House on 40 acres Residential or commercial

[David Beavan]

The lender ordered a 1004 appraisal for a rural home on 40 acres with no outbuildings. 20 acres is tillable and is currently rented to a neighboring farmer. The income produced is minimal and helps pay the tax man. The property is zoned Ag and a SFR is permitted. Zoning in the area requires a 35 acre parcel for construction of a new SFR. The site as improved is at its HBU. I noted the above in the report.

Now the underwriter comes along and says that this is a mixed use and to use the 1004 residential form is a violation of USPAP and the appraisal must be done as commercial.

I see nothing in USPAP that addresses this issue. I don't see this as a USPAP issue. Any thoughts are appreciated.

 

[Jerry Bone Jr]

Now the underwriter comes along and says that this is a mixed use and to use the 1004 residential form is a violation of USPAP and the appraisal must be done as commercial. I see nothing in USPAP that addresses this issue. I don't see this as a USPAP issue. Any thoughts are appreciated.

Don't worry about what an underwriter says about USPAP. What the UW is trying to say is: don't put that report on a 1004; do put it on a commercial form or narrative.

 

[Michigan CG]

Underwriter is an idiot.

I don't know anything about WI farm land although I do know about MI, IA and IL farm land and I would guess that the tillable acres are worth between $2,500 and $5,000 where you are.

I would also GUESS that land rent is between $100 and $200/acre.

If zoning requires 35 acres then other single-family homes also have surplus (not excess) land and that land is either tillable or non tillable. Non tillable land would most likely be "recreation" land and tillable land would be, well tillable.

Just because the land is tillable does not make the property mixed use. To make your report clear you should describe the home site area, the tillable land area and its rent and productivity and the other 20 acres and what is there.

You need to explain what the land value is which would include the building site area, the tillable land area and the remaining land area.

 

[Terrel L. Shields]

Underwriter is an idiot

beat me to it. A house on 1 acre is a SINGLE FAMILY RESIDENCE. A house on 40 acres is a SINGLE FAMILY RESIDENCE. The fact the land surplus to the property could be put to another use does not change that fact. Since 35 ac. is required as a minimum, 40 hardly is excess to the subject nor does it have a different HBU. If I understand your post then the property cannot be divided without a zoning change. So the UW is incompetent.

The URAR is never my choice for large land parcels but there certainly isn't any real USPAP issue for using it.

 

[zdfenton]

I've completed plenty of 40 acre appraisals in WI where there was some tillable acreage but HBU was still residential. In a strict sense are they mixed use? Sure, because you have res use mixed with agricultural use.

Does that mean they can't be done on a 1004? Absolutely not. Form choice has little to do with USPAP, as long as your form choice is not misleading and allows you to credibly perform your scope of work, which it certainly does in this case

The Fannie Sellers guide doesn't allow agricultural-type properties such as farms (Section B4-1.4-03), but from the way you described it this doesn't sound like a farm to me. Of course their investor's guidelines could be more restrictive, and is why their sphincter is tightening

 

[CANative]

Of course their investor's guidelines could be more restrictive, and is why their sphincter is tightening

Apparently this has caused a loss of blood flow and oxygen to their head.

 

[David Beavan]

Thanks for your responses!

I don't know anything about WI farm land although I do know about MI, IA and IL farm land and I would guess that the tillable acres are worth between $2,500 and $5,000 where you are.

I would also GUESS that land rent is between $100 and $200/acre.

Michigan CG - Pretty much spot on.

 

[Dave Smith]

USPAP does not address which forms to use.

Besides, the land is not zoned commerical!

The "commerical" element of the land rent is insignificant in the big picture.

During my 30+ years as an appraiser I have completed many 1004s involving acreage parcels for banks throughout Wisconsin. Never had one come back due to using the 1004 form.

Maybe not an idiot underwriter - but definitely mis-informed.

Stick to your guns.:new_2gunsfiring_v1:

 

[Terrel L. Shields]

Apparently this has caused a loss of blood flow and oxygen to their head.

which could be because their

sphincter is tightening

around their throat.

 

[The Warrior Monk]

I'd be careful with this one. I don't know the specifics of your state license law, nor your market area, so I can't answer decisively. I can tell you that in NY there is a category for experience that counts for commercial experience called "farms under 100 acres."

Someone mentioned that the property is zoned residential. That's actually not relevant. Residential subdivisions fall under the CG license. And in a great many zone codes, residential zoning allows for certain general community facilites, such as firehouses, schools, hospitals, etc., all of which clearly fall under CG practice.