How to include adjacent owned parcel

[Richard Carlsen]

Non-sewer area. Contiguous lots, one improved, the other not improved 'visually.' (My current assignment) Due to zoning, unimproved lot would normally be buildable.

Research showed both lots sold together, although have separate parcel #'s. Dwelling age is 45 years.

Well......further research showed that the septic drainfield is on the unimproved lot. Dwelling on the improved lot cannot be livable without the drainfield.

Happens all of the time up here. Septic or drain field is on next lot or there is a lift station with effluent crossing the road to a site where the septic system can properly function. The extra land must be included with the subject.

One thing that everybody seems to keep forgetting every time that a reference to H&BU comes up, is that we do not appraise to the H&BU of any property or properties. We appraise to the assignment and the assignment conditions. If the client wants the house and the contiguous vacant lot in the appraisal, regardless if the the vacant lot could bring $40,000 on the open market but will contribute only $20,000 to the value if combined with subject's lot, that's the way you do the assignment. Regardless of the H&BU or what will bring the most money (selling separately), you appraise the two lots together as one site if that is what the assignment calls for.

 

[CANative]

Happens all of the time up here. Septic or drain field is on next lot or there is a lift station with effluent crossing the road to a site where the septic system can properly function. The extra land must be included with the subject.

One thing that everybody seems to keep forgetting every time that a reference to H&BU comes up, is that we do not appraise to the H&BU of any property or properties. We appraise to the assignment and the assignment conditions. If the client wants the house and the contiguous vacant lot in the appraisal, regardless if the the vacant lot could bring $40,000 on the open market but will contribute only $20,000 to the value if combined with subject's lot, that's the way you do the assignment. Regardless of the H&BU or what will bring the most money (selling separately), you appraise the two lots together as one site if that is what the assignment calls for.

What if they wanted you to appraise the property as though it had a high producing oil well in one corner? That way the hypothetical value would allow for a real loan.

 

[The Warrior Monk]

We appraise to the assignment and the assignment conditions.

That is not true. Assignment conditions are only one element of the Scope of Work.

There are other elements in the SOW that must be considered, such as Intended User and Intended Use. The client is often not the Intended User in the case of lending, so what the client wants must be measured against the assignment conditions of the Intended User.

If the client wants the house and the contiguous vacant lot in the appraisal, regardless if the the vacant lot could bring $40,000 on the open market but will contribute only $20,000 to the value if combined with subject's lot, that's the way you do the assignment. Regardless of the H&BU or what will bring the most money (selling separately), you appraise the two lots together as one site if that is what the assignment calls for.

The parcels could be appraised as a portfolio for a lender, provided they are single and separate. I would definitely question the single-and-separate nature of the parcels, since in many jurisdictions they (obviously) would not be.

Also, assuming that the parcels are single-and-separate, appraising them as a portfolio does not ignore HBU. There are assignments that don't consider HBU, but they aren't determining market value and they aren't for lenders.

 

[The Warrior Monk]

Happens all of the time up here. Septic or drain field is on next lot or there is a lift station with effluent crossing the road to a site where the septic system can properly function. The extra land must be included with the subject.

BTW, this is an example of why the appraiser cannot ignore or assume away legal issues. Your earlier posts pushed aside legal issues, yet you're making a definitive statement regarding a legal issue here.

This may not be true of all areas, as my comments, which is why I said to check. Each appraiser has to know the factors that affect real property values in their area, which include legal issues.

 

[Richard Carlsen]

What if they wanted you to appraise the property as though it had a high producing oil well in one corner? That way the hypothetical value would allow for a real loan.

What HC? There is no HC made. The site appraised consists of two separate parcels that are considered the site for valuation. If the lending consideration requires them to be joined, then that is what the client can require. However, if the client wants a value whereby the site considered consists of two lots, it would take a HC on my part to give a separate value to the unimproved lot based on it being separated from the defined "site".

The parcels could be appraised as a portfolio for a lender, provided they are single and separate. I would definitely question the single-and-separate nature of the parcels, since in many jurisdictions they (obviously) would not be.

The appraiser does not determine the Intended Use or the Intended User of the report. The appraiser only names them based on what is contained in the assignment. Your statement above seems to assume that FNMA guidelines apply to all lending other than portfolio. However, it is not the appraisers responsibility to require any particular legal action to make the property to conform to those guidelines. That is the responsibility of the lender. The appraiser only has to state that the site consists of two separate contiguous parcels per the assignment requirements. Not being an attorney nor that familiar with the legal ramifications required to conform to the buying requirements of the secondary market, I for one am not going to commence practicing law in my appraisals. If the buying guidelines require the two parcels to be under one parcel ID, so be it but that requirement will come from the lender/client and not from me.

