Excess or surplus land?

[Trihard]

Subject property has an adjoining parcel with separate parcel numbers and legal descriptions, owned by the borrower. Both parcels appear to be on one deed. Both parcels are about .6 AC. Second parcel has a pole barn on it. Lender asked to value both. This is a FHA Loan. Is this excess or surplus land?

 

[glenn walker]

Subject property has an adjoining parcel with separate parcel numbers and legal descriptions, owned by the borrower. Both parcels appear to be on one deed. Both parcels are about .6 AC. Second parcel has a pole barn on it. Lender asked to value both. This is a FHA Loan. Is this excess or surplus land?

Most will combine as one parcel especially since both are already on one deed and it's only about a little over1 acre gross. But I don't over think it as we have hundreds of threads that beat this horse dead, when mosts folks buyers just value it as one larger lot . BUT since it's on one deed already I would call it surplus and look for homes on large lots and just adjust for lot size and what shops or pole barns contribute ..

What is excess vs surplus land?
Excess land has the potential to be sold separately and is valued separately”. Surplus land is defined as “land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use.

 

[Trihard]

Most will combine as one parcel especially since both are already on one deed and it's only about a little over1 acre gross. But I don't over think it as we have hundreds of threads that beat this horse dead, when mosts folks buyers just value it as one larger lot . BUT since it's on one deed already I would call it surplus and look for homes on large lots and just adjust for lot size and what shops or pole barns contribute ..

What is excess vs surplus land?
Excess land has the potential to be sold separately and is valued separately”. Surplus land is defined as “land that is not currently needed to support the existing use but cannot be separated from the property and sold off for another use.

The issue is that FHA does not want excess land to be included in the valuation. That is what stumps me.

 

[J Grant]

Subject property has an adjoining parcel with separate parcel numbers and legal descriptions, owned by the borrower. Both parcels appear to be on one deed. Both parcels are about .6 AC. Second parcel has a pole barn on it. Lender asked to value both. This is a FHA Loan. Is this excess or surplus land?

idk. What is the minimum size lot for a house built per zoning ?

If the zoning minimum is .6AC for a house, then you have two plots of land and one of them is excess land. If min zoning is .8 ac or .1 ac for a house, then you have one big lot of surplus land - despite being 2 parcels inone deed.

FHA does not allow the value of an excess lot to be in the appraisal so if the lender asked you to value both and you have excess land the lender is wrong

 

[Zephyr999]

The issue is that FHA does not want excess land to be included in the valuation. That is what stumps me.

Principle of appraisal would say it doesn't matter what 'they' want. Excess land could have a different HBU and is not needed to support the improvements.

The 'they' would prefer to only loan on an improved parcel...bank policy.

The owner or buyer pays cash for the excess land and deeds it separately but if it's caught up in loan tied to a deed with both parcels harder to separate as bank wants total loan paid to get the excess parcel freed up.

 

[sputnam]

Subject property has an adjoining parcel with separate parcel numbers and legal descriptions, owned by the borrower. Both parcels appear to be on one deed. Both parcels are about .6 AC. Second parcel has a pole barn on it. Lender asked to value both. This is a FHA Loan. Is this excess or surplus land?

That is a market question. What is typical and marketable in the area? I dunno. You're the appraiser, that's part of doing your job.

 

[Tiffany Gibbons]

The issue is that FHA does not want excess land to be included in the valuation. That is what stumps me.

Make it "subject to" the two parcels being combined since their barn is on it. Then it is a "marketable entity". So it is surplus land.

 

[Trihard]

Principle of appraisal would say it doesn't matter what 'they' want. Excess land could have a different HBU and is not needed to support the improvements.

The 'they' would prefer to only loan on an improved parcel...bank policy.

The owner or buyer pays cash for the excess land and deeds it separately but if it's caught up in loan tied to a deed with both parcels harder to separate as bank wants total loan paid to get the excess parcel freed up.

FHA assignment condition states that excess land is to not be included in the final valuation.

 

[Trihard]

idk. What is the minimum size lot for a house built per zoning ?

If the zoning minimum is .6AC for a house, then you have two plots of land and one of them is excess land. If min zoning is .8 ac or .1 ac for a house, then you have one big lot of surplus land - despite being 2 parcels inone deed.

FHA does not allow the value of an excess lot to be in the appraisal so if the lender asked you to value both and you have excess land the lender is wrong

Neither lot meets current minimum site size zoning ordinances but are grandfathered in and can be rebuilt if it burns down. Both lots combined would meet zoning.

 

[Terrel L. Shields]

I see it as one deed, one property and both lots are functioning as a unitary holding.