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
Problem is, since it was "assumably" legally subdivided, now you have TWO parcels, TWO appraisals. It would be misleading to do it any other way. The only way I see you could keep it "simple" is to appraise it as ONE parcel with a "hypothetical condition", the hypothetical condition being a reverse subdivision. Then again, "assuming" that two dwellings on one lot will comply with zoning and/or use restrictions. Then you MIGHT value the parcel in its entirety with the main dwelling and arrive at a "contributory value" for the second dwelling (then again IF it is permitted). However, no one except POSSIBLY a local lender who portfolios their loans will touch it.
 

Caterina Platt

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
New Mexico
If the back property has legal recorded easement of the shared drive, it would not be landlocked. If this is not a bonafide and true 'easement', my first thought would be to smack the county official who allowed such a split without requiring an easement.

Second, why would the second parcel be a detriment to value? Do easements pose an adverse marketing problem in your area? If the second unit sold were alone, would it be totally out of character for the development? If the two units are best as a 'set', I would address this in my highest and best use analysis. You describe the development to have some 'high end' homes and state that guest quarters occassionally the 'high end' market. Would this guest house also be useful as a maid's quarters, studio, or detached home office? I see quite a few of those in my market, and buyer's evidently add value to the structures depending on the quality and condition. The blessing to the split is that you don't have a zoning problem of 2 homes on one parcel.
 

jtrotta

Senior Member
Joined
Jan 16, 2002
Tony -
Both Ray & Caterina provide good input, so I'll add a little twist to your inquiry; you say properties like this are sparse, but there-go back in time and find (2) sales, as close in time as possible; then search abutting counties to find some recent sales; provides proof for the marketability of the item.
Second, if the rear property is in his In Laws name, maybe he needs to on that Deed also or they may not Lend at all on the rear parcel, no ownership rights.

Good Luck 8)
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
I agree with Ray. As long as there are 2 properties in 2 different names, it's 2 separate appraisals and anything else is misleading. With the exception of a fully explained combination of the separate parcels completed as a hypothetical condition and subject to them being put back into one name. If you do the second scenario, make sure that your URAR has the wording: "This Appraisal and Report is Null and Void without all [total number of pages in completed report] pages of attached addenda." This way, no one can just eliminate your addenda to make it seem like what it is not.

Personally, I would make it 2 reports.

Regarding fee quotes: I now always do my quotes with the statement that this fee quote is subject to change if my initial research finds something that is not now known that would cause it to be different than originally thought. I'm thinking of going to a letter that spells out the assignment, fee, and potential changes cause I've taken a real beating on some owner requests like the one you have.

Good luck and let us know what happens.
 

Tony in Ohio

Thread Starter
Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Ohio
Thanks for the feed back so far.

I believe the split was done to bring the subject in line with zoning, and thus allow the property(ies) to be within the law. I still have significant research to do before I can determine if the highest and best use would consider the properties together or not. My gut feel is that the rear lot (low value) is an external to the front lot (high value), due to the lack of privacy (Driveway is approx ten feet from house). My research so far is sketchy, but does not seem to indicate a highest and best use as separately held parcels as I originally thought it might.

I plan on researching at least 5 years in the community, and 3 in some comparable markets, but I don’t think I will find any data that will “nail” the value.


Thanks for the info so far. Just posing the questions to you helps me organize my own thoughts, and gets me half way through the problem.
 

Judy Whitehead (Florida)

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Florida
One other thing to consider - the ''driveway'' may be only 10 feet from the front house, but the legal easement could be (and probably is) on the edge of the property. In other words, what you ''drive on'' could actually be different from where the legal easement actually is. So, I would make certain that I knew exactly where the easement is.

Also, if you were asked to do a single appraisal with a guest house and this is now two separate appraisals (due to the legal descriptions) then I would perhaps review my fee and explain about the additional work involved.
 
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