Fannie Mae and "Multiple Parcels"

[djd09]

fannie is clueless. All they care about is stealing appraiser data, not paying for any of it, and keeping appraisers in line and well divided.

 

[Amy Perkins]

Ok, so my experience is that sometimes there is a reason why two parcels cannot be sold separately. Maybe it has to do with some physical property to the land (like the property percs on one parcel and the house sits on the other or some other reason). If they can be sold separately, they typically should be valued separately. You likely will determine this by contacting someone with the authority to determine this in government. Then in your report you say, per Mr. Smith in the zoning department these parcels cannot be separated. This is how we cover our liability. If the bank wants to bundle the land appraisal and the improved property they may do it themselves and can feel free to foreclose on both. However, the valuation should be separate if they can be sold separately. You risk undervaluing a parcel that can be sold separately when you appraise them together, which could be misleading.

 

[George Hatch]

If you're saying that about me then you're also saying it about Fannie Mae, why don't you report them to the CFPB or your state board for putting out this newsletter instead of whining about in a forum?

You've made that argument several times in the thread in lieu of contributing any original thinking of your own to it. What you're doing here is known as the appeal to authority. The assumption that they're right about how to appraise due to their status as Fannie. For that matter, Lee is doing the same when he refers to former ASB members - who at least are experts at appraising and USPAP - who agree with him.

By definition the appeal to authority will be an inferior argument to the appeal to reason. With that said, if we're picking teams as to who has more credibility on the topic of HBU analysis and MV Ima have to side the appraisers, not the bankers.

 

[George Hatch]

Wrong, the vacant lot listing ended up being cancelled and the MLS shows an SFR sold for $414k with the extra parcel in the comments, once again.

This has nothing to do with HBU, everyone agrees that the HBU of the vacant lot is to build an SFR. The problem is this - nobody ever asked you to appraise the vacant lot.

You've failed to identify the subject property, failed to meet your client's scope of work ("I'm just going to give them two values and let them decide" haha the order would be canceled in three seconds), failed to demonstrate/support your value by not using like comps (A+B are adjoining and marketed at the same time) and therefore grossly overvalued the subject property leading to increased risk for your client.

You've also failed to cite any source that a property must be appraised in its highest and best use, or that HBU is equal to market value. And you've failed to answer the question: in these rather common cases, how can the market be so wrong, so often? Where are all the smart buyers? How many times can you write something off as atypical, uninformed, outliers etc, three sales in a row is not enough for you? Sounds like willful ignorance to me.

On the flip side, you're trying to tell me I violated a couple of USPAP FAQs that don't even apply to this situation. Mmmkay.

First off, just the fact the property was listed by that broker prior to the sale as 2 units and then sold at the sum of the asking price for both is not a piece of history that you can rewrite. How else would a broker handle reporting that sales transaction if not to post the closing price on the SFR listing and cancel the land listing?

Then there's this: I never said one word about FAQs, which by definition are not part of USPAP proper. I almost never cite FAQs because they're a derivation of the fundamentals in USPAP proper. I always try to go straight to the source material. I have never accused anyone of violating an FAQ because it's impossible to violate an FAQ - they have no standing in the rules/regs.

What I did say was that if I have the comparables to support a MV of $540 for the two and your report includes zero (as in, not one) actual comparable of the "house+extra" subject that you appraised it's going to be you who ends up playing defense, not me.

 

[Andrei Fin]

Calling me clueless is appeal to reason, right?

I agree with what Amy said. But if the liability is in being misleading and undervaluing, I'd rather appear in front of the board having disclosed everything in great detail and undervaluing the property, than overvaluing it on the basis that every last market participant must be uninformed. Although you would never be given the opportunity in real life, because the client would just cancel the order since they're not interested in a hypothetical scenario.

 

[djd09]

what is the highest and best use when they waive the appraisal. dum dums.

 

[Andrei Fin]

What I did say was that if I have the comparables to support a MV of $540 for the two and your report includes zero (as in, not one) actual comparable of the "house+extra" subject that you appraised it's going to be you who ends up playing defense, not me.

You DON'T have comps unless they are adjoining and sold at the same time.

 

[George Hatch]

I don't recall ever calling you clueless but if I did then I apologize. What I will say is that if you didn't even think to consider these possibilities then you'd be missing the boat.

I already found comps for each parcel in the Garfield transaction and I barely even looked. That took me all of about 5 minutes, and that's doing it the hard way. I don't have the MLS access to look for house+extra, but if I did have that access I sure as heck would have looked - in *addition* to looking for comps for each component.

You probably *could* find sales of house+extra to use as your direct apples-to-apple comparison, but you'd have to be willing to consider the point that those are the only comps you could use without having to consider the extra parcel variable before you'd even make the effort to look. Simply finding the SFR on the one 15000sf lot doesn't really make your case. your next best bet would be to find a property with that combo but not recent or necessarily a comp in your current appraisal - the way you'd use that is to develop the adjustment and then import that rate to apply to you direct comps - just like developing a lot size adjustment when none of your direct comps have a similar sized lot.

Here's the thing - I don't object to the expression of a bulk sale value if that's what they're asking, but I'm never going to do that without also looking into the possibility that they might be worth more if sold separately. Meaning, sometimes the best choice isn't A vs B; sometimes it's A+B. Let them decide which makes more sense to them for their use.


One reason I do that is because I consider it in my OWN interests to do that even if they don't agree with me. If I do both then nobody can ever claim I skipped one or the other. Nobody can claim later on that they didn't really understand what the effect on value was or what the property's attributes - including the HBU really was because I already cover that. It's been many, many years - Over 30 by now, that I haven't written an HBU summary for one of my appraisal reports when based on the definition of MV. The last time I skipped that I was still hacking out 1004s for a fee shop, that's how long ago it was. I didn't know any better back then, so sue me.

I've had *many* assignments over the years where I have added another valuation scenario that nobody asked for, including situations with multiple lots. I never ask for permission to do it, either; because it's my SOW (inclusive of their requests and expectations) and it's my call. I'm the appraiser, not them; so I'm the one who teaches them what goes into an appraisal. The day I have to take lessons on appraising from a user is the day I need to reconsider my own competency.

BTW, the idea that its safer or somehow more virtuous to undervalue a property on a lender's behalf is a bad plan. You should probably reconsider that idea and never express it again.

 

[Andrei Fin]

Nobody can claim later on that they didn't really understand what the effect on value was or what the property's attributes - including the HBU really was because I already cover that.

Oh yes they can, because you failed to consider that nobody in that market wants to live next to a construction site or blighted lot. Worse than failed to consider it- you refused to consider it even when confronted with the evidence. And the reason is obvious.

 

[Lee Lansford]

Ok, so my experience is that sometimes there is a reason why two parcels cannot be sold separately. Maybe it has to do with some physical property to the land (like the property percs on one parcel and the house sits on the other or some other reason). If they can be sold separately, they typically should be valued separately. You likely will determine this by contacting someone with the authority to determine this in government. Then in your report you say, per Mr. Smith in the zoning department these parcels cannot be separated. This is how we cover our liability. If the bank wants to bundle the land appraisal and the improved property they may do it themselves and can feel free to foreclose on both. However, the valuation should be separate if they can be sold separately. You risk undervaluing a parcel that can be sold separately when you appraise them together, which could be misleading.

You understand. Good.