Fannie Mae and "Multiple Parcels"

[Andrei Fin]

In the real life cases I have seen, the second parcel would be worth much more for development than as extra site value. However let's say there are three builders in town and ten parcels for sale, the three most desirable parcels will be sold, and the three least desirable parcels are probably not going to get sold anytime in the foreseeable future. So for these less desirable sites, the HBU may be to develop it, but the reality is that people are transferring them for extra site value. And in that case it would not accurately reflect the market to comp them with vacant lot sales.

 

[alebrewer]

in no case would client instructions be considered one of the elements of an HBU analysis.

 

[Eli]

Again, the definition of mv includes an explicit assumption of a hypothetical sale as of the date to the typical buyer. It does not make any reference to what the current owner is actually doing with that property.

Vacant parcels *commonly* get bought and sold without anybody building anything on them. Whether someone intends to start building is not one of the elements of an HBU analysis.

The hypothetical I was referring to is the sites being combined vs separate. That is a H&B use issue. For example if the market indicates most houses have two lots? See? Or the subdivision indicates people want larger lots and have combined two or three lots? Vs selling them?

 

[Terrel L. Shields]

I've never seen a buyer concerned about whether they are buying a second lot or single lot other than the homes situation related to the neighborhood. They don't know the difference in a 7500 SF lot and a 15000 SF one...they concern themselves about their budget and the house.

 

[alebrewer]

In the real life cases I have seen, the second parcel would be worth much more for development than as extra site value. However let's say there are three builders in town and ten parcels for sale, the three most desirable parcels will be sold, and the three least desirable parcels are probably not going to get sold anytime in the foreseeable future. So for these less desirable sites, the HBU may be to develop it, but the reality is that people are buying them for extra site value. And in that case it would not accurately reflect the market to comp them with vacant lot sales.

I would think it would depend on the market... in my specific market, almost every home in my neighborhood has a vacant, adjacent lot (owned by the owner of the improved lot). The reason, I assume, is that this market enjoys the buffer from neighbors, the additional utility of the combined lots, etc. In this case, and without doing a detailed H&BU analysis, my offhand feeling is that H&BU is probably for the lots to remain assembled, and not subdivided. I know that isn't true for every market, though, hence my idea that the market determines what the H&BU is...

 

[Eli]

Let me make it clear. If there is no market for a vacant lot based on recent market activity, the highest and best use of site is most likely to "hold it". An old mentor with plenty of lawyers told me that and I thought "what?" ........Then I realized he was right.

 

[George Hatch]

"Holding it" doesn't mean the property has no value. If just means the consummation of any sale is further out.

And sure, there are occasions when assembling lots is more profitable, like when those lots are too small to build.

Let's say you have 25 x 100 ft lots but the development criteria include 20ft front setback, 15ft rear setback and 5ft setbacks on the side. And a requirement for 2 enclosed parking spaces. That leaves you with a ground floor footprint of 15x40 inclusive of the 2-car garage. Yeah, putting 2 of those together might make the combo worth more than the sum of the components because now your 1st level footprint is 40x40.

The answer isn't "never" and it isn't "always". It's "let's analyze and see what we get".

 

[Eli]

"Holding it" doesn't mean the property has no value. If just means the consummation of any sale is further out.

The value of the effective date is "nil" the way he phrased it. Remember we are talking "market value". "NIL" was his answer. The "definition of value" is huge in the equation.

Proving (adding support) for "Use Value" would be hard, but it depends. It may be a piece of cake in some areas.

 

[George Hatch]

You're a CG. Are you familiar with the concept of "present value of future reversion"?

 

[Eli]

You're a CG. Are you familiar with the concept of "present value of future reversion"?

Yes, Argus too. LOL On a vacant residential lot adjoining the subject? LOL I might do qualitative analysis. I can't say . I am not geographically competent to the theoretical pose.