Highest & Best Use

[PrincessLeia]

Just got an order from a client.

Basically a woman who owns 3000+ acres is breaking off 20+ and selling it in a private sale. The 20+ acres also has a manufactured home on it in a rural area with no zoning, so any and all uses are permitted.

Was it appropriate for me to decline the order on the basis that it needs to be completed by a Certified General Appraiser?

In my mind, those 20+ acres could be used for a small farm (agricultural), industrial or commercial uses such as a new subdivision.

Either way, my little residential license allows me to evaluate residential but not the above uses. How can I evaluate what the highest and best use of this property would be if I am unqualified to evaluate commercial, industrial, agricultural, etc uses?

So I declined it. But uncertain if that was correct. And feeling a little funny about HBU analysis... How can Certified Residential Appraisers properly evaluate HBU in areas where there is no zoning and all uses are permitted? This is the second one I've declined in the last month due to HBU and large acreage with no zoning and many potential uses....

Any beneficial or helpful comments would be appreciated.

 

[Mark K]

If you don't feel competent to complete the assignment you are correct in turning it down.

As far as a CR doing a HBU analysis with a "little residential license" you should learn how to properly analyze a HBU.

If, after analysis, you determine that the HBU is outside of you license scope, your would be right to turn it down, but you need to do the analysis first. If its 20 or 50 acres in the middle of nowhere, the odds of it becoming industrial or a new WalMart are probably pretty slim.

I've been thru Wyoming a few times and very little of that land screamed out anything other than ranch or some type of ag land.

Again, it depends on your competence and comfort level. If you don't feel qualified, pass on the assignment.

 

[PrincessLeia]

Dear Mark,

Thanks for that. I just called another Certified Residential appraiser who is in the next town over. The property is a 30 min drive from the center of town. So, not too far out. Certainly the property wouldn't be used as a Walmart, but it could be used for a company that supports the coal industry. There are a lot of surface coal mines here (many south of town just like the subject) and there are quite a few businesses that service the mines. This includes the storage of massive heavy equipment (trucks and equipment the size of houses) that need a lot of land for parking, storage, etc.

She said that in the past she has investigated to find out if the property produces hay or if they have cows on it and use it for grazing land. 20 acres is pretty small for grazing land. But 20 acres would be good for hay as you could produce quite a few tons of hay for sale. She said in this case one could consider it income producing but wouldn't necessarily classify it as commercial.

She said If it doesn't already have hay on it then HBU would most likely be "as is" with the manufactured home on it. But if it produces hay- it's income producing and could be considered agricultural. So, it could be rejected at that point (with an inspection fee) or she said I could investigate the sales of vacant lots with hay and communicate with a local General appraiser for the hay tonnage, to calculate the income potential or addition of such a feature. To be honest, I feel like that would be appraising something residential appraisers aren't qualified to appraise. But she said she would have first called the current owner and found out if it has hay on it or cattle/horses and if its used as grazing land before rejecting it.

Anyway, I feel safer rejecting it. Wishing I understood commercial more so I could work on puzzles like this. But I really dont want to have to go through the trainee phase again to get my commercial license... :-/

Thanks again Mark. I appreciate it.

 

[George Hatch]

In general.....

Assignments where you are dealing with new and unfamiliar property types will always be losers in terms of fees. You might choose to stretch your wings on one because you're either doing a client a favor or you're trying to learn new stuff. It's pretty common for the axiom to apply "no good deed goes unpunished".