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FHA Sale, Two Pids

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CJ1234

Junior Member
Joined
Jan 24, 2008
Professional Status
Certified Residential Appraiser
State
Minnesota
Sale in Minneapolis. Subject parcel is improved. Adjacent/ajoining parcel is vacant, and being including in the sale per MLS. There are two separate legal descriptions. Purchase contract only lists the legal description of Parcel A. I email the agents to verify, and yes Parcel B is included in the sale. Per Agent, the city states at the second parcel must be included in the sale as the size is too small to build. Minimum requirement in zoning is 5,000 SF, each of the two parcels are 3,352 SF.

Now, here is what FHA states, My BOLD
Excess Land refers to land that is not needed to serve or support the existing improvement. The highest and best use of the excess land may or may not be the same as the highest and best use of the improved parcel. Excess land may have the potential to be sold separately.

Surplus Land refers to 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 to the value of the improved parcels.

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.

(Now, this section does not exactly match my situation, as there are two legal descriptions)
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 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.
Supplemental information. Typical sites in immediate area are 30-40 feet wide; subject is 27.5'. There are multiple sites in the area with the same size. Zoning is R2B two family; surrounding use within 4-block area: R2B, High Density Residential, Commercial and Office-Residential.

Question: How do I proceed? If the second lot met the zoning requirements this would be an easy exercise, but since the second parcel (with it's own legal description) does not meet the requirements, is it truly excess land?
 

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Michigan CG

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Certified General Appraiser
State
Michigan
Without the second parcel the land does not meet what is legally permissible. You don't have excess land (excellent excess) despite having two parcels.

The subject property (with both parcels) meets the minimum land size requirements.
 

CJ1234

Junior Member
Joined
Jan 24, 2008
Professional Status
Certified Residential Appraiser
State
Minnesota
Without the second parcel the land does not meet what is legally permissible. You don't have excess land (excellent excess) despite having two parcels.

The subject property (with both parcels) meets the minimum land size requirements.
Thank you for your input.
Would I condition the report on the combination of the two parcels? The site may not be buildable for residential purposes, but potentially a garage could be built, for an adjacent property? Or parking for nearby apartment / condos? The property north of the vacant lot appears to be mixed use, and potentially could desire to purchase for parking. (Totally conjuncture, but I'm trying to think this from all angles)
 

Michigan CG

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Michigan
Would I condition the report on the combination of the two parcels?

NO. We don't have the power to force people to do things that are not necessary, we give opinions of value. You stated above that the city won't allow the sale of one without the other. The two sites are one economic unit.
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Thank you for your input.
Would I condition the report on the combination of the two parcels? )

No.

If your assignment is as-is.
You are not a lawyer.
Do not endeavor to encumber the property with legal issues to make your job easier. That's a recipe for disaster down the road.

If the zoning or infrastructure changes both lots might meet the minimum property requirements, you don't know yet, but by requiring assemblage, you remove the potential future value of being unassembled, and separately buildable.

With the UAD, you add both parcel numbers separated by a semi-colon. If the combined taxes of both parcels is detrimental to the value, when compared to lots that are larger, you will want to comment on that or wait for the stip.
 

glenn walker

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Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
FHA allows you to do this ** Post-#2 hit the nail on the head it's not excess or surplus land and it's highest and best use would be to combine the two --because one is a lonely number when you can't use it for anything but a bus bench.
 

Meandering

Elite Member
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Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
And you performed that H&B analysis based on???????????

pullyourheadoutofyourass.jpg
 

CJ1234

Junior Member
Joined
Jan 24, 2008
Professional Status
Certified Residential Appraiser
State
Minnesota
And you performed that H&B analysis based on???????????

I'm working through an assignment before I accept with a forum of appraisers who, over a decade of reading, I hoped would help me clear my head. Ever have one of those moments when something is as clear as mud? I had already realized that subject to combination of the parcels was poor judgment, but for whatever reason, this one is tripping me up.

NO. We don't have the power to force people to do things that are not necessary, we give opinions of value. You stated above that the city won't allow the sale of one without the other. The two sites are one economic unit.
Agreed. The agent said the city won't allow the sale without the other, I've left a message with the city to confirm.

I appreciate the feedback-- I've reached out to the city zoning and will tackle this tomorrow, hopefully with more sleep and clear mind.
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
QUOTE="CJ1234, post: 2768960, member: 112797"]I'm working through an assignment before I accept with a forum of appraisers who, over a decade of reading, I hoped would help me clear my head. Ever have one of those moments when something is as clear as mud? I had already realized that subject to combination of the parcels was poor judgment, but for whatever reason, this one is tripping me up. .[/QUOTE]

Sorry Cj,

That comment was meant for Glen's H&B statement.

So start at the beginning.

Can the parcels be sold separately?
Township says no, so effectively it is one parcel with two tax bills.

Combined acreage of the subject is X, combined tax bills of the subject is $X,

Comparable land of similar acreage has a tax bill of $Y

$X-$Y =$Z,

Now, what's the cost to assemble the parcels?
Lawyers and filing charges and tax assessor changes....$5k?

$5,000 divided by $z = years to recoup the costs of assemblage.

So if your X = $500
and your Y = $400 (because the tax on the undersized lot shouldn't be very much)
your $Z = $100.

$5,000 divided by $100 = 50 years to recoup the costs of assemblage in tax savings.

Now you've heard of something called urban sprawl? It's real, so within 50 years, can you imagine that your subject and it's surrounds get zoned commercial? Get improved with high tech water delivery and sewage removal infrastructure allowing for greater density of development? How about within 50 years or less cars disappear in favor of hover craft, could you see the roads changing and taller building being built on smaller parcels?

Doesn't matter.

Because to say it'll take 50 years to recoup the costs of assemblage, is asinine to say that assemblage is financially feasible for any purpose other than to make the appraiser's narrative explanation's shorter. The H&B is the interim use as two parcels which can not be separately sold from each other. With the interim use being expected to last until zoning and minimum lot size requirements are reduced so that both lots are conforming for development. There is no projected zoning changes proposed or planned in the near future. You verify everything with the zoning officer write it all up nicely and have a great holiday weekend.

.

.
 
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Dublin ohio

Senior Member
Joined
Mar 20, 2008
Professional Status
Licensed Appraiser
State
Ohio
but for whatever reason, this one is tripping me up.

Paralysis through over analysis. As far as what the city says about not being to sell separately. Really has little if anything to do with HBU. Would just support your conclusion about HBU. Like MCG said "Without the second parcel the land does not meet what is legally permissible".
 
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