Fannie Mae and "Multiple Parcels"

[djd09]

nice deflection. fannie don't care, lenders don't care, sellers don't care, buyers don't care. then why should appraisers. strike up the band.

 

[George Hatch]

Because when the poo hits the fan - that's when lenders start looking for plausible deniability. And when an appraiser makes an error in fact they are leaving themselves open to being scapegoated under the plausibly deniable excuse.

"We made a $418k mortgage on this property that you valued at $440k. However, 30% of that $440k value is attributable to the separate vacant lot, whereas the improved parcel only contributed $310k. If you had told us the value of the house by itself was only $310k we would never have put a $418k loan on that property."

And yes, that will usually be an untruth of its own, except that the appraiser has no defense against the allegation because they could have readily provided the supported opinion of $310k for the house if they had taken the time/effort to do it.

This means that the biggest beneficiary to coloring within the lines is to protect yourself from being abused even when your client or users are trying to do dumb things. THAT is why appraisers should be mindful of the fundamentals. I care about the appraiser's legitimate interests just as much as I care about the users' legitimate interests, and I see no reason why appraisers shouldn't cover both ends at all times.

Never volunteer to be someone else's designated victim.

 

[glenn walker]

I have heard plenty of lot buyers say they bought something just to control who and how something is developed... Or not developed. My neighbor bought a 10 acre parcel that had been landlocked for 50 years after a road was closed. The road to the parcel could have been reopened as a dead end to the property. It was on a hillside and overgrown with trees. The owner inherited it 40 years earlier and when he died, heirs decided to sell. The neighbor offered a premium to prevent someone from making it into a building site next to him. Its HBU is a moot question and when have you heard a buyer say they analyzed HBU when buying property? Buying a buffer is easier to do when and where land prices are cheap.

Agree with Terrel-typical buyers do not do H & B use tests and in land transactions when prices are low it's often just pure speculation on the wish and hope a future event happens. There are also cases where a property is purchased to create a buffer between two neighbors who dont like each-other. I had an-Uncle who once purchased an-adjoining lot because the neighbor two lots over had a dog that barked too much. Then my uncle used that vacant lot for the next 30 years to park his trucks on. His H & B use analyses was originally based on nothing but utter contempt for his neighbor and he said he way over paid for the lot but it was worth every dime. Go figure his H & B use analyses consisted of nothing but extreme buyer motivation to get farther away from his neighbor. The same goes for how Realtors come up with list prices, they do no individual line item +/- adjustments but in some cases there estimated values are really similar to what appraisers arrive at.

 

[Andrei Fin]

I keep saying this: the more accurate default on the situation of the 2-lot assemblage in general isn't "never" but it also isn't "always".

Correct you are.

That some folks can't understand this is (almost) amazing.

I understand what George is saying here 100%. Our disagreement is only what constitutes the best market data to support our conclusion. We have this sale of the subject example on Garfield in 2016 and again in 2018, and also this sale on Walnut, in all three cases both lots went to the same buyers and they're still not built on. That data really stands out to me, you can write it off as atypical or uninformed if you want, and use other lot sales instead. Given the scope of work, I'll hang my hat on that and say that the MV for our subject property A+B is the MV of A plus the value in use of B. If you prefer, you can turn down the assignment or provide multiple values. As an appraiser my business philosophy was to solve problems for my clients, not create them. I will agree with Lee that in the case of a refi with no data this is a sticky situation and therefore Fannie should have worded the last sentence of the newsletter better to include something like "might" or "may".

The lot on Walnut does not have the same HBU as our subject, it's zoned for multi family. Also the appeal of the main home would not be impacted much by the development since it's already on a nice large parcel off to the side vs a small flag lot. The vacant lot on Garfield is really marginal and the appeal of the main home would be greatly impacted by the development. The most profitable is not the most probable in this case. Edit- actually I believe the Garfield house was on a landlocked lot with a driveway easement, not flag lot.

 

[Carnivore]

Carnivore, we already did the HBU analysis.

Fannie issued guidance on loan eligibility of the subject property in a not uncommon scenario: subject is adjoining parcels a(improved) and b(unimproved) sold together by same owner.

