Can you value as vacant.if its improved?

[AlwaysLearning]

I have a request form a client on an improved parcel with an affixed manu home. Client wants me to value as vacant land only, with no value given to the improvements. I talked with a few local Certified Appraisers out here to get thet their opinion, and the consensus is yes but disclose. Thoughts? A few suggested hypotheticals and one suggested it was all SOW....which makes sence. Appreciate any feedback. Thanks!

If your only concern is compliance with USPAP then YES you can appraise the land only (of an improved property). And there is no need for a hypothetical condition.

Some posts here reflect personal opinions that have little to do with USPAP. You may want to read Standard Rule 1-2(e) (including any relevant "comment on (i)-(v)") and USPAP Frequently Asked Questions (2008-2009) question no.113 page F-52

 

[fifteen]

If it helps, compare it to appraising a partial interest in a property. Say 25%. That interest would reflect a market value equal to the interest. Partial valuation.

 

[CANative]

That interest would reflect a market value equal to the interest.

A HC would be needed if there was a change in zoning expected.

:Eyecrazy:

 

[PamelaCelilo]

Wow...this was amazing...and extremely helpful! Thank you all for your help and time. I received an email form an AF addict, that got me on a lead to this link...and it looks like the right answer. (well according to the Appraisal Foundation anyway Check out the March 2008 physical segment question: http://www.appraisalfoundation.org/s_appraisal/sec.asp?CID=12&DID=12

 

[PropertyEconomics]

One of the FAQs helped make the issue more confusing.


In my own practice, I draw the line with using a hypothetical condition as what exists versus what doesn't exist. For example:

• A commercial building is located on leased land. Does a hypothetical condition need to be used to appraise the land? No. Why? The property rights are legally divided, thus the rights pertaining to the land and the rights pertaining to the improvements are spelled out.
• A residential property is improved with a dwelling, and the rights pertaining to land and building are not divided. Would a hypothetical condition be required to appraise the land. Would a hypothetical condition ber required. IMHO, Yes...because the property rights are not divided, thus the appraiser must "pretend" that they are something other than what actually exists in order to appraise a segment of the property.

As this pertains to lending, it's a problem. Lenders do not lend on hypothetical properties, thus as a stand-alone appraisal is inappropriate. When I've had to use hypothetical conditions in a lending report, it is part of a larger analysis.

This statment may be true of MOST residential lenders but it is not true of bank lenders or private hard money lenders. Many banks lend on hypothetical properties or that has been my experience.

 

[PropertyEconomics]

If your only concern is compliance with USPAP then YES you can appraise the land only (of an improved property). And there is no need for a hypothetical condition.

Some posts here reflect personal opinions that have little to do with USPAP. You may want to read Standard Rule 1-2(e) (including any relevant "comment on (i)-(v)") and USPAP Frequently Asked Questions (2008-2009) question no.113 page F-52

I personally believe that FAQ 113 missed the mark in that the property rights, as David mentioned earlier are separate between the land and the improvements .. when ownership is joined, it is my personal opinion that you cannot value an improved property as vacant without a hypothetical condition affecting the analysis as the analayis is of something that is contrary to that which exists as of the effective date of appraisal.

I know others have differing opinions including the AF .. which again I believe to be totally in error, however, several USPAP instructors agree with the concept as David and I have presented.

 

[The Warrior Monk]

This statment may be true of MOST residential lenders but it is not true of bank lenders or private hard money lenders.

Actually, it's more true of these lenders. Many of these lenders (at least all I've dealt with...and that's all I deal with) fall under the category of FRT, thus and "as is" value of is a requirement.

Many banks lend on hypothetical properties or that has been my experience.

I would be very interested in knowing how a mortgage on a hypothetical property is written and recorded. To date, nobody has ever been able been able to produce such a document, so I consider it hearsay.

 

[PropertyEconomics]

Actually, it's more true of these lenders. Many of these lenders (at least all I've dealt with...and that's all I deal with) fall under the category of FRT, thus and "as is" value of is a requirement.



I would be very interested in knowing how a mortgage on a hypothetical property is written and recorded. To date, nobody has ever been able been able to produce such a document, so I consider it hearsay.

I know of a note that was written, closed, and has since been paid off on a subdivision in which only the land was considered in value. I do not have access to the document because I dont have access to it ... but I know for a fact it happened.

 

[fifteen]

ahh, nevermind - carry on

Actually, it's more true of these lenders. Many of these lenders (at least all I've dealt with...and that's all I deal with) fall under the category of FRT, thus and "as is" value of is a requirement.



I would be very interested in knowing how a mortgage on a hypothetical property is written and recorded. To date, nobody has ever been able been able to produce such a document, so I consider it hearsay.

 

[The Warrior Monk]

Wow...this was amazing...and extremely helpful! Thank you all for your help and time. I received an email form an AF addict, that got me on a lead to this link...and it looks like the right answer. (well according to the Appraisal Foundation anyway Check out the March 2008 physical segment question: http://www.appraisalfoundation.org/s_appraisal/sec.asp?CID=12&DID=12

In the March 2008 Q&A, even though the situation doesn't exist, it could actually exist. In other words, the property rights dealing with the land and improvements could actually exist separately, and often do. It is more common in investment properties, but it also exists in owner-occupied residential assignments also.

FAQ 114 also addresses the issue. Basically, it's stating that one can pick a random lot size (in that case, 5 acres), and appraise it without a hypothetical condition.

The only way the Q&A and FAQ interpretations can be reconciled with the definition of hypothetical condition is that hypothetical conditions do not apply to the appraisal of property rights, but rather "land and improvements.

If indeed that ASB means to say that hypothetical conditions don't refer to property rights, I believe they must clarify the issue. I also believe the ASB is falling into the trap of appraising "land and improvements," rather than "property rights."