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HC or EA or Neither ?

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Ray Miller

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Elite Member
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Feb 20, 2002
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Licensed Appraiser
State
Wisconsin



HC or EA????

Last appraisal review of the year!

Subject property is 240 acres divided into 10 parcels. The bank wanted an appraisal done on one of the parcels which is 29.9 acres. The appraiser did it on the entire 240 acres. So the bank orders a review with new value (yes they are paying for the review of the first appraisal and for the second appraisal. No slack cutting to speak of review is 450 beaver pelts and the new appraisal is 450 beaver pelts.) The 29.9 acres has a four year old home it and a few outbuildings.

In the original appraisal on the 240 acres, it made no difference as to access to the home from the state hiway. But now doing just the parcel with 29.9 acres, if the bank were too foreclosed on the property there would be no access to the home and buildings with out an easement. There is no easement showing on any of the deeds that you would need to cross to get to the subject property. The property can be access from the Lower Wisconsin River Waterway by boat as the subject is contiguous to the Waterway and public usage. But that would not be a good year round access.

The Reg. of Deeds at the court house said many times there is an easement but they are not recorded. I call the owner and he said he would not have a problem granting an easement to the property if he were to sell it or one of the other parcels that you must cross getting to it. But this is a what if; What if he gets mad next year when they foreclose and does not want to grant an easement. What if he sells one of the other parcels and the new owners don't want to grant and easement?

So would I be safe in doing the review and the new appraisal as an HC that there is an easement or an EA?

I have already gave the Bank a heads up this morning. They said do it the best way so they can sell the loan in a portfolio to an investor.

How would you approach this problem???????
 

Don Clark

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Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
Ray,

If it is not recorded, it fails to give constructive notice. It would be the same as an unrecorded deed. I would, for appraisal purposes treat it as a hypothetical condition. Hypothetical---contrary to what actually exist. You have no viable proof that an easement exist.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
I don't know WI and easement laws. Some states require a trapped property to have access, whether the easement/access is recorded or not, which might be what the Reg of Deeds means...there are easements but they are not recorded.

Some states recognize these unrecorded easements as "Implied Easements" or "Easement By Necessity". Talk to the town about those and see if they are applicable to your local municipality. If so, you are covered.

If they are not applicable, but the Reg. of Deeds says there are easements but they aren't recorded, get the name of the person telling you that and their phone number. Ask for a reference in the code that implies those easements, or ask for in writing what they are telling you verbally. In those cases you are covered.

If you cannot get it in writing, you have the name and number of the official. Put in the report what they told you, quote them, provide the phone number, and state the report is based on the extraordinary assumption that the information is correct. Recommend in the report that the lender obtain verification in writing and make the report subject to that verification...if using the 1004 form, check "subject to inspection" and clearly state what is necessary for the value to be correct and that you do not have to see the statement from the town, but it is left to the underwriter, etc.

At least, that is how I would handle it.
 

George Hatch

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Jan 15, 2002
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Certified General Appraiser
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California
Whether you can do it at all kinda depends on whether the borrower has the ability to provide the access easement.

If so and assuming the lender hasn't yet made the loan they can condition it upon getting the easement access resolved. You can appraise it "subject to" the borrower providing the easement access from the 240 to the 29.

If you can't conclude that it is reasonably probable then I'd say you're looking at an "As Is" only situation at this point.
 

Couch Potato

Elite Member
Joined
Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
I would use the Hypothetical Condition an easement exists. It would not make sense to have it subject to the creation of an easement because the common ownership of the parcels generally extinguishes such an easement. An easement is only needed in the event some portion of the 240 acres is sold in a separate transaction.

It is a situation that certainly fits the qualifications for using a hypothetical condition. ( BTW, the explanations on pages F-62 through F-66 in tomorrow's USPAP do a very good job of covering the subject of hypothetical conditions.)
 

Mike Boyd

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Jan 18, 2002
Professional Status
Retired Appraiser
State
California
Whether you can do it at all kinda depends on whether the borrower has the ability to provide the access easement.

If so and assuming the lender hasn't yet made the loan they can condition it upon getting the easement access resolved. You can appraise it "subject to" the borrower providing the easement access from the 240 to the 29.

If you can't conclude that it is reasonably probable then I'd say you're looking at an "As Is" only situation at this point.

I agree with George. If there is no access the property suffers from functional obsolescence with value only to the adjacent property owners (assuming THEY have access.)

I would make the report subject to evidence of an adequate recorded easement.
 

Couch Potato

Elite Member
Joined
Mar 15, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
I agree with George. If there is no access the property suffers from functional obsolescence with value only to the adjacent property owners (assuming THEY have access.)

I would make the report subject to evidence of an adequate recorded easement.
But the guy owns all the land. One can't grant an easement to oneself.
 

Ultraviolet

Senior Member
Joined
Dec 31, 2002
Professional Status
Retired Appraiser
State
Arizona
I'd say a lot depends on how the surrounding 200+ acres are being used, and how an easement would affect the other parcels. Would it run through the middle of any, diminishing their value? Is it really feasible to run an easement across multiple parcels to get to the house? How would the marketability of the subject be affected?

I ran into this on a property in Sonoita a few years ago. The lender didn't want to lend on the whole 200+ acres so he had the borrower carve out an 11 acre parcel with an easement from the highway. The reality was that the entire 200 acres was being used to run cattle and it was really a small working ranch. What is the actual marketability of the house, 11 acres and easement from the highway (post foreclosure) when the borrower still owns the surrounding acreage and runs cattle on it? I turned down the assignment because my license didn't cover the complexity.

I would tread lightly trying to fit a square peg into a round hole to make a property saleable to an investor.

Of course, I don't know the specifics of your assignment and it may be something entirely different.
 
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Jo Ann Meyer Stratton

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Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
A property owner could grant an easement across land they own in certain circumstances. This would have to be determined by a title company or an attorney familiar with the laws of that specific state. I would do the appraisal subject to a hypothetical condition that an easement would be established prior to close of escrow. Then it becomes the client's responsibility to have their title company or attorney do something. But this is the client's problem--not the appraiser's.

And there is a possibility that the ownership after the split could be different. For example the small parcel will be in the name of Bill and Betty Smith as Joint Tenants. The remainder of the acreage could be in the name of Bill and Betty Smith under a Warranty Deed. In Arizona the Joint Tenancy deed would mean if one of them dies, the survivor has to record a Death Certificate and they have 100% ownership. The Warranty Deed would require a will to be probated and the survivor would have only a half interest until the court settles the estate. Or one of the parcels would be in a life estate or revocable trust and the other different ownership rights. All the client's problem--not the appraiser's.
 

Wayne Tomlinson

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Joined
Jan 25, 2005
Professional Status
Certified General Appraiser
State
Illinois
Easement

If you have the same owner on all the parcels, it will not be possible to have an easement, because you cannot grant an easement to yourself. It would be meaningless.

On the other hand, the owner could grant an easement to the bank as a part of their security interest. That would cure the problem of the bank foreclosing and not having an easement to that parcel.

Check with an attorney or let the client satisfy themselves.

Wayne Tomlinson
 
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