Excess or surplus land?

[J Grant]

If you guys want to really see if FHA is taking a hard stand on excess land having to be vacant call your HOC and see what they say. The guy that I talked to was really keen on excess land must be vacant. So give them a call and report back here what they say.

I can believe it however, that does not apply to appraising outside of their loan program, just as their insisting we give no value to an excess lot does not apply outside of their loan program.

 

[J Grant]

Also I will point out if you are using the market as a tape measure for excess land the majority of excess land or any land that is sold will not have a pole barn or any other improvement on. So if you are using the market as your support you should have the majority of excess land sales with a building on it, which I know for a fact is not true.

The market does not determine what is excess land or what is surplus land. The market can determine the HBU for an excess lot, They are two different things. The market can determine value. The market does not determine what physically exists nor what the zoning is.

Example: 2 adjacent lots,7500 sf each, both owned by one owner/or on one deed . The minimum zoning for a SFR is 7500 SF. The second lot is vacant. It is excess land.

Example B: 2 adjacent lots,7500 sf each, both owned by one owner/or on one deed . The minimum zoning for a SFR is 7500 SF. The second lot is vacant . The market shows most owners of a vacant adjacent lot are not selling it, they hold it . The appraiser, because of that, decides it is not excess land, it is surplus land, because the market sees it that way. WRONG.

Correct example B The second lot is excess land, per zoning and it can be divided and sold then the HBU per present market is not to sell but to hold the excess lot t/use it for privacy.

 

[Mark K]

Further - as stated - the surplus land cannot be developed if sold separately because it violates the zoning requiring a larger site. Thus, once again, it is surplus land not excess lot. FHA has nothing to do with that.

He also stated that both sites were grandfathered. In this area, any lot that was legally platted as a building lot is also grandfathered and can be built on in spite of zoning changes that increase the minimum size required. Likely the same in the OPs area.

If you're right about unbuildable, I agree with you, absolutely surplus, does not fit in the definition of excess. But I doubt that you're right.

 

[Tiffany Gibbons]

He also stated that both sites were grandfathered. In this area, any lot that was legally platted as a building lot is also grandfathered and can be built on in spite of zoning changes that increase the minimum size required. Likely the same in the OPs area.

If you're right about unbuildable, I agree with you, absolutely surplus, does not fit in the definition of excess. But I doubt that you're right.

From most of the responses (and totally disregarding FHA), I do now finally see the purpose of demonstration appraisal reports done for designations where you are forced to do pages and pages of explanation for your Highest & Best Use, as vacant, as improved, the ideal improvement, etc. I did different kinds of properties for 3 different designations that were graded by ASA, CAE, and MAI appraisers. It does help having to examine H & B use from every angle, even when the solution should be obvious.

 

[J Grant]

From most of the responses (and totally disregarding FHA), I do now finally see the purpose of demonstration appraisal reports done for designations where you are forced to do pages and pages of explanation for your Highest & Best Use, as vacant, as improved, the ideal improvement, etc. I did different kinds of properties for 3 different designations that were graded by ASA, CAE, and MAI appraisers. It does help having to examine H & B use from every angle, even when the solution should be obvious.

One of the functions of HBU is legally permissible. Excess land is two or more lots that can be divided with each lot able to meet the minimum zoning for a SFR or other improvement. Surplus, no matter the size , is not able to be divided with part sold off to be built on because a section cut off is too small to meet min building per zoning.

We should remember that zoning pre-dates the HBU . Zoning comes first and creates what is legally permissible as exists . The HBU analyzes what exists.

Thus, th first step of the appraisal problem before HBU is identifying what exists. Is it excess or surplus? Some appraisers can not even correctly identify it for the frst part of the problem,.
How can an appraiser perform a HBU analysis when they don't even understand what the subject consists of?

 

[Terrel L. Shields]

Something grandfathered as two joined lots will not keep that grandfathered status if split. And if split neither lot is buildable.

 

[Tiffany Gibbons]

Something grandfathered as two joined lots will not keep that grandfathered status if split. And if split neither lot is buildable.

That is why I like the way the VA Lender's handbook clearly defines how Highest & Best Use and how they define "marketable entity" when a property of this nature is involved. They would expect the parcels to be combined (easily done by request through assessment mapping upon the sale), the mortgage applies to both, surplus land, because who is looking to buy an vacant non buildable parcel with someone's accessory improvement? especially as described as not meeting the setback requirements to be a buildable lot and so forth. It is surplus land, surely there are similar properties. YMMV of course.