Can you value as vacant.if its improved?

[Michigan CG]

Regardless of whether or not the lender wants you to include demolition cost, you must (IMO) include it - otherwise the report could be considered misleading.....

If the improvements hypothetically do not exist, there is nothing to hypothetically demolish. Misleading would be not disclosing the current improvements. You can sure discuss potential demo costs in the report, but there is no need to if it is not within the Scope of Work.

 

[DWiley]

The reason I ask is because it's difficult for me to discern the substantive difference between disclosing that there are existing improvements and disclosing that the value opinion of the underlying land is based on the hypothetical condition that there are no improvements.

They would have the same effect as far as communicating what is being done. The difference is that using a HC carries additional reporting requirements.

The safe thing to do would be to prominently disclose that the subject property was the underying land only, and that the existing imrpovements were not considered in the appraisal. I would also prominently state that if the improvements were included, then the analysis and the assignment results would be different.

This would communicate what is going on and it would cover the appraiser in case he/she ran into someone (reviewer, board memebrs, etc.) who (incorrectly) thought that a HC was required.

 

[Michigan CG]

.....The safe thing to do would be to prominently disclose that the subject property was the underying land only, and that the existing imrpovements were not considered in the appraisal......

Sorry, that does not work for me. In your scenario the improvements DO exist, but you are appraising the land part only. The hypothetical condition assumes the land is vacant, with no improvements.

Those are two different things.

 

[CANative]

Tell them it would be easier, cheaper and faster if they ordered a regular Fannie Mae type MH appraisal on a Fannie Mae form which includes the cost approach which includes the land value separately.

See what they say.

 

[Mr Rex]

Err, HC means contrary to what exists. So Mr Wiley is suggesting that an HC is not necessary when appraising some property with improvements but not ignoring what exists without a HC? I must admit, I missed those meetings of the founding fathers. Please do elaborate.

 

[CANative]

You don't need an HC because the subject of the appraisal is a component of the whole and that component does not include the improvements.

Compare this to appraising the income stream of a Walgreens drug store.

 

[Lee Lansford]

Sorry, that does not work for me. In your scenario the improvements DO exist, but you are appraising the land part only. The hypothetical condition assumes the land is vacant, with no improvements.

Those are two different things.

Tim, Danny can certainly respond to this (and, far better that I!), but I thought that I would add my $.02!

Years ago I first became aware that this scenario did not require a HC. I admit that I struggled with the concept and I, too, were an early proponent of going the HC route to solving the problem.

However, I do understand what Danny is offering. If an appraiser conducts the appraisal as Danny has outlined, the result will be an appraisal that is USPAP compliant (and, following, certainly not misleading). At the very least, such is the opinion of the ASB specific to the situation we are discussing.

Lee

 

[fifteen]

It's a partial valuation, just make sure intended user and intended use is spelt out clearly. A HC would be needed if there was a change in zoning expected. 2 cents

 

[Mr Rex]

The safe thing to do would be to prominently disclose that the subject property was the underying land only, and that the existing imrpovements were not considered in the appraisal. I would also prominently state that if the improvements were included, then the analysis and the assignment results would be different.

I clipped his response. So where is there not an HC? Inquiring minds want to know.

 

[Michigan CG]

If the client wants an appraisal of land with no improvements but there are improvements then an HC is appropriate, and IMHO warranted.

Mr. Wiley is proposing appraising the land only, not using the HC that the improvements do not exist, and without stating through a HC that the improvements do not exist he is appraising a component of the whole, and the whole has other components and is not vacant.

Mr. Wiley's approach would be more appropriate if he were appraising say a McDonald's site where the land is leased and the building is owned by McD's (McD's rarely buys land but builds their buildings on leased land). In that case the improvements do exist and the subject of the appraisal is the land component, knowing that the improvements do exist.