HUD Section 184 loan appraisers - HELP!

[VolcanoLvr]

Note.........this is directed specifically to those appraisers who are experienced in doing Native Indian loan appraisal assignments on Reservation Trust Land. If you don't have experience, or don't know what this is, DO NOT REPLY and DO NOT OFFER SUGGESTIONS.....because you don't know anything about this topic.

Problem #1....assignment is a 'subject to completion' brand new, yet to be built and installed MFH on trust land, on undeveloped site. Home cost is about $86,000.

Problem #2....site prep cost + extra amenity being purchased is raising the total cost of the home and site development to about $115,000. (+$29K)

Problem #3....appraisal is done using only the CA on the 1004C form, with NO SITE VALUE. (I might add the M&S 1007 form if it will do MFH.)

For OMV purposes, do you just add #1 & #2 together?

On the open market, for similar fee simple properties, this property would sell for more than the $115K.

This is the first one like this for me. I have done other Sec. 184 assignments. None NC MFH on trust land!

 

[VolcanoLvr]

Follow - up............the site is actually 'allotted' land. Tribal member does not own the site, but has a 50 year lease.

 

[VolcanoLvr]

Well, a whopping 11 reads, but no replies.

Tells me that all the Section 184 experienced appraisers are busy so far today, and have not seen this ........ or that there are many of you with Indian Reservations nearby, but have never decided to broaden your experience level to do these kinds of reports.

Granted, I have somewhat of an advantage: there are 6 IR's in my area, so there is activity from tribal members buying homes.

Note: these Sec. 184 loans apply to property purchases off-reservation also. Those are done as standard 1004 type reports, but to FHA inspection requirements. (So, yes, you also need to be FHA approved.)

This kind of biz represents about 10-20% of my workflow at present. So it's a decent 'book of business.'

 

[Mr Rex]

http://www.HUD.gov/offices/adm/hudclips/handbooks/hsgh/4150.2/41502appcHSGH.pdf

 

[VolcanoLvr]

I have that document in my 'kit bag of tricks' already....but thanks for posting it. Others may want to read it.

Normally, these allotted land assignments use the CA on the dwelling only.

In this case, the appraisal is for a brand new MFH, on currently undeveloped land. My concern is do I add the development cost to the building CA and report the total as the OMV?

If I don't do it that way, and only report the dwelling CA, the borrower may not qualify for the intended loan, or else will have to self-fund the development costs.

I may have to call the HUD Hoc later today to ask an appraiser there about this.

 

[CANative]

Use the cost approach, there is no land value. The cost of the MH + site development is the cost approach.

You can augment your finding by using sales of very similar MHs and extracting the site value from those sales.

Also, the opinion of value is not strictly market value. The client has to waive the traditional definition of MV - and they know that.

 

[VolcanoLvr]

OK.....I have taken time to read Appendix C again.

Development costs are allowed to be included in the CA.

So that answers the question!

I have too many irons in the fire at the moment on other assignments, so had not had time to dive into this until now.

 

[Terrel L. Shields]

... the cost approach, there is no land value.

A 50 year lease has a leasehold value

 

[CANative]

A 50 year lease has a leasehold value

What if there is no money involved. And the leaseholder can't reassign the lease (it takes tribal permission from the elders to decide who can use that land next)? In other words, there is no market.

 

[VolcanoLvr]

CAN....do you do HUD Section 184 assignments? If not, you're not helping the situation. Please re-read post #1.

But so that I can get back to this report, for allotted land, 'value to land' can be inserted on the form. This is per Appendix C .... although much of what HUD writes can be hard to figure out, and sometimes appears contradictory the more one part is compared to another part (the writing).

So, Terrel is 'almost' correct, and I have just finished doing vacant land sale research in the market area. (Vacant land still transfers up here, fortunately.) I will put a calculated land value for the subject site into the CA....and then describe the situation further in the report.

These Section 184 reports can be tricky, which is why most appraisers don't want to fool with them.