Yes, I know FNMA already issued guidance on that scenario: Its Flawed, Pure and Simple. Its flawed because the Two FAQ and another reason that Lee Referenced, this is really not an issue in Standard 1. Its an issue of Standard 2 when it comes to FNMA or other Federally regulated Lenders.

If I was doing this assignment for a Private Civilian for that persons informational use! This would not be a problem.

Knowing the Intended User and purpose of the Appraisal is very important.

If i am wrong about what I just said, someone will call me out.

 

[George Hatch]

I understand what George is saying here 100%. Our disagreement is only what constitutes the best market data to support our conclusion. We have this sale of the subject example on Garfield in 2016 and again in 2018, and also this sale on Walnut, in all three cases both lots went to the same buyers and they're still not built on. That data really stands out to me, you can write it off as atypical or uninformed if you want, and use other lot sales instead. Given the scope of work, I'll hang my hat on that and say that the MV for our subject property A+B is the MV of A plus the value in use of B. If you prefer, you can turn down the assignment or provide multiple values. As an appraiser my business philosophy was to solve problems for my clients, not create them. I will agree with Lee that in the case of a refi with no data this is a sticky situation and therefore Fannie should have worded the last sentence of the newsletter better to include something like "might" or "may".

The lot on Walnut does not have the same HBU as our subject, it's zoned for multi family. Also the appeal of the main home would not be impacted much by the development since it's already on a nice large parcel off to the side vs a small flag lot. The vacant lot on Garfield is really marginal and the appeal of the main home would be greatly impacted by the development. The most profitable is not the most probable in this case.

Different zoning? WTH? Both sets of parcels are reported in the County GIS app as being zoned RD-5 and the vacant parcel on Walnut isn't a corner lot.




As for the appeal of the vacant lot on Garfield, it fronts the street. It's the SFR parcel to the rear which relies on the dominant driveway easement for access. All this does to the vacant parcel at the street is reduce its usable lot area to maybe 6000sf. If I'm appraising the parcel on Garfield in mid-2016 the parcel sale on Walnut is most definitely a primary comparable and I'll only be adjusting for the difference in usable lot area. Which won't be much.

 

[djd09]

We made a $418k mortgage on this property that you valued at $440k. However, 30% of that $440k value is attributable to the separate vacant lot, whereas the improved parcel only contributed $310k. If you had told us the value of the house by itself was only $310k we would never have put a $418k loan on that property."

We made a $300,000 loan based on the GLA at 2,500 sq ft, when the house was only 2,000 sq ft. Only if you could have verified the correct sq. ft. we would have never made the loan at 300,000.

Blame it on the third party inspector or Fannie in the case of multiple parcels.

 

[George Hatch]

We made a $300,000 loan based on the GLA at 2,500 sq ft, when the house was only 2,000 sq ft. Only if you could have verified the correct sq. ft. we would have never made the loan at 300,000.

Blame it on the third party inspector or Fannie in the case of multiple parcels.

Sorry, cuz, data inaccuracies occurring outside of the appraiser's SOW isn't the appraiser's fault. That's one of the standard assumptions and limitations we assert in every appraisal report we sign. There is no overlap between that and the appraiser not doing (MV) what they say they're doing.

 

[djd09]

Sorry brother , misleading is misleading, substantial errors are substantial errors, no way around it.

 

[Andrei Fin]

Different zoning? WTH? Both sets of parcels are reported in the County GIS app as being zoned RD-5 and the vacant parcel on Walnut isn't a corner lot.


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As for the appeal of the vacant lot on Garfield, it fronts the street. It's the SFR parcel to the rear which relies on the dominant driveway easement for access. All this does to the vacant parcel at the street is reduce its usable lot area to maybe 6000sf.

I stand corrected on zoning, the listing agent said approved for SFR but I must have misunderstood.

The vacant and improved lots on Garfield are really small for this neighborhood. If you build another house, both would feel really cramped with minimal yard. The appeal would be more of a family compound situation, which is exactly how the agent worded the Walnut listing. Someday if/when there is more development pressure, selling them off separately might be a really good call. For the foreseeable future there are plenty of nice buildable lots to be had in this area. Like you said-

If there is sluggish/ low demand for vacant lots, then for that build able lot a HBU today may be interim use hold for future appreciation.

That's sometimes the case. And as noted above, sometimes the values and marketability are so low that the extra lot has about the same value when used as a lawn instead of being developed.