Excess land or surplus land

[MKay Appraising]

Scenario - FHA purchase transaction. Residential. House is maybe 1000 sf. The area contained inside of the red lines is the entirety of the parcel. Just outside of city limits. 3.36 acres.

Is this excess land or surplus land and how would you proceed in the valuation? Give the additional land value or not?

What I'm thinking - The parcel acreage is larger than the typical lot in the market AND the right side of the lot absolutely looks like it could be subdivided off. I'd figure I would start by telling the lender that I can't value the back acreage, because I consider it to be excess land. FHA doesn't allow valuation of excess land. And just see how they want to proceed. But if they tell me to proceed "how I see fit", the only thing I can think of is to value the first "typical" acreage for the area, and give $0 for anything extra. So if the typical lot is 1 acre, then the additional 2.26 acres gets nothing.

 

[Dublin ohio]

The parcel acreage is larger than the typical lot in the market AND the right side of the lot absolutely looks like it could be subdivided off.

The question is can it be subdivided off under current zoning and is there a market if it can

 

[MKay Appraising]

There's no zoning, and the lot to the right is the same shape as the rectangular piece. Even if the septic system went a little to the right for the subject property, I think the right side of the entire lot could at least be subdivided off as a flag lot and still have marketability.

 

[J Grant]

Scenario - FHA purchase transaction. Residential. House is maybe 1000 sf. The area contained inside of the red lines is the entirety of the parcel. Just outside of city limits. 3.36 acres.

Is this excess land or surplus land and how would you proceed in the valuation? Give the additional land value or not?

What I'm thinking - The parcel acreage is larger than the typical lot in the market AND the right side of the lot absolutely looks like it could be subdivided off. I'd figure I would start by telling the lender that I can't value the back acreage, because I consider it to be excess land. FHA doesn't allow valuation of excess land. And just see how they want to proceed. But if they tell me to proceed "how I see fit", the only thing I can think of is to value the first "typical" acreage for the area, and give $0 for anything extra. So if the typical lot is 1 acre, then the additional 2.26 acres gets nothing.

FHA does not allow the value of the excess land/lot to be included in the value opinoin- it does allow an appraisal to proceed when excess land is part of the package sale of a property.

However, we can still appraise the excess land as part of the package sale of the property- I assume for FHA, one would make an HC that per FHA regulations no value of the excess lot was included; however, the sale/mortgage encumbers the subject dwelling on a lot and the excess lot.

 

[Dublin ohio]

There's no zoning, and the lot to the right is the same shape as the rectangular piece. Even if the septic system went a little to the right for the subject property, I think the right side of the entire lot could at least be subdivided off as a flag lot and still have marketability.

So no zoning or land use regs at all. Seems to me that any subdivision would leave the existing home sitting on a pretty atypical funky lot

 

[MKay Appraising]

FHA does not allow the value of the excess land/lot to be included in the value opinoin- it does allow an appraisal to proceed when excess land is part of the package sale of a property.

So, are you saying that I should move forward with a valuation of just the house and the typical acreage needed for the area with a hypothetical condition that the parcel was separated to exclude the excess land? I figure they'll split up the valuation process to value the excess land separately since it is included in the contract.

 

[MKay Appraising]

Also, I feel like a survey would be required in this instance, no?

 

[Dublin ohio]

Also, I feel like a survey would be required in this instance, no?

Right now you are just spitting into the wind. With no zoning regs, IMO It would take quite a bit of work to determine HBU of the proposed excess land and what about the remaining value of the existing home on what would be, at least to me, a less than desirable site due to the final configuration. What is the market in the area for building sites? FHA says to include the excess land but not to give it value. So again to actually determine the value of the existing home minus the excess land would require comparing the proposed existing home site to homes on similar sites since IMO the new configuration would have a reduced overall utility compared to a similar acreage lot that would be 150' x 300'

 

[MKay Appraising]

Right now you are just spitting into the wind. With no zoning regs, IMO It would take quite a bit of work to determine HBU of the proposed excess land and what about the remaining value of the existing home on what would be, at least to me, a less than desirable site due to the final configuration. What is the market in the area for building sites? FHA says to include the excess land but not to give it value. So again to actually determine the value of the existing home minus the excess land would require comparing the proposed existing home site to homes on similar sites since IMO the new configuration would have a reduced overall utility compared to a similar acreage lot that would be 150' x 300'

It seems a lot easier to just search for properties with around ~3 acres and appraise as normal. It's all one parcel AND there are plenty of homes in the area with more than 3 acres. It's just the shape that gets me. The lot to the right is a newer construction home on a large rectangular lot. That's why I was thinking the subject's lot could be divided similarly. But you bring up a good point that the shape of the proposed subject lot would be a little funky and have less marketability compared to the typical. So maybe just say it's surplus land that can't be split off because it would hurt the utility of the proposed left over lot? Am I in the ballpark here??

 

[JTip]

I think the right side of the entire lot could at least be subdivided

Don't "think".

Call the Greene County Courthouse Tuesday and talk with someone who knows.