But who knows? I could change my mind. 
Sweet. You start with reference to reality, but then fly off on a discussion of a mortgage lender lending on air rights. That is just classic. Thank you for that humerous interlude.
Who was it criticizing others because he felt they were twisting a scenario to prove a point? I think you just forfeited your right to play that card, WF.
The reality is that the OP addressed an appraisal of the rights to the underlying land, something that is done a very regular basis. No one has yet explained why it is that those rights do not already exist within the full bundle of rights.
You are correct in that I would have been better off leaving any reference to air rights out of that one paragraph because I was being too vague and the point would have been better made without it. But there is a relation and I should make it.
Constant throughout this thread are examples being used that in reality alter the appraisal problem, but this is not acknowledged by some posters. Then we have Carnivore, whose side I tend to agree with, that is saying to look at USPAP as a complete document, not in snippets. Also, to look at the problem identification in total, not in snippets. We have calls to identify what is the subject, what are the rights versus the bundle of rights, posts 118 & 119 finally start to flirt with the total problem the O.P. may face instead of a snippet of it. And that is the exact problem with the March 2008 Q&A, it encourages a snippet view instead of the total problem view. All of this also brings out a disconnect that I will admit has been going on for too long without proper explanation. We'll get back to that, but I doubt the explanation should be what you would want it to be.
Our O.P has not said, but one of the big parts of the total left out here is the requested definition of value. I suspect the one wanted is the market value definition found commonly in Fannie Mae forms. I see the problem of this thread as one of being lack of recognition that we have two completely different “Hypothetical” things at issue here.
Only the first one is if appraisal methodology should use a hypothetical condition the land is unimproved or not.
It is the overwhelming second one that inescapably leaves out that the definition of market value carries an assumption of a hypothetical sale taking place between a seller of the subject property and a buyer of it. Both assumed to be equally educated involving any situation surrounding the subject property, to paraphrase. What I see that is constantly left out of this debate, is the fact that the assignment type of the O.P clearly calls for,
without a hypothetical condition being used regarding a nonimproved land status, for a seller that is trying to market ONLY a portion of the bundle of rights that represents the rights to use the underlying land. Because, it has been asked, by the client, what would be the market value of JUST the land and we are not going to use a HC that the land is vacant. That leaves the current property owner offering to sell the land only, but not the rights to the improvements. This underlying land is going to be encumbered by the fact the rights to use and enjoy current improvements on the land are NOT being sold in the hypothetical sale taking place to the hypothetical buyer per the definition of market value! ….. In short, the fee is being requested to be viewed as offered to be hypothetically split between what will now be two owners in common that will have
divided interests in a fee estate, and this is no longer "Fee." But rather a lesser estate. And a “one-sided” division to boot as it would be impossible for access to the improvement dwelling to be denied the seller, in the future, by the hypothetical buyer. If the subject lot is a standard urban or suburban lot (no potential for income off the land) what is the buyer being asked to purchase? What rights are being left regarding use of the land that must be implied by the fact access to the improvements must be allowed to the seller?
As implied by post 118, where are the comps for such an assignment? As implied by post 119, what is the adjustment for the hampered utility due to lack of ownership of the entire bundle of rights involving such a subject? More, going back to the SOW Rule, how is this client going to “hypothetically” break that bundle of rights up for a nonexistent hypothetical sale that is taking place? We don't have an actual sale document to go by that would spell out who gets what rights on our effective date of a hypothetical sale. Try asking such a client for the details of such a transaction and watch the melt down that is going to take place. Can the seller grow a garden? Can the buyer tear out the driveway and force the seller to park in the street? The appraiser is supposed to pull this stuff out of their rump? Yes, yes, yes, the lender can mortgage the entire property and all the bundle of rights, yet only lend on the “value” of a portion of it. But that is a lending issue, it is not the appraisal issue at all. Lacking a HC of “The land is vacant, or not improved” the client is asking for a view of a hypothetical sale taking place that the client, without doubt,
fails to define! Hence my comment that the client is asking for the air rights to be appraised by a residential appraiser. The assignment is hot air! The appraiser is being provided NOTHING that allows the appraiser to say that, hypothetically, here are the details of the sale taking place so that the appraiser may look at what rights are being transferred, versus the definition of value to be used, in order to arrive at anything that could be called credible. Nor has the needed information been provided that would allow the appraiser to opine if there is any market for such an offering. Nor have we remotely begun to touch on the definition of complex assignments, and licensing, yet for such assignments.
We do have a debate left that I freely admit to. Yes, what are we doing when the subject property is the total property, the entire bundle of rights, yet we break out land “as if” vacant in a cost approach or comply with Fannie wanting a “land value” even when a cost approach is not used? For the moment I'll only say what we are NOT doing is what I described above. In such cases of cost approach use, the assignment does not typically involve a hypothetical sale of only a portion of the bundle of rights. The purpose of the cost approach is to show substitution regarding a market for the entire bundle as we know it in today's society. The cost approach itself concludes with an opinion of the total property and it's value, not just the land. The last thing is we all know the real reason(s) the mortgage side keeps wanting an opinion of just the value of the land and both cases again involve lending concerns, not appraisal concerns. Personally, I could care less if the land to value ratio is beyond a certain percentage, I could care less about inappropriate use for hazard insurance as long as I am not asked to be involved in that. But maybe both cases are instances of something appraisers
should have been defended from, by those that write the rules we are to follow, and apparently a majority of those people failed to defend us in the ways they should have.
So far, what I see is we have an inappropriate FAQ that came out March of 2008 that utterly failed to warn of the differences between assignment types, SOW matters, definitions of value, commercial and residential appraising. The FAQ refers to circumstances it would be appropriate in, without defining them, and without warning that there are many it would not be appropriate for. And I think the only reason it did not immediately get blasted by copious numbers of appraisers is because very many of them have never received any education in estates as they should have.
But who knows? I could change my mind..
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