FHA And Excess Land Hypothetical

[bnmappraisal]

If I appraise it as 2 autonomous parcels with an encroachment it is the highest & best use. But causes problems with FHA.

(my bold) it's not our problem if a property "causes problems" with FHA or any other entity.

 

[sunsetvalley]

To the OP, how are the parcels autonomous if they both have the subject improvements on them? We are asked to comment on encroachments, easements, etc. because those conditions mean someone else has a right to the subject property. (Think of the bundle of rights). What would it take to convey the not-quite-vacant parcel as truly vacant, free of others using it? Something not worth doing?

Some posters respond to others without quoting them (I do that) when the discussion pace picks up, so you may not realize they are talking to each other.

They are autonomous in their legal description, plat and tax ID. Only one has the subject improvements on it with the corner of that improvement going onto a 2-ft corner possibly. The lot could be transferred with removal of the porch corner according to the county. That's what is causing the problem. Can the porch be removed? Yes. It doesn't have any value even in the appraisal. Could the future owner remove the porch and sell the lot to another owner. Yes. Is there a market for the lot. Yes. The only thing preventing that is 1-2 feet of the porch corner. Would it be worth doing? Yes. I am purchasing a property with 2 separate tax lots, priced well under the market of even 1 house on a small lot. Then I remove the porch and I have a lot worth $86,000 based on the 4 other appraisals we've done in the development recently. The cost to remove the porch, which is not contributing any value? Probably $5000?

 

[sunsetvalley]

(my bold) it's not our problem if a property "causes problems" with FHA or any other entity.

True. But they sure make it seem like its our problem.

 

[J Grant]

My supervisor's argument, the county's argument and the HOA's argument is that it is not needed. I have 2 separate parcels, 2 separate tax ID accounts, 2 separate LEGAL descriptions and 1 porch that may or may not encroach because we are not sure where the survey lot line is. There's MUCH more complication to this that involves lawsuits and a bunch of other things. The way it is right now is a problem because of the encroachment. And we are talking about 1-2 feet on a corner. We walked every inch of the lot. It's buildable. Even if they adjust the line the 2 feet to include the porch, then the lot would be buildable. It's a separate lot. That's my problem. The lot next door was just partitioned off a bigger lot. I'm not talking about a big lot and it needing to be divided and having excess land or surplus land. I have TWO TAX lots, that have been two tax lots since the 1950s when they developed. The owner has been arguing this with the county for the last 6 months because they are upset the HOA is making them pay 2 fees and they have to pay taxes on a fully assessed tax lot. I don't care to be ruining a deal...I care to get this right because the potential for someone to get sued in this is high. This is going FHA, buyers are putting 1% down and it's priced as if there is not a 2nd lot. It's priced almost $70K below the other houses in the development with 9000sf less land...

I just want to get this right.

I know the snarkiness on this forum, I've read it for years. But sometimes it's hard to handle. I've spent HOURS on this and I'm not getting paid anymore for it than a basic cookie cutter. I've read FHA guidelines, Appraiser blogs, forums, talked with different appraisers and have gone over this in my head. I just want to get it right...

Okay... I hear you on the snark, I've begged for better moderation but they take a hands off approach unless it becomes beyond the pale of offensive.... so it is what it is .

We understand it is two legal separate tax lots etc . And either way, both lots transfer with the sale, correct? So the only question is whether to call the second lot surplus or excess. Imo, the fact that the porch COULD encroach, or does encroach, ( at first you said it did, now you are not sure), THAT little porch encroachment is what makes it excess land because the land is needed to serve the improvement ( because of the porch and possible set backs to the lot line, how close is the house to boundary of second lot if the porch is encroaching? )

Boo hoo owner arguing with county about taxes is not your concern stay out of it...

I fail to see how lawsuits have anything to do with the assignment...unless there is backstory not told here. On the appraisal, I would disclose that the second lot has its own tax ID, legal etc, but because the porch either encroaches or could encroach ( survey recommended), the second lot on the appraisal is treated as surplus land instead of excess land . As far as its sale price , maybe the market value opinion will be higher than the sale price. Why is that an issue either...the surplus land may or may not add contributory value,...

 

[J Grant]

True. But they sure make it seem like its our problem.

Yes they do, and that is the hard part about being a residential appraiser ( or an appraiser in general). The work itself is not always that hard, but the parties, clients and pressure make it so. Perhaps that is true in many businesses where people put up with tyrannical bosses, cranky customers, dealing with crazy public etc..

 

[J Grant]

They are autonomous in their legal description, plat and tax ID. Only one has the subject improvements on it with the corner of that improvement going onto a 2-ft corner possibly. The lot could be transferred with removal of the porch corner according to the county. That's what is causing the problem. Can the porch be removed? Yes. It doesn't have any value even in the appraisal. Could the future owner remove the porch and sell the lot to another owner. Yes. Is there a market for the lot. Yes. The only thing preventing that is 1-2 feet of the porch corner. Would it be worth doing? Yes. I am purchasing a property with 2 separate tax lots, priced well under the market of even 1 house on a small lot. Then I remove the porch and I have a lot worth $86,000 based on the 4 other appraisals we've done in the development recently. The cost to remove the porch, which is not contributing any value? Probably $5000?

