FHA Excess Land

[MASSAPP]

HI Good folks of the forum,

I am working on a house in rural location. Site is 107 acres. house needs 2-5 acres of land to support existing improvements...well, septic, buffer, pond by house for view. Rest of land is not developable as access is via private gravel road and not a lot of demand for housing sites in area. Anyway, reverse mortgage situation. I am hoping someone can provide clarification/guideance on the FHA guidelines for excess land. From what I can tell, there is an example of excess land being treated with hypothetical condition but the example in the FHA manual is of two lots sitting side by side and one is seperately saleable. This is 107 acres in one tract. Homeowner/client seem anxious to have all of the land included in appraisal. Any help would be appreciated.

 

[Dublin ohio]

You say it cannot be developed. But can it be subdivided? What is the remaining land being used for now? What kind if land is it? (ag, wooded, etc)

 

[alebrewer]

How would the market treat it? Are there sales of homes on similar sized tracts being used as SF?

 

[MASSAPP]

Hi Thanks for the quick response. Property is about half mile off hard surface road...gravel driveway in. Legally could be subdivided. property is 50/50 managed trees and pasture. pasture not used in 10 years. fences need work. sales for cabin/retreat are present. big cities surround in all directions but all 1-3 hours away. small, economically depressed city 20 minutes away. i think most likely buyer is someone who wants a place in country. local people can't afford it....median household income sub 50K locally.

My question is really about FHA regulations and if this is something that will fly with FHA.

Below is from 4000.1

Required Analysis and Reporting The Appraiser must include the highest and best use analysis in the appraisal report to support the Appraiser’s conclusion of the existence of Excess Land. The Appraiser must include Surplus Land in the valuation. 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 nonconformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land. The value of the second lot must be excluded from the final value conclusion of the appraisal and the Appraiser must provide a value of only the principal site and improvements under a hypothetical condition.

My property is one large tract. so doesn't fit example.

I guess my real question is about the presence of Excess land and if it can be included on FHA appraisals or is the FHA requirement only for excess land to be excluded only for land that is already plated Thanks for your help.

 

[J Grant]

I did a quick internet search is there a maximum acreage for FHA loans, lots of info came up both from FHA and articles about it.

 

[BRCJR]

RSW is good FHA question source.

 

[Dublin ohio]

Hi Thanks for the quick response. Property is about half mile off hard surface road...gravel driveway in. Legally could be subdivided. property is 50/50 managed trees and pasture. pasture not used in 10 years. fences need work. sales for cabin/retreat are present. big cities surround in all directions but all 1-3 hours away. small, economically depressed city 20 minutes away. i think most likely buyer is someone who wants a place in country. local people can't afford it....median household income sub 50K locally.

My question is really about FHA regulations and if this is something that will fly with FHA.

Below is from 4000.1

Required Analysis and Reporting The Appraiser must include the highest and best use analysis in the appraisal report to support the Appraiser’s conclusion of the existence of Excess Land. The Appraiser must include Surplus Land in the valuation. 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 nonconformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land. The value of the second lot must be excluded from the final value conclusion of the appraisal and the Appraiser must provide a value of only the principal site and improvements under a hypothetical condition.

My property is one large tract. so doesn't fit example.

I guess my real question is about the presence of Excess land and if it can be included on FHA appraisals or is the FHA requirement only for excess land to be excluded only for land that is already plated Thanks for your help.

My bold. That would seem to answer you question. If your HBU concludes surplus land. It says it MUST be included. I have not done FHA for years. So not sure if there is a maximum amount of land they will let you consider.

 

[jay trotta]

Hi Thanks for the quick response. Property is about half mile off hard surface road...gravel driveway in. Legally could be subdivided. property is 50/50 managed trees and pasture. pasture not used in 10 years. fences need work. sales for cabin/retreat are present. big cities surround in all directions but all 1-3 hours away. small, economically depressed city 20 minutes away. i think most likely buyer is someone who wants a place in country. local people can't afford it....median household income sub 50K locally.

My question is really about FHA regulations and if this is something that will fly with FHA.

Below is from 4000.1

Required Analysis and Reporting The Appraiser must include the highest and best use analysis in the appraisal report to support the Appraiser’s conclusion of the existence of Excess Land. The Appraiser must include Surplus Land in the valuation. 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 nonconformity in zoning regulations for the remaining improved lot, the second vacant lot is Excess Land. The value of the second lot must be excluded from the final value conclusion of the appraisal and the Appraiser must provide a value of only the principal site and improvements under a hypothetical condition.

My property is one large tract. so doesn't fit example.

I guess my real question is about the presence of Excess land and if it can be included on FHA appraisals or is the FHA requirement only for excess land to be excluded only for land that is already plated Thanks for your help.

Required Analysis & Reporting states; must include the Highest and Best Use analysis in the appraisal report to support the Appraiser's conclusion of the existence of Excess and Surplus Land.

It would appear to me, that you have your work cut out for you on this and you should be very thorough on your development and report writing for the report.
Good Luck

 

[Jerry Bone Jr]

https://singlefamily.fanniemae.com/media/9071/display

 

[BRCJR]

https://singlefamily.fanniemae.com/media/9071/display

The OP was a FHA question.