Land Appraisal

[Terrel L. Shields]

You can appraise any of them once you reasonably identify the subject.

Exactly. You are appraising a partial interest. There is no hypothetical, and not necessarily an assumption. They want you to leave out 0.5 acres of a 5 acre parcel. Nothing more.
Goes back to Q & A 2008 March...which half the posters didn't believe then either.

 

[Deleted member 152047]

I think you need to clarify why they want to appraise a portion of land.

You only need to know what the purpose of the appraisal is. I could ask an appraiser to come value 1 SF of land in my front yard. I would tell him that it is to establish the market value of the property. You don't need to know why to the extent that you have mentioned. We aren't mortgage brokers and governmental lending restrictions have no bearing on the SOW, unless it is one of the client's conditions.

If the lender only loans on a half acre; the answer should be no.
--Irrelevant

If you are appraising it for condemnation purposes, via eminent domain and you have a map of it; you will need to determine if there are any severance damages to the rest of the parcel.
--Not if it is outside of the SOW

Perhaps the government wants a piece and you need to find out if the taking of the portion (cut out) affects the rest of the parcel.
--Maybe

If this is a lot line adjustment where an adjacent owner is selling off a portion to another adjacent owner and it is legally permissible they need a map of it and you need to do a before and after appraisal before the bank will release that portion of the "cut out."
--Again, not if it is not within the SOW

Ask to talk to the owner and find out why they need a cut out valued
--They could come back and simply say for internal reasons, or because because, or for estate planning. Honestly, I think you overthought it a bit Amy, some of this is sage advice, but you don't have to know that the owner intends on determining the market value of the "cut out" because he wants to sell it to his second cousin Joe, who is going to build a home with a red barn, gravel driveway, and fence the perimeter for his two dogs and one cat that he is going to have around to kill any potential mice.

the answer for something like this is just not so simple and frankly if they are trying to get around lender guidelines because they want to sell a loan; it is not reason enough.
--Irrelevant

Moreover, some lenders will not lend on properties with a lot of land because they want to avoid the risk associated with land value; getting an appraiser to break these rules is not ethical. You need to know where the "cut out" is and what it is for. It should be for a valid, ethical reason.
--Not if the subject of the appraisal is clearly stated within the LOE and SOW

 

[Mr Rex]

Exactly. You are appraising a partial interest. There is no hypothetical, and not necessarily an assumption. They want you to leave out 0.5 acres of a 5 acre parcel. Nothing more.
Goes back to Q & A 2008 March...which half the posters didn't believe then either.
View attachment 38417

Depends on the client. Fannie, FHA et al specifically prohibit it without definitive description of the subject or it is HC or EA, both which are not allowed in the "Real" lending world of 90+% of the Residential world.

 

[Terrel L. Shields]

ending world of 90+% of the Residential world.

When did 90% of res market start lending on bare land?

 

[Mr Rex]

Touche. In any case, most lenders are not so reckless to lend on subject properties with limited description. Even if you provide them with the dreaded narrative appraisal.

 

[Mark K]

Depends on the client. .

Isn't this always the case?

The OP stated 'land appraisal'. When I see that I don't include F/F, etc. in the appraisal problem consideration. Its nearly always a local lender, in-house loan, where the lender/client sets their own rules/regs/guidelines, etc.

I like the term of 'physical segment' better than 'partial interest' in this case.

 

[BRCJR]

Ask the lender for the description they are planning to use in the DOT.

 

[Restrain]

OP, you are appraising in Texas. Find out exactly what this tract is going to be used for. If Dad is going to give the 0.5 acres to Jr to build a house on, you are going to run into all sorts of issues, such as minimums for a septic system, etc, separation between well and septic, access to the site across the remainder of the 4.5 acres, etc. While this is not right up front for a 0.5 acre sale, you might be appraising a site that has no real value except to build a barn on. Details, details.

 

[Amy Perkins]

You only need to know what the purpose of the appraisal is. I could ask an appraiser to come value 1 SF of land in my front yard. I would tell him that it is to establish the market value of the property. You don't need to know why to the extent that you have mentioned. We aren't mortgage brokers and governmental lending restrictions have no bearing on the SOW, unless it is one of the client's conditions.

If the lender only loans on a half acre; the answer should be no.
--Irrelevant

If you are appraising it for condemnation purposes, via eminent domain and you have a map of it; you will need to determine if there are any severance damages to the rest of the parcel.
--Not if it is outside of the SOW

Perhaps the government wants a piece and you need to find out if the taking of the portion (cut out) affects the rest of the parcel.
--Maybe

If this is a lot line adjustment where an adjacent owner is selling off a portion to another adjacent owner and it is legally permissible they need a map of it and you need to do a before and after appraisal before the bank will release that portion of the "cut out."
--Again, not if it is not within the SOW

Ask to talk to the owner and find out why they need a cut out valued
--They could come back and simply say for internal reasons, or because because, or for estate planning. Honestly, I think you overthought it a bit Amy, some of this is sage advice, but you don't have to know that the owner intends on determining the market value of the "cut out" because he wants to sell it to his second cousin Joe, who is going to build a home with a red barn, gravel driveway, and fence the perimeter for his two dogs and one cat that he is going to have around to kill any potential mice.

the answer for something like this is just not so simple and frankly if they are trying to get around lender guidelines because they want to sell a loan; it is not reason enough.
--Irrelevant

Moreover, some lenders will not lend on properties with a lot of land because they want to avoid the risk associated with land value; getting an appraiser to break these rules is not ethical. You need to know where the "cut out" is and what it is for. It should be for a valid, ethical reason.
--Not if the subject of the appraisal is clearly stated within the LOE and SOW

I think my point here is that not to lose sight of what could be considered a misleading report. Which is why we need to be ethical rather than a Made As Instructed report.

 

[Amy Perkins]

Does it matter what it is "really for"? Shouldn't it be appraised to the H&BU? That may not necessarily be what it is really for, in all cases.

Yes, if you want it to be used for ethical purposes and not to trick anyone, otherwise you are flying blind.