FHA And Excess Land Hypothetical

[J Grant]

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?

"give value " is vernacular, actually the market conveys value, it will either show higher prices for homes with bigger lots or not...compare it to some similar homes with small and big lots, review other sales, talk to RE agents.

As far as HBU, spell it out...something like this..." The subject straddles 2 lots with a corner of the porch, thereby creating an encroachment of 1-2 feet on to the second lot. Each lot has its own tax ID and if there were not an encroachment, the second lot would be considered excess land . However because there is an encroachment, the second lot is needed to serve and support the improvement, therefore in the appraisal it is considered surplus land "

Disclose each lot size and each legal tax id etc , and explain the two together total the large lot total sf.

 

[J Grant]

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.

Ask your mentor whether or not that should be mentioned in the appraisal...I don't know the answer , we are supposed to disclose known facts and now unfortunately this is a known fact...though technically it has nothing to do with the valuation... I wonder if that is her motive for selling it at a low price, for spite to get back at the estate..sounds like a nut job.

 

[Michigan CG]

The lawsuit and such is not your problem, you are completing an FHA assignment. The assignment conditions are AS-IS..............as of the date of inspection what is it? It is two parcels where there is an encroachment of the porch (don't forget about set-back requirements). The porch is on the other parcel and as of the EFFECTIVE date the AS-IS situation is the second lot is needed for the improvements to the first parcel.

You say cut a couple feet off of the porch, but what is the set-back requirement? Five feet, ten feet, 15 feet?

AS-IS, as of the effective date, you have two parcels with surplus land.

 

[J Grant]

The only way the lawsuit has anything to do with the assignment is it might be the seller's reason for selling low...either she needs cash fast to pay off the estate, or she is doing something under the table but can' t speculate on the latter.

OP could say something like " The SC price is 200k and the appraisal opinion of market value is 240k. A possible reason the seller accepted a lower price might be due a personal estate settlement situation

 

[Terrel L. Shields]

really just wanted to get some insight

Since the house is on both lots then both are required for the improvements and both lots are ONE economic unit. The second lot is not sucky "surplus", although the economic unit may have excess land, is does not have an excess LOT, because it is required for the house...I.e. - not an encroachment. It simply is on two lots. Explain, adjust if you cannot find a comp with similar lot size (total land size) and go on. No hypothetical required.

 

[glenn walker]

Glenn,

This is what caused the problem. If I appraise it as one parcel, then with the zoning, the planned unit CC&Rs and the surrounding uses, the highest & best use is not its current use. Its current use is 2 autonomous parcels, which is the use that conforms to the zoning, neighborhood and planned development standards. If I appraise it as 2 autonomous parcels with an encroachment it is the highest & best use. But causes problems with FHA.

I'm sorry if some of you think I'm an FHA God trying to cause problems. I really just wanted to get some insight and help. I will not be asking here again.

OK - If you really believe it's highest and best use is two separate parcels then be done and inform the lender that after an-exhaustive and thorough Highest & Best use analyses you have determined the property should be appraised as two separate parcels and it currently it will not and does not meet FHA Minimum Property Requirements.

If you are correct then it's not your problem to try and pound a square peg through a round hole. If you are wrong the lender will simply inform their FHA-HOC that they disagree and they can order a new case number and get another appraiser , if the second appraiser and FHA agree with your analyses your done, if not expect to get a lot of letters, phone calls and make sure you are on the FHA- Roster. Remember nobody is going to fall on the sword for you if you are wrong !

 

[RSW]

"give value " is vernacular, actually the market conveys value, it will either show higher prices for homes with bigger lots or not...compare it to some similar homes with small and big lots, review other sales, talk to RE agents.

As far as HBU, spell it out...something like this..." The subject straddles 2 lots with a corner of the porch, thereby creating an encroachment of 1-2 feet on to the second lot. Each lot has its own tax ID and if there were not an encroachment, the second lot would be considered excess land . However because there is an encroachment, the second lot is needed to serve and support the improvement, therefore in the appraisal it is considered surplus land "

Disclose each lot size and each legal tax id etc , and explain the two together total the large lot total sf.

I had a VA appraisal a few weeks ago where the driveway was located on a second lot. I treated it just as you described above.

 

[Mr Rex]

I think Reagan was an Appraiser GOD like the OP aspires to be.