Nobody said that the appraiser should ignore any legal issues. By naming and stating the legal descriptions of both lots, the appraiser is simply defining the parcels that constitute the site. However, the appraiser is under no obligation to require any legal action to make the appraisal conform to any buying requirements unless the appraiser is specifically so instructed. The appraiser is an appraiser; the appraiser is not a trained legal authority on the buying requirements of the secondary market.

 

[Lee Lansford]

...One thing that everybody seems to keep forgetting every time that a reference to H&BU comes up, is that we do not appraise to the H&BU of any property or properties. We appraise to the assignment and the assignment conditions. If the client wants the house and the contiguous vacant lot in the appraisal, regardless if the the vacant lot could bring $40,000 on the open market but will contribute only $20,000 to the value if combined with subject's lot, that's the way you do the assignment. Regardless of the H&BU or what will bring the most money (selling separately), you appraise the two lots together as one site if that is what the assignment calls for. [/FONT][/COLOR][/SIZE]

Richard, a caveat:

Often this (referencing your words above) "assignment condition" constitutes putting a square peg in a round hole when in comes to appraising for residential lending. That is, the request does not correspond with the intended use (and, user) of the appraisal (loan headed to the secondary market). The result: an unacceptable assignment condition.

Frequently (not all of the time) such requests ("can't you just appraise the 2 parcels as though they are one?") come from a mortgage broker or other unknowing or devious type.

They will present the appraiser with a subject having improvements all on one parcel and a 2nd adjacent vacant parcel--with its own separate H&B Use. They want the appraiser to "combine" the two as though one: one opinion of MV. You know...it's just "too messy" to have to deal with 2 separate and distinct properties when the "borrower needs both" in one opinion of value to qualify for the loan.

"Conveniently", they don't want the appraiser to report and analyze matters of H&B Use (that is, the 2nd parcel is reported as "surplus"--NOT having its own separate H&B Use--land).

Under such a scenario, which box does the appraiser "X" when asked "Is the highest and best use of the subject property as improved?"

My conclusion: in many (not all!) assignments with this condition, the condition is in fact unacceptable and the appraiser fails to correctly report and analyze. The result: a misleading report of an appraisal.

 

[Richard Carlsen]

That is, the request does not correspond with the intended use (and, user) of the appraisal (loan headed to the secondary market). The result: an unacceptable assignment condition.

Frequently (not all of the time) such requests ("can't you just appraise the 2 parcels as though they are one?") come from a mortgage broker or other unknowing or devious type.

My answer to the request that I appraise the two parcels as though they are one is "Yes I can." If that is what the client wants, I can do it. If I know that the client might have trouble selling the loan, I would mention it to him but the decision as to what I am to consider as the site for the assignment lies with the client; it is not mine. The client is responsible for that determination. Since a lender is considered to be a sophisticated user of appraisals, it is safe to assume that they know what they want when requesting an assignment.

Under such a scenario, which box does the appraiser "X" when asked "Is the highest and best use of the subject property as improved?"

In the case where the client defines the site, I would check the YES box since the site is defined as the two lots. I will have noted within the text of the appraisal that the site is constitute by two separate contiguous parcels. The YES box check refers to the defined site. The site is defined in the legal description in the upper part of the page (ex: Lots 23 & 24, Plat of Holiday Hills, T24N, R8W). That legal description defines the subject parcel as improved. And that defined site is what I have to address in subsequent parts of the URAR.

 

[Webbed Feet]

You next engagement assignment.

I have a house in one town and a lot thirty miles away in another town. I am the client and I am telling you to "consider" the site thirty miles away as the site for the house. I'm responsible anyway so shut up and do what I am telling you to do. I'm sophisticated remember?

Yep! I defined it for you! Now check that dang box I TOLD you to check! And whatever you do, keep in mind your fired if you bring up a dang thing about intended use and SOW. I don't give a rip! None of that "hypothetical" crap either! If you won't do it, I can find an appraiser who will! ... By golly, I've got names right off some internet forum!


