Land value and value opinion are the same - UW questioning

[Steve Pendleton]

FHA reverse mortgage. 1955 house on 20,000 sf lot. House has some unfinished work, missing door casings, etc. but pipes and wiring were replaced. Definitely livable. Sales price of comps is $215K, 214K, 212K, 155K, and 245K. Adjusted values are $232K, $237K, 241K, 210k, and 228k. My value opinion was $230k. Cost method comes in at $320k, mostly because site value is $225k. Five solid comps for land value between $190,000-235,000. UW is questioning land value. Have already set the effective age to 30 years so I cant get any more depreciation for cost approach without deep-sixing the loan. Any suggestions on how to reconcile the two approaches or explain to UW?

 

[J Grant]

FHA reverse mortgage. 1955 house on 20,000 sf lot. House has some unfinished work, missing door casings, etc. but pipes and wiring were replaced. Definitely livable. Sales price of comps is $215K, 214K, 212K, 155K, and 245K. Adjusted values are $232K, $237K, 241K, 210k, and 228k. My value opinion was $230k. Cost method comes in at $320k, mostly because site value is $225k. Five solid comps for land value between $190,000-235,000. UW is questioning land value. Have already set the effective age to 30 years so I cant get any more depreciation for cost approach without deep-sixing the loan. Any suggestions on how to reconcile the two approaches or explain to UW?

if your subject is liveable, why are you using comps at land value?
Why are the comps "land value"- were the houses on them in such poor condition that they were tear-downs?

 

[Mark K]

So you're saying that the improvements contribute only $5K to the overall property? The dwelling effective age must be about 59 on an age-life of 60.

No wonder the UW is questioning it. I would have some questions also. You might as well have used a Land Form for the report if the improvements contribute only $5K.

Were the comps tear-downs or were they in a significantly inferior area with low land values? And if so, you should have very large site adjustments.

 

[Steve Pendleton]

Those are the comps that best match the condition and characteristic of the subject property. There aren't any that are higher priced in the same condition within a reasonable distance. In this area developers are buying up lots and replacing the homes with 4-8 unit detached townhomes. So $225k for a 20,000 sf lot is a bargain for them.

 

[Dublin ohio]

Those are the comps that best match the condition and characteristic of the subject property. There aren't any that are higher priced in the same condition within a reasonable distance. In this area developers are buying up lots and replacing the homes with 4-8 unit detached townhomes. So $225k for a 20,000 sf lot is a bargain for them.

Do the comps have similar site sizes as compared to subject. Are they still standing

 

[Steve Pendleton]

No the comps weren't tear downs. They were in approximately the same condition as the subject. The improvements are worth more than $5k and will be viable for 10+ years.

 

[Steve Pendleton]

#1 comp has a lot of 14k sf. I adjusted other lots at $2.5/sf so most got a bump of around $30k.

 

[Mark K]

No the comps weren't tear downs. They were in approximately the same condition as the subject. The improvements are worth more than $5k and will be viable for 10+ years.

Not sure how you can state that. Land value is $225K, overall value $230K. Simple math says the dwelling and land improvements must be worth $5k.

BTW, I doubt they want to make a loan where with the land value being over 90% of the appraised value.

 

[Steve Pendleton]

If I double the site adjustment I only get to $260,000 for value opinion and gross adjustments all exceed 25% and some are over 50%

 

[Steve Pendleton]

Yes, from a market perspective the value of the improvements is $5k. I agree. I'm just saying from a replacement perspective or an income approach the value is more than $5k.