Fannie Mae and "Multiple Parcels"

[Mr Rex]

I keep re-reading the Fannie advice and I don't see where they advise to ignore the H&BU issues. I suspect their upcoming announcement will clarify that it is acceptable to check no, explain what you did and how you came to that conclusion etc and the loan will still be eligible. Hardly rocket surgery IMHO.

 

[Lee Lansford]

What if... since one component of the subject property has a separate HBU... you can provide the value for that component under a different definition of MV at the client's request? Does USPAP say that only one definition of value is allowed? Does it say you can't appraise two properties on one form? Isn't the definition of value part of the scope of work?

It's already common for appraisers to include more than one value opinion - using more than one valuation scenario - in appraisals.

Appraisers commonly provide opinions of insurable value (even though many of them omit including the definition they're using for that)
Appraisers sometimes get tasked to add an opinion of Liquidation Value and/or Disposition Value
Appraisers sometimes get tasked to add a value under bulk sale conditions - which is actually closer to what this situation is
"As Is" and "Subject to completion" is common

So in answer to your question, USPAP doesn't impede any of those situations. What it does impede is calling an apple an orange. What it does impede is *ignoring* the HBU of the additional parcel by use of the unconsidered assumption that the extra parcel is nothing more than a lawn to a buyer or seller.

As I keep saying, if Fannie has a problem with what an appraisal is that is their own problem, of their own making, and can only be solved at their own hand.

Appraisers are not dogs, and Fannie doesn't have a leash on us. They're just another user as far as our appraisal standards go. You can heel for them if you want, but if you wouldn't heel for Fly-By-Night Mortgage then it's not any more ethical to heel for Fannie.

"Stop it! You're making entirely too much sense!"

But, of course, right you are.

 

[George Hatch]

'explain what you did and how you came to that conclusion etc "

So in other words, act like a professional and comply with USPAP. You're going to develop your opinion and proceed accordingly.

 

[CANative]

The problem is the stupid form and the way it asks the question about improved HBU. This is a good example of why it is incorrect to simply check these boxes, yes or no, and not include a summary of the rationale.

 

[Michigan CG]

What if... since one component of the subject property has a separate HBU... you can provide the value for that component under a different definition of MV at the client's request? Does USPAP say that only one definition of value is allowed? Does it say you can't appraise two APNs on one form? Isn't the definition of value part of the scope of work?

Let us take a five-acre parcel with improvements that are worth $200,000 and the land is worth $60,000 for a total of $260,000. Lender wants you to add a two-acre parcel for a total of seven acres. The two acres by itself is worth $40,000. If we add them up together as some would (wrongly) suggest the opinion of value is $300,000.

Now we have another argument that the appraisal be made with an HC that it is one seven-acre property. Just combining them together does not change the fact that the two acres is still excess land so this theory is also incorrect, but maybe better than the first. In this scenario the seven acres is worth about $70,000 (I am using land values from my market). So the value of a house on seven is $270,000. That is not the highest and best use as $270,000 is worth less than $300,000.

The misguided FNMA letter says the additional two acres is value in use. To me that says to value the whole property at $270,000 and that the FINAL value on the 1004 form would be $270,000 but that would not be the MARKET VALUE. The final appraisal value would be based on a value in use.

The correct way to address this would be to conclude a value of the house on five at $260,000 and do an addendum or a second separate appraisal stating the market value of the two acres is $40,000.

 

[Michigan CG]

I suspect their upcoming announcement will clarify that it is acceptable to check no, explain what you did and how you came to that conclusion etc and the loan will still be eligible.

That might be acceptable but I doubt that will ever happen.

 

[CANative]

Let us take a five-acre parcel with improvements that are worth $200,000 and the land is worth $60,000 for a total of $260,000. Lender wants you to add a two-acre parcel for a total of seven acres. The two acres by itself is worth $40,000. If we add them up together as some would (wrongly) suggest the opinion of value is $300,000.

Now we have another argument that the appraisal be made with an HC that it is one seven-acre property. Just combining them together does not change the fact that the two acres is still excess land so this theory is also incorrect, but maybe better than the first. In this scenario the seven acres is worth about $70,000 (I am using land values from my market). So the value of a house on seven is $270,000. That is not the highest and best use as $270,000 is worth less than $300,000.

The misguided FNMA letter says the additional two acres is value in use. To me that says to value the whole property at $270,000 and that the FINAL value on the 1004 form would be $270,000 but that would not be the MARKET VALUE. The final appraisal value would be based on a value in use.

The correct way to address this would be to conclude a value of the house on five at $260,000 and do an addendum or a second separate appraisal stating the market value of the two acres is $40,000.

I just had a conversation and email from an appraiser friend who makes a very strong and rationale argument for including the value together. The Fannie statement is flawed though or could have been much better.

 

[J Grant]

I just had a conversation and email from an appraiser friend who makes a very strong and rationale argument for including the value together. The Fannie statement is flawed though or could have been much better.

Since I have been saying since post one they could be included together for the value, what did your friend say that was convincing ?

The assignment is for one market value opinion for the 2 together. Any additional MV opinions within the appraisal for either of the individual properties are additional, but the assignment purpose is one value. If some believe the only "correct" way to do it is to provide two separate appraisals, they are in effect declining the assignment .

 

[J Grant]

The real problem is because there are typically few transactions of a house conveyed with an excess land lot in many areas, it is hard to establish what the benchmark for market value is for it.

s. Therefore speaking with RE agents would be critical, as would going further back in time or area to find a comp /comps, as well as analyzing the trend is to build or hold vacant lots in the area.

 

[CANative]

It's not that simple. And that's what the problem is with the Fannie thing.

Edit: Referring to the post right before the above post.