Now tomorrow we'll have one for you where the lots are ... what did you say? .. OH yeah.. contiguous, whatever that means.. Anyway, none of this horse pucky about one being zoned commercial and the other residential, ok? And don't you DARE do something like get copies of the deeds! ... Ownership is not the appraiser's place to get into! ... That's under "sophisticated" again... And that cliff, we already KNOW one lot is 300 feet below the other one! .. Look, dimwit, you wanted that contiguous thing.. you got it!

No, you can't adjust your fee either, and remember, you've got 24 hours after inspection to get this done... we set your inspection for this afternoon for you... Now get to work!

:new_all_coholic:

P.S. I think I need to cut back on coffee ......

 

[Richard Carlsen]

I have a house in one town and a lot thirty miles away in another town. I am the client and I am telling you to "consider" the site thirty miles away as the site for the house. I'm responsible anyway so shut up and do what I am telling you to do. I'm sophisticated remember?

Yep! I defined it for you! Now check that dang box I TOLD you to check! And whatever you do, keep in mind your fired if you bring up a dang thing about intended use and SOW. I don't give a rip! None of that "hypothetical" crap either! If you won't do it, I can find an appraiser who will! ... By golly, I've got names right off some internet forum!


Now tomorrow we'll have one for you where the lots are ... what did you say? .. OH yeah.. contiguous, whatever that means.. Anyway, none of this horse pucky about one being zoned commercial and the other residential, ok? And don't you DARE do something like get copies of the deeds! ... Ownership is not the appraiser's place to get into! ... That's under "sophisticated" again... And that cliff, we already KNOW one lot is 300 feet below the other one! .. Look, dimwit, you wanted that contiguous thing.. you got it!

No, you can't adjust your fee either, and remember, you've got 24 hours after inspection to get this done... we set your inspection for this afternoon for you... Now get to work!

OK. I can appraise that.

As a friend of mine once said while teaching a class; "I can appraise anything" (referring to real estate of course). There is nothing in the appraisal rules that I know about that says that an appraiser cannot form an opinion of value on 2 or more dissimilar parcels combined if that is what the client needs and has so specified in the assignment.

Just because I can appraise it does not mean that you, the Intended User can in fact use it for the Intended Use but since you are a big boy so I'm going to assume you know what the heck you are doing. The fact that the lots have different zoning and utility and market appeal is just another facet of the assignment. There value will be as you directed: the Market Value of the residential lot and the commercial lot sold as one. Doesn't make sense to me and there is most likely a very limited market but if you what you want to know what I think the value of the two lots together is, I'll certainly try to provide a logical, justifiable opinion of value.

BTW, I will do the inspection just as soon as your check for my fee clears.

 

[The Warrior Monk]

The appraiser does not determine the Intended Use or the Intended User of the report. The appraiser only names them based on what is contained in the assignment.

However, it is not the appraisers responsibility to require any particular legal action to make the property to conform to those guidelines.

The appraiser names them for a specific reason. One of those reasons just so happens to be that certain assignment conditions are associated with intended users. If the appraiser knows that certain assignments conditions are associated with certain Intended Users, then the appraiser can't simply ignore them because the client wants something else.

Some appraisers, in fact, do what the client says and ignore the assignment conditions of the intended user. How do I know? These reports ended up in my lap when when I was reviewing. And one of the most egregrious was one that is applicable to what we are talking about. The appraiser treated a parcel, with a separate ID number, as a single-and-separate parcel. It was, in fact, not single and separate.

However, it is not the appraisers responsibility to require any particular legal action to make the property to conform to those guidelines. That is the responsibility of the lender.

The appraiser only has to state that the site consists of two separate contiguous parcels per the assignment requirements.

I have never stated, nor implied, that the appraiser has to require anything. I have, repeatedly over a number of years, stated that the appraiser has to properly identify the real property being appraised. The property is what it is. However, the appraiser must properly identify the property being appraised. Stating that the subject property consists of two contiguous parcels is not enough. The utility of those parcels must be identified. In the case at hand, that would mean if they are single-and-separate or not.

I'll give an example of what I am talking about. The attachment below show three separate parcels, outlined in red and divided by pink. Each parcel has its own ID. However, for the purposes of building it is one lot. The divisions on this site are due to division by taxing jurisdiction. The property is divided by a school district line and a village line. The lots cannot be sold separately.

However, the appraiser is under no obligation to require any legal action to make the appraisal conform to any buying requirements unless the appraiser is specifically so instructed.

I have never implied nor discussed the above; this is a new issue that you are bringing up. I am talking specifically about legal matters pertaining to the utility, and hence value, of a particular parcel.