Condition: Arms-length Commercial activities

[ZZGAMAZZ]

Appraising it for business income is a going concern and that would make it a commercial appraisal, which a res license typically does not do -

Regarding HBU of a property, I like to imagine it as vacant - that way, one does not get sidetracked about who actually lives there or rents there and what activities they engage in. A house and a 4 stall barn is probably a hobby farm. A property with a house with a 20-stall barn and extensive facilities is typically set up for boarding. Especially if the RE agent is bragging about it. Seems the client asked the appraiser how many stalls there are and if there is any income present. Which should have been disclosed anyway.

WRT HBU, the question for a residential loan is whether to continue the present existing use or other . If a horse farm or hobby farm is on a large lot or a parcel that can be subdivided, in some areas, especially semi-rural, where development is encroaching, the land can be worth a lot more than the improvement. HBU is other/ land value in that case. I grew up in an area that used to have many stables, most of which have closed and been made into subdivisions. Kind of sad, but a clear illustration of HBU. In a rural or wealthy equestrian area, it is more likely that the horse farms will remain.

There is a saying- how do you make a small fortune with horses ? Answer: start off with a large fortune.

Hmmmm. Seller described his on going effort to thwart off potential buyers who would divide the property, as the area is indeed experiencing rapid subdivision growth, as well as efforts he described of the nearby city to incorporate the land away from the county-- totally unaware if a City inherently desires ownership more so than a typical County, which might be less concerned about taxable income??? One thing forsure, an appraisal career is never boring...

 

[J Grant]

Hmmmm. Seller described his on going effort to thwart off potential buyers who would divide the property, as the area is indeed experiencing rapid subdivision growth, as well as efforts he described of the nearby city to incorporate the land away from the county-- totally unaware if a City inherently desires ownership more so than a typical County, which might be less concerned about taxable income??? One thing forsure, an appraisal career is never boring...

If the land is worth more vacant to subdivide, that is the essential feature of this assignment. Ask yourself if you are competent for it. You are all over the place about taxable income and such. You are appraising the property.

 

[J Grant]

"Can we attribute the income to R.E." sure puts the issue into perspective IMO... kinda reminds me of the standard IRS deduction for clothing, i.e., purchases qualify as a deduction only if the item is worn only for work but not for work and play. In that context the real property could be.used Only as income producing features. With consideration for admin time, the seller is a retired educator whose FT active retirement income is based on the equine boarding [unsure if a staff is involved or how much time he devotes, although he described how different types of boarding affect the management, i.e. some type requires literally no labor ever cept to lay out bales of hay. Way too late to not accept the assignment that's obv far above my expertise. I don't even understand why anybody would ride a horse, if a car is available... way too much a city boy. Tried to avoid this type of property by moving to the beach, but work requires me to return to the I.E., "just when I thought I was out, they pulled me back in...

Horse people are crazy ( I am one of them). Some people are born with a compelling love of horses, as others are drawn to surfing or motorcycles. High risk thrills which normal people sensibly avoid. . All I wanted to do was ride and own a horse since I was three years old. Nobody else in my family was like that.
Your assignment is the property, sounds like it was ordered as a res appraisal, though it must disclose it is run as an income-producing boarding facility. More important than that is if the land is worth more subdivided - which is a possible HBU HBU issue

 

[ZZGAMAZZ]

If the land is worth more vacant to subdivide, that is the essential feature of this assignment. Ask yourself if you are competent for it. You are all over the place about taxable income and such. You are appraising the property.

Assignment was completed a few weeks ago. Conditions were received and responded to recently as I agreed to change the relationship to Non-arms-length for various reasons that subsequently have been described here, and I responded to the condition about income production by describing the owners' comments, and indicating the Market Value definition pertains to real property rather than value-in-use activities being conducted. [Maybe a career killing comment but as detailed as the client might ever expect to obtain from a blue-collar res appraiser like me, although I sure will be better prepared to accept or decline next similar assignment, wondering where all these cookie-cutter assignments I keep hearing abou...]

 

[ZZGAMAZZ]

Horse people are crazy ( I am one of them). Some people are born with a compelling love of horses, as others are drawn to surfing or motorcycles. High risk thrills which normal people sensibly avoid. . All I wanted to do was ride and own a horse since I was three years old. Nobody else in my family was like that.
Your assignment is the property, sounds like it was ordered as a res appraisal, though it must disclose it is run as an income-producing boarding facility. More important than that is if the land is worth more subdivided - which is a possible HBU HBU issue

JG, believe it or not, but I still intimately remember how you consoled me from 3000 miles away about 4 years ago when my puppy passed away!!! Helped me to survive the tragedy!!!!

 

[J Grant]

Assignment was completed a few weeks ago. Conditions were received and responded to recently as I agreed to change the relationship to Non-arms-length for various reasons that subsequently have been described here, and I responded to the condition about income production by describing the owners' comments, and indicating the Market Value definition pertains to real property rather than value-in-use activities being conducted. [Maybe a career killing comment but as detailed as the client might ever expect to obtain from a blue-collar res appraiser like me, although I sure will be better prepared to accept or decline next similar assignment, wondering where all these cookie-cutter assignments I keep hearing abou...]

It sounds like you handled it well, especially considering how I advised you to do exactly that, but three weeks after the fact, it turns out!

 

[sputnam]

Horse people are crazy ( I am one of them).

That seems to be true. One thing to know... never let horse people get a good start talking about horses.

 

[George Hatch]

One thing I run into on the regular is when the real property and the business sell at the same time they often allocate more to the realty and less to the business for taxation reasons.

 

[ZZGAMAZZ]

It sounds like you handled it well, especially considering how I advised you to do exactly that, but three weeks after the fact, it turns out!

....course just yesterday I receive a call and a corresponding email with an addenum to the purchase contract of which I was unaware, which included a comment that seller and buyer were uncle and his neice--although the buyer/borrower is a male like the seller. Kinda weird because the document wasn't dated but it also referred to the revised selling price, a few hundred thousand $$$'s less than the original contract, equal to my OV, so they had to create it after the fact. Do any appraisers ever try to figure everything out? I think it's impossible to do.

 

[J Grant]

....course just yesterday I receive a call and a corresponding email with an addenum to the purchase contract of which I was unaware, which included a comment that seller and buyer were uncle and his neice--although the buyer/borrower is a male like the seller. Kinda weird because the document wasn't dated but it also referred to the revised selling price, a few hundred thousand $$$'s less than the original contract, equal to my OV, so they had to create it after the fact. Do any appraisers ever try to figure everything out? I think it's impossible to do.

No, because we are not appraising the contract, we are appraising the property. I see what exists in their contract and report it. They can do whatever they like in their Sales contract. The point of us reviewing it is to see if the terms are unusual/might affect price and the names or other in the contract might indicate whether or not it is an arms length sale.