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FHA/combined Lots/excess Land/highest And Best Use

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expo77

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Currently working on an FHA appraisal of a 5 acre manufactured home. During the inspection the owner informed me that he inherited the front 3 acres of the property 6 years ago and combined it with his 2 acres to get the 5 he has now. All improvements on the property are on the rear 2 acres with nothing but a driveway and pond on the front 3 acres. They are combined and not platted separately. (Since they are platted as 1 parcel would this negate 4000.1?

"If the subject of an appraisal contains two or more legally conforming platted lots under one legal description and ownership, and the second vacant lot is capable of being divided and/or developed as a separate parcel where such a division will not result in a non-conformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land."

The county has confirmed that it could be split with an easement to access the rear parcel. This seems to me like the definition of excess land and should be described but not valued. However to determine excess land HBU must be considered.

The contributory value of the 3 acre parcel is less than the value it would bring if divided and sold alone. However, this is a rural area and 5+ acre sites are common and in demand. The 4000.1 does not mention "larger than what is typical for the neighborhood" like the previous handbook. HBU of the 5 acre site if vacant would be to divide and have 2 buildable lots as the cumulative value would be worth more than the whole. So the question is determining HBU of the 2 acre site with improvements plus a vacant 3 acre site.

To divide the property:

1)It is legal
2) It is physically possible
3) It is financially feasible
But
4 Maximally Productive?

2 vacant buildable lots would be worth more than 1 5 acre lot,
but the as improved 5 acre lot is worth less than an as improved 2 acre lot + a vacant 3 acre lot and if both were improved they would be worth more. Trying to find some guidance on how far to go with hypothetical conditions on HBU to determine what is maximally productive.

So my thinking is that HBU is the improved lot on 2 acres and dividing the 3 acre lot for sale

I'm finding it a bit confusing that FHA wants me to exclude the excess land. I'm probably over thinking this and have been reading too far into the 4000.1 and online articles and forums about HBU.

What would you do? Thanks in advance. Attached an aerial pic to show the rear 2 acres with improvements and the front 3 acre parcel that has the driveway and borders the street.
 

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Michigan CG

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As of the effective date of the appraisal, what is the minimum frontage allowed? While an easement might be possible it does not exist as of the effective date. Looks like the parcel is 400' wide; does half of the width meet zoning as of the effective date?
 

J Grant

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Florida
https://hudgov.prod.parature.com/link/portal/57345/57355/Article/8226/What-are-the-appraisal-reporting-requirements-for-a-property-with-excess-or-surplus-land

"Currently working on an FHA appraisal of a 5 acre manufactured home. During the inspection the owner informed me that he inherited the front 3 acres of the property 6 years ago and combined it with his 2 acres to get the 5 he has now. All improvements on the property are on the rear 2 acres with nothing but a driveway and pond on the front 3 acres. They are combined and not platted separately. (Since they are platted as 1 parcel would this negate 4000.1?

"If the subject of an appraisal contains two or more legally conforming platted lots under one legal description and ownership, and the second vacant lot is capable of being divided and/or developed as a separate parcel where such a division will not result in a non-conformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land."

Read the above carefully, it tells you what to do. The subject as of eff date is not 2 platted lots under one legal description. You need to identify the lot as having a potential excess site if in future it were platted into two, however as of effective date the subject is one platted lot. and thus per HUD instruction above you would be valuing the house on the 5 acre lot.
 

Michigan CG

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and thus per HUD instruction above you would be valuing the house on the 5 acre lot.
I suggest you dig a little deeper and look at other publications, specifically about excess land and Highest and Best Use.
 

J Grant

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Florida
I suggest you dig a little deeper and look at other publications, specifically about excess land and Highest and Best Use.
The HBU has already been identified as existing residential. The OP said 5 acre sites are typical in area and in demand, the subject is on one 5 acre site.

HUD has specific instructions about what constitutes excess land to be excluded in the valuation for their appraisals, which is is an assignment requirement- If an appraiser concludes the HBU of site as vacant is to divide is to divide the larger parcel into 2 lots you can state that, however, at present time it is not 2 separate platted lots under one legal, it is one lot, therefore HUD wants the entire lot included in the home valuation.
 

expo77

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Florida
As of the effective date of the appraisal, what is the minimum frontage allowed? While an easement might be possible it does not exist as of the effective date. Looks like the parcel is 400' wide; does half of the width meet zoning as of the effective date?
Yes, if split it would meet all zoning requirements
 

Mr Rex

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It is one lot as is.
 

expo77

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Florida
The HBU has already been identified as existing residential. The OP said 5 acre sites are typical in area and in demand, the subject is on one 5 acre site.

HUD has specific instructions about what constitutes excess land to be excluded in the valuation for their appraisals, which is is an assignment requirement- If an appraiser concludes the HBU of site as vacant is to divide is to divide the larger parcel into 2 lots you can state that, however, at present time it is not 2 separate platted lots under one legal, it is one lot, therefore HUD wants the entire lot included in the home valuation.
I guess my main concern is that HBU may be to split the parcel as it would be "maximally productive". The value of the 3 acres alone with worth 2 or 3 times the contributory value of the 3 acres added to the original parcel. So would this be a case where there is excess land due to being maximally productive? 5 acre lots are common but splitting the parcel would result in higher overall residual land value.
 

Mr Rex

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There is only one lot per your original post. So you are over thinking this.
 

J Grant

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Certified Residential Appraiser
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Florida
I guess my main concern is that HBU may be to split the parcel as it would be "maximally productive". The value of the 3 acres alone with worth 2 or 3 times the contributory value of the 3 acres added to the original parcel. So would this be a case where there is excess land due to being maximally productive? 5 acre lots are common but splitting the parcel would result in higher overall residual land value.
again, read the HUD directive, you do not have two platted lots under one legal, therefore it directs you to appraise it as one lot.
 
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