HBU/excess land

[ClemsonCatfish]

I have a current assignment that I'm hoping to get some advice on. The subject improvement is on a typical sized lot in a neighborhood. There is an additional lot next door that is a viable building lot that has a separate deed and Tax ID#, and could be sold separately. The agent said they were initially going to sell the lot separately, but the sellers decided to include it with the sale of the lot with the improvement on it, and they priced it accordingly (basically what they thought the site with improvement plus the vacant lot are worth). Clearly the additional lot is excess land. I confirmed with the town that the lot could be sold and built on. I explained to the AMC that this assignment will need to be two separate appraisals, one for the lot with the improvement and one for the vacant lot. The lender plans on putting both parcels on one deed if and when the sale goes through. The lender is insisting that both the lot with the improvement and the vacant lot be included on one appraisal. If you were in my shoes, what would you tell them at this point? Can this be done as a hypothetical (in which case the OOV may come back well below the contract price)? Appreciate any feedback, thank you.

 

[J Grant]

I have a current assignment that I'm hoping to get some advice on. The subject improvement is on a typical sized lot in a neighborhood. There is an additional lot next door that is a viable building lot that has a separate deed and Tax ID#, and could be sold separately. The agent said they were initially going to sell the lot separately, but the sellers decided to include it with the sale of the lot with the improvement on it, and they priced it accordingly (basically what they thought the site with improvement plus the vacant lot are worth). Clearly the additional lot is excess land. I confirmed with the town that the lot could be sold and built on. I explained to the AMC that this assignment will need to be two separate appraisals, one for the lot with the improvement and one for the vacant lot. The lender plans on putting both parcels on one deed if and when the sale goes through. The lender is insisting that both the lot with the improvement and the vacant lot be included on one appraisal. If you were in my shoes, what would you tell them at this point? Can this be done as a hypothetical (in which case the OOV may come back well below the contract price)? Appreciate any feedback, thank you.

It can be done as one appraial and one value - the value is for the house on its lot and the adjacent vacant lot sold together as a package/bulk sale. The price is the price, your value may or may not match that price.

The HBU for the vacant lot as a stand-alone may be to sell the lot at some point, but the HBU as asked in the appraisal, is a total HBU - if the house ( mprovmetnet ) contributes more than tearing it down, then the HBU is existing.

This scenario has been covered many times on the board - you might want to search old posts

 

[ClemsonCatfish]

It can be done as one appraial and one value - the value is for the house on its lot and the adjacent vacant lot sold together as a package/bulk sale. The price is the price, your value may or may not match that price.

The HBU for teh vacant lot as a stand-alone may be to sell the lot at some point, but the HBU as asked in the appraisal, is a total HBU - if the house ( mprovmetnet ) contributes more than tearing it down, then the HBU is existing.

This scenario has been covered many times on the board - you might want to search

Thank you J Grant. When combining two parcels in a situation such as this, are you valuing the "whole" as a hypothetical condition?

 

[alebrewer]

The 2nd lot value cannot be included IF: the loan is for FHA AND you determine that the 2nd lot has a separate highest and best use (which appears to be the case). The 2nd lot CAN be included if the loan is for GSE use. Per the Fannie guidance in the hyperlinked appraiser update:

https://singlefamily.fanniemae.com/media/22301/display

 

[Tom D]

Just cause you can build a house on the lot means what.
Is it ecnomically profitable to do that. We got 40,000 lots here all buildable, but they aint building on them. Your question is very vague on facts. What is the subject value and lot size. Can you build a new house and make a profit. Why hasn't that been done already when rates were 3%.

Maybe the lot has more value to the current owner as a vacant lot next door. What are the lot sizes. Am i looking in my new neighbors windows.

I don't disagree with anyone here. But what are the variables. Just some guessing here on answers, including mine.

 

[Terrel L. Shields]

I explained to the AMC that this assignment will need to be two separate appraisals,

Why? USPAP reference please

 

[J Grant]

Thank you J Grant. When combining two parcels in a situation such as this, are you valuing the "whole" as a hypothetical condition?

There is no HC, you are simply appraising it as one package deal, a house sold with the adjacent lot for a combined value.

 

[Carnivore]

Thank you J Grant. When combining two parcels in a situation such as this, are you valuing the "whole" as a hypothetical condition?

Jgrant is right, No , it's not a Hypothetical. in your report your legal description is what your appraising. i.e. -- Lot #1 & Lot #2, Plat Book 10 Sleepy Hollow S/D

 

[Terrel L. Shields]

Just add the one-page land appraisal form and then explain in the reconciliation

http://formsinword.com/pdf_files/FNMA-land-appraisal-report-legal.pdf

 

[Mark K]

Clearly the additional lot is excess land.

No, not excess land. As others have said, it is a separate parcel that needs a separate appraisal. Nothing to stop you from including both in one report with the value of the additional parcel as a site adjustment or a separate line item in the grid, but you need to appraise it to support your adjustment. Whether you include the lot appraisal in your report is your call but you might as well include it in the addenda since they are probably going to ask about it.