If at some point in future the owner decides to remove porch, retrofit house and sell off the second lot, they;d have to to pay off the mortgage to do so because the second lot is encumbered with the mortgage ( whether you give it value or not in the appraisal )

But that is a speculative future, you are appraising the property "as is", now. And now, it has a porch encroaching on the second lot, thus the second lot is needed to support the improvement. Also, since you said you lack a survey with boundary lines, how can you be sure the house meets zoning set back requirements from the second lot, even if the porch were removed?

 

[sunsetvalley]

I ha

Okay... I hear you on the snark, I've begged for better moderation but they take a hands off approach unless it becomes beyond the pale of offensive.... so it is what it is .

We understand it is two legal separate tax lots etc . And either way, both lots transfer with the sale, correct? So the only question is whether to call the second lot surplus or excess. Imo, the fact that the porch COULD encroach, or does encroach, ( at first you said it did, now you are not sure), THAT little porch encroachment is what makes it excess land because the land is needed to serve the improvement ( because of the porch and possible set backs to the lot line, how close is the house to boundary of second lot if the porch is encroaching? ) 11 feet. The corner goes over by about 1-2 feet at one corner. The setbacks require 5 feet side. The porch was added in the last 10-15 years without a permit and was built on the paver patio. It has dryrot about 1 foot from ground. We are calling it an encroachment based on what the county said and the county record aerial view. My mentor says we don't really know for sure because we don't know where the survey line is.

Boo hoo owner arguing with county about taxes is not your concern stay out of it...Believe me, I know it's not relevant but the county did because the owner asked to have the lot combined into one lot and they said no because the encroachment could be cured. It was just a piece of the puzzle.

I fail to see how lawsuits have anything to do with the assignment...unless there is backstory not told here. They don't, there's just a recorded judgment that references the property which showed up when I searched for the transfer deed. I don't think any of that has anything to do with it...other than I probably worry too much about things.

On the appraisal, I would disclose that the second lot has its own tax ID, legal etc, but because the porch either encroaches or could encroach ( survey recommended), the second lot on the appraisal is treated as surplus land instead of excess land . As far as its sale price , maybe the market value opinion will be higher than the sale price. Why is that an issue either...the surplus land may or may not add contributory value,...

It's not an issue. It's market value is way over the sales price anyway.

 

[J Grant]

They are autonomous in their legal description, plat and tax ID. Only one has the subject improvements on it with the corner of that improvement going onto a 2-ft corner possibly. The lot could be transferred with removal of the porch corner according to the county. That's what is causing the problem. Can the porch be removed? Yes. It doesn't have any value even in the appraisal. Could the future owner remove the porch and sell the lot to another owner. Yes. Is there a market for the lot. Yes. The only thing preventing that is 1-2 feet of the porch corner. Would it be worth doing? Yes. I am purchasing a property with 2 separate tax lots, priced well under the market of even 1 house on a small lot. Then I remove the porch and I have a lot worth $86,000 based on the 4 other appraisals we've done in the development recently. The cost to remove the porch, which is not contributing any value? Probably $5000?

Why is it priced under the market ? In any event, if your opinion of value is higher than the sale price, then so be it. Still would be relevant to find out why they are selling it so low...poorly informed seller? Seller In a rush or non arms length? Odd...

 

[sunsetvalley]

If at some point in future the owner decides to remove porch, retrofit house and sell off the second lot, they;d have to to pay off the mortgage to do so because the second lot is encumbered with the mortgage ( whether you give it value or not in the appraisal )

But that is a speculative future, you are appraising the property "as is", now. And now, it has a porch encroaching on the second lot, thus the second lot is needed to support the improvement. Also, since you said you lack a survey with boundary lines, how can you be sure the house meets zoning set back requirements from the second lot, even if the porch were removed?

Because the front portion does not encroach based upon what the county said. It's 11 feet from the corner of the house to the corner of the porch. The setback requirement is 5 feet. The math says there is enough space between the house and the line. The encroachment is only about 1 foot. This isn't a square/rectangular lot. The line goes back at an angle and the house sits at an angle.

OK. So I'm understanding this correctly. The encroachment means the lot is surplus land and not excess land, "As-Is" today. So, then I give value to the surplus land? The definition of surplus land is throwing me off.

"Land that is not currently needed to support the existing improvement but cannot be separated from the property and sold off. Surplus land does not have an independent highest and best use and may or may not contribute value to the improved parcel."

OK, I get that. But how do I address the highest & best use with the surplus land scenario?

 

[sunsetvalley]

Why is it priced under the market ? In any event, if your opinion of value is higher than the sale price, then so be it. Still would be relevant to find out why they are selling it so low...poorly informed seller? Seller In a rush or non arms length? Odd...

Seller is being sued by her brother because she used her mother's estate to purchase the property through inappropriate distribution of funds. She needs to sell it to pay back the estate.