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highest & best use issue

Renee Healion

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Feb 21, 2004
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Certified Residential Appraiser
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Connecticut
Fannie won't "buy" a mortgage on a property where the HBU is not as-improved. The 1004 format assumes market value. Check no and carry on with teardown comps and you are addressing something other than MV. If you report on that form with teardown comps, say, then what do you do about the preprinted definition, which is MV?.
 

George Hatch

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California
We agree tear down is HBU and typically motivated buyer for the subject. Which still doesn't mean it must be put on a land appraisal form. The borrower did not apply for a land mortgage loan and the client did not order a land appraisal. Chances are they cant' use it on that form and will ask for a do over on a 1004 ( if they need it on a 1004 ). Maybe the client needs to reject the loan, based on the HBU or C 5 or C6 poor condition of house and needs it on the 1004 form to do so. Or they could come back to borrower and say your loan was rejected for conventional financing but I can put you into a 203k loan program if you want to expand/remodel the house. We don't know what the client will do with the appraisal, but if client wants to go forward and needs the 1004 form, you can still value subject for the $ amount of lot without putting it on a land form.
How a particular property owner is using the property or the type of loan a particular lender is trying to put on a property are not part of the "HBU as improved" analysis.

And your right insofar as an SFR lender generally not having any use for a land appraisal; where you're incorrect is in thinking that putting the land appraisal on a 1004 changes anything for the lender or makes your value conclusion as land anything other than a land appraisal. So tell the lender what their situation is and let them decide whether they want you to proceed with the land appraisal or to terminate the assignment.

After that, if they want to go find some appraiser who's more cooperative and will help them cheat the secondary market investor they intend to sell that mortgage to then that more cooperative appraiser won't be you.
 

J Grant

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Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Fannie won't "buy" a mortgage on a property where the HBU is not as-improved. The 1004 format assumes market value. Check no and carry on with teardown comps and you are addressing something other than MV. If you report on that form with teardown comps, say, then what do you do about the preprinted definition, which is MV?.
What something appraises for and what fannie buys are two different issues. We have no control over what fannie buys or rejects in their mortgage problem .

Check no, HBU is not as improved and continue on to appraise it at the HBU ( a tear down ) And in the appraisal develop the market value opinion.
 

J Grant

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Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
How a particular property owner is using the property or the type of loan a particular lender is trying to put on a property are not part of the "HBU as improved" analysis.

And your right insofar as an SFR lender generally not having any use for a land appraisal; where you're incorrect is in thinking that putting the land appraisal on a 1004 changes anything for the lender or makes your value conclusion as land anything other than a land appraisal. So tell the lender what their situation is and let them decide whether they want you to proceed with the land appraisal or to terminate the assignment.

After that, if they want to go find some appraiser who's more cooperative and will help them cheat the secondary market investor they intend to sell that mortgage to then that more cooperative appraiser won't be you.
We can agree to disagree...I see no conflict with fannie or "cheating" by filling out the HBU on a 1004 as "not existing HBU and then other/ HBU is as a tear down for present or future site to build on " If the HBU instantly triggered a land appraisal, the 1004 form would say "do not complete if HBU is other than existing" But it does not say that. If HBU was commercial, that would be out of the residential realm and not appropriate for a 1004 form. But despite appraiser saying HBU is not as exists, the existing property is a residential property consisting of a depreciated house on a lot.

I agree consult with client, imo after that there are 3 options, cancel assignment, with client agreement CHANGE THE ASSIGNMENT to a land appraisal, or continue assignment as a 1004 and mark the correct tear down HBU and use appropriate comps of tear downs.sold for site value etc on the grid.

I am with you on the appraiser should not try to cheat the secondary market investor by ignoring or doing a misleading appraisal around the HBU issue.
 

George Hatch

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Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
Appraise as a tear down with an REL of zero?

So the property is worth $500k as a house but $600k as land and you'd appraise it as a tear down even though that value has no relation to how that property would be bought and sold in the hypothetical sale upon which the definition of MV is based?

I don't think you would actually do that.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Appraise as a tear down with an REL of zero?

So the property is worth $500k as a house but $600k as land and you'd appraise it as a tear down even though that value has no relation to how that property would be bought and sold in the hypothetical sale upon which the definition of MV is based?

I don't think you would actually do that.
If appraising as a tear down I'd appraise for what it is worth as a tear down, regardless of the form used .Why would I appraise for something that is no relation to how it would perform in the market ? I never suggested anyone do that.

I personally have not seen your above example but if for some reason that is what the market returned, 600k vacant vs 500k with the house then that is what I would appraise it for and explain.

In my market area the reverse is true, even when it is a tear down, a lot with a house on it sells for a higher price and has shorter DOM than similar sites vacant. I am not sure how you got from my posts that just because it is on a 1004 form we are appraising other than what the market returns.

The form does not make the value, MV is MV, but the form should be appropriate for the assignment and in this case the assignment was a 1004 form...which lender might use to reject the property due to HB issues or poor condition. But what the lender decides or whether the loan is rejected or accepted for funding is out of our control or interest.

If client agrees to a NEW ASSIGNMENT and use is now a land loan evaluation, then switch to a land form. The MV for the property should be the same whether on a land form or a 1004 form, agree?,
 
Last edited:

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
What does a form have to do with market value?

MV is MV, some forms are more appropriate for certain assignments than others ( or no form )

Whether done on a narrative ( no form) , a land form, or a 1004 form the MV would be the same value opinion for the subject as tear down.
 

ramrcdk

Senior Member
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Jan 15, 2008
Professional Status
Certified Residential Appraiser
State
North Carolina
Surely Sdn525, the Poster of the Thread: will allow us to know the outcome. Do Tell??!!
 

George Hatch

Elite Member
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Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
California
What does a form have to do with market value?

MV is MV, some forms are more appropriate for certain assignments than others ( or no form )

Whether done on a narrative ( no form) , a land form, or a 1004 form the MV would be the same value opinion for the subject as tear down.
As has repeatedly been mentioned in this thread, "meaningful to the user" is part of the consideration.

And stop referring to "value as a tear down". If it's worth more as land value then it's generally not even economically feasible to rehab the structure.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
As has repeatedly been mentioned in this thread, "meaningful to the user" is part of the consideration.

And stop referring to "value as a tear down". If it's worth more as land value then it's generally not even economically feasible to rehab the structure.
Indeed. And meaningful to the user can be doing the appraisal on a 1004 form if the assignment is a 1004 . Check with client...

Tear down is a common term used in the market for these types of properties and often shows up on the MLS listings. Use a different word if you prefer.
 
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