Land value and value opinion are the same - UW questioning

[Raven59]

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

It seems that if you had selected a price above $230K, we would have had a different conversation. Your adjusted land range could easily support the same value you indicated as improvement or more. It is unclear what the best use for this land is, but if it is for land, adjustments will need to be made accordingly. For just land, this means that all the comparable prices will have negative adjustments for size differences (inverse relationship).

Are you choosing to use the land for residential purposes to help facilitate the loan? It is confusing when you say "$225K for a 20,000 sf lot is a bargain for them." If it is a bargain, why are we discussing anything besides the land value?

You mentioned that the improvements have a remaining economic life of 30 years, but have 10+ years of life. Please consider the costs of demolishing the improvements and look at the land value again. It appears that the current use may only be an interim use until a more profitable use is found. Disclose want you know and let them evaluate the risks.

 

[Tom D]

FHA reverse doesn't loan on land only, and they want a normal est house life. the appraisal should not have been completed, the lender should have been informed. was it worth completing it, and now the issue of did you do it right.

 

[Raven59]

FHA reverse doesn't loan on land only, and they want a normal est house life. the appraisal should not have been completed, the lender should have been informed. was it worth completing it, and now the issue of did you do it right.

Yeah, I get it.

 

[Tom4value]

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?

Yeah, I would have questions, too. I would question your site value.

 

[J Grant]

Yeah, I would have questions, too. I would question your site value.

I questioned the value opinion as being possibly too low, and the 14,000 sf lot comp was the only one with a larger divisible site and idk what that sold for I am assuming on the higher end, that was the best comp to base the OMV

If their land value is correct, then either the opinion of MV was too low if the dwelling still contributes value, or the dwelling is a teardown HBU as vacant. the subject 20,000 lot has excess land idk if that was addressed or not -

 

[Dublin ohio]

It's not an excess land issue. It is that they are buying 20K sf sites and building multi family on them.

 

[Functional Obs]

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?

"The current improvements contribute little to the property's value."

 

[Lee Lansford]

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.

I have to think that you're H&BU analysis (what you communicated to the client) is flawed. The subject would seem to have a very low REL.

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.

In your opening post you told us that the improvements contribute $5k to the MV of the property.

 

[Lee Lansford]

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.

But, that's not what you communicated in your appraisal.

 

[sputnam]

The UW should be questioning. What you are telling them is that the improvements have no market value. Of course, that's possible but, the report needs to be very clear about it and about the support for that conclusion.