Land appraisal revision

[OSU Beavers]

AMC: Per underwriting, the adjustment for well improvement needs to be removed. Please provide a revised appraisal as soon as possible.

I called my E&O and they said Don't do it.

 

[OSU Beavers]

Actually my E&O said it was a business decision.

The lender responded through the AMC:

“For all our land appraisal orders the appraisal must support land value only. No value should be given to any structure or improvements. Per the assignment conditions: If the subject has any improvements, appraiser to use a hypothetical condition that those improvements do not exist on the property (report would be completed “subject to” that hypothetical condition). Can we please get the revised report back today”

So apparently I need to revise the as is appraisal to a report with a hypothetical condition that the well does not exist. I am not sure what to make the report “subject to” to.

Any guidance?

 

[Mike Ault]

Actually my E&O said it was a business decision.

The lender responded through the AMC:

“For all our land appraisal orders the appraisal must support land value only. No value should be given to any structure or improvements. Per the assignment conditions: If the subject has any improvements, appraiser to use a hypothetical condition that those improvements do not exist on the property (report would be completed “subject to” that hypothetical condition). Can we please get the revised report back today”

So apparently I need to revise the as is appraisal to a report with a hypothetical condition that the well does not exist. I am not sure what to make the report “subject to” to.

Any guidance?

That, you can do. You don't make it subject to anything but the hypothetical condition that the well you know is there isn't valued in your appraisal.

 

[Tom D]

The value is based on the pretense that the new $30,000 well does not exist, as per the lenders scope of work reguest.

 

[Webbed Feet]

Just give them anything they want, it's a long standing tradition of 80% plus of most real estate appraisers anyway. Plus, in a couple of years that is what all the AI driven appraisal reports will be doing. It's great for America!

 

[Tom4value]

Actually my E&O said it was a business decision.

The lender responded through the AMC:

“For all our land appraisal orders the appraisal must support land value only. No value should be given to any structure or improvements. Per the assignment conditions: If the subject has any improvements, appraiser to use a hypothetical condition that those improvements do not exist on the property (report would be completed “subject to” that hypothetical condition). Can we please get the revised report back today”

So apparently I need to revise the as is appraisal to a report with a hypothetical condition that the well does not exist. I am not sure what to make the report “subject to” to.

Any guidance?

A hypothetical condition can be applied to a situation that does not currently exist. Most commonly it is used for pre construction. This is the opposite. They want the value as if it was raw land ready to be improved.


Sounds weird but if you think about it, it isn’t. Treat it like if they wanted the value of the raw land that is currently improved with a burnout, obsolete structure or any improvement that is obsolete. In that case, you would determine the value of the raw land as if vacant and subtract the cost of razing the structure.

Now in this case, unlike above, the land can be improved with or without the well so you really don’t need to condition to have it removed AND you can give them the value without a well (I.e., remove the adjustment). I would just disclose that there is a functioning well. Do NOT say that it doesn’t exist! Just say that the value does not include the well. That effectively solves the appraisal problem and is not misleading.

 

[OSU Beavers]

A hypothetical condition can be applied to a situation that does not currently exist. Most commonly it is used for pre construction. This is the opposite. They want the value as if it was raw land ready to be improved.


Sounds weird but if you think about it, it isn’t. Treat it like if they wanted the value of the raw land that is currently improved with a burnout, obsolete structure or any improvement that is obsolete. In that case, you would determine the value of the raw land as if vacant and subtract the cost of razing the structure.

Now in this case, unlike above, the land can be improved with or without the well so you really don’t need to condition to have it removed AND you can give them the value without a well (I.e., remove the adjustment). I would just disclose that there is a functioning well. Do NOT say that it doesn’t exist! Just say that the value does not include the well. That effectively solves the appraisal problem and is not misleading.

This appraisal is made with the lender imposed Hypothetical Condition that the subject's on site private well does not exist.

 

[Tom4value]

This appraisal is made with the lender imposed Hypothetical Condition that the subject's on site private well does not exist.

Then the only way is to condition for its removal or rendering it inoperable and factor the cost from the value.

You CANNOT say it doesn’t exist. It does and to say otherwise is misleading, not an hypothetical condition and a violation of USPAP. That is the same as in the “old days” of lenders wanting to say that you are only to appraise up to 5 acres of a large lot. You could appraise just the 5 acres but you couldn’t say the excess land doesn’t exist.

 

[TerryRohrer]

Then the only way is to condition for its removal or rendering it inoperable and factor the cost from the value.

You CANNOT say it doesn’t exist. It does and to say otherwise is misleading, not an hypothetical condition and a violation of USPAP. That is the same as in the “old days” of lenders wanting to say that you are only to appraise up to 5 acres of a large lot. You could appraise just the 5 acres but you couldn’t say the excess land doesn’t exist.

You need to revisit the meaning of “hypothetical condition.” Your last two posts are exactly backward. USPAP actually allows you to appraise a physical segment of a property without invoking a hypothetical condition.

 

[sputnam]

AMC: Per underwriting, the adjustment for well improvement needs to be removed. Please provide a revised appraisal as soon as possible.

I called my E&O and they said Don't do it.

I already told you that.