Leased Acreage

[Susie Seibert]

Happy New Year Gang! Hope it's a great one for all of us!

I just got an order to appraise a home on 56 acres. The homeowner stated that the land is being leased to a local farmer for agricultural purposes.

Does Fannie Mae take the same stand on leased farm land as it does as if the homeowner were farming it himself? I would assume so but I don't know so that's why I'm asking.

Also, is there a way to talk to a Fannie Mae appraiser directly?

Thanks!

 

[Abester]

A short term lease does not typically affect value. A long term lease may be another matter...

 

[Susie Seibert]

so is the issue with Fannie Mae the way the property is being used? if the homeowner is making their living from farming? if the land is being sprayed with chemicals? i guess i don't understand their objection to farmed land. what is considered short term by them?

any further explanation would be appreciated.

 

[Abester]

I don't know about Fannie because I don't work for her. If you are valuing the property, value the property. If you are underwriting, that is another task. Too many appraisers get caught up in underwriting issues that have nothing to do with valuation. A yearly lease (common) rarely impacts the value of the property. A 10 year lease at $1/acre/year might very well impact the value. What is the expectation of the typical market participant?

 

[Susie Seibert]

not sure...typically i don't think they're very long...year to year is what i've heard

 

[PropertyEconomics]

so is the issue with Fannie Mae the way the property is being used? if the homeowner is making their living from farming? if the land is being sprayed with chemicals? i guess i don't understand their objection to farmed land. what is considered short term by them?

any further explanation would be appreciated.

Fannies stance is they dont make agriculture loans. Their risk levels are associated with residential real estate and not that of agricultural properties. You can certainly call Fannie and discuss it with them. Is the size of the land typical for the area? Whate type of farming operations are going on on the property. All things you will need to know prior to talking to Fannie about the assignment.
Have you also had these discussions with your client?

There are lenders, however, that specialize in agricultural properties and some banks that portfolio the loans depending on the strength of the borrower.

 

[Abester]

PEs response is good, but I like to cause trouble. If a lender calls me and asks me to appraise the property, I don't care what loan program it's going to be in. If it's too much to ask that the lender knows what it is asking for when it places the order, then boo for them.

If I went to McDonalds and ordered a Big Mac, and the counter help told me I'd be better served with the nuggets, I'd tell them to buzz off - I'll get the Whopper.

May I assume we're having the Fannie discussion because we're going to put the farm analysis on the 1004? Yeah!

 

[Susie Seibert]

They want the report on a 1004. Our community is very rural and lots of people lease their acreage to farmers. This is a BIG agricultural community. Crops are typically soybeans, sugar beets, corn, navy beans. I'm going to email the lender...was just trying to get some info on my own in case they had questions for me. Fannie Mae left me a message and I'm still not sure what they're saying...and of course the lady is gone until a week from Friday...I'll try and reach someone else Monday.

Thanks for your time...all other thoughts appreciated.

 

[Abester]

If the driving value of the property is the house, you may be able to do that. If the value is in the land, the 1004 is not adequate (nor desired).

 

[Louis Pompeo]

PEs response is good, but I like to cause trouble. If a lender calls me and asks me to appraise the property, I don't care what loan program it's going to be in. If it's too much to ask that the lender knows what it is asking for when it places the order, then boo for them.

This flies in the face of knowing the "Intended User" of the report. The appraiser should be competent to know the assignment conditions imposed by the intended user. If the appraiser knows that their client lends according to FNMA Guidelines, then the appraiser has to consider this in the Scope of Work and perform the assignment accordingly, or reject the assignment.

We can't claim ignorance of the requirements or assignment conditions of the Intended Use or Intended User.

PE's response is 100% correct.

Happy New Year everyone!