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Legal Description Change After Inspection

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Bob1969

Freshman Member
Joined
Aug 30, 2017
Professional Status
Licensed Appraiser
State
North Dakota
I am completing an assignment on a rural property for a local client for an in-house loan. I inspected the property about a month ago and learned through a stop at the courthouse that the subject is situated on a 160 acre parcel. This is a rural area with limited online resources and the client sent the request over indicating the legal as a 10 acre parcel. I called the client to let them know and they told me to hold off. Fast forward to yesterday and the owner has now filed an outlot with the county separating the home and 10 acres from the 160. The client told me to go ahead with the assignment. My question is about the effective date for the report. If I use the effective date as the date of inspection, the outlot had not been filed at that time. I would appreciate advice and/or suggestions.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
This is for a lender, so I assume they are going to want an as-is value.
However, that as-is value could be subject-to the extraordinary assumption that the lot has been split.

Ask your client how they want you to do this assignment:
A. It can be done as of the original inspection date with an extraordinary assumption that the lot has been split and your subject is 10-acres. You would need to verify that the original 10-acre parcel you thought existed is consistent with what was actually split. If the answer is "yes, do it that way", then do it that way. Describe the situation in the report. On the surface, I wouldn't necessarily consider this a new assignment. However, if you do, be sure to include a prior services statement.
B. It can be done as a new assignment with a current effective date. This, obviously, is the fool-proof way to proceed. Charge for the last trip (if you like) and re-inspect the property; assuming nothing material has changed, that re-inspection won't take that long. You may have all the necessary data from the first go-round. Just make sure that the site area of 10-acres is consistent with what you thought it would be when you picked the original comparables. If you do it this way, make sure you include a prior services statement.

Good luck!
 

BRCJR

Elite Member
Gold Supporting Member
Joined
Sep 20, 2005
Professional Status
Licensed Appraiser
State
Virginia
Would this be better suited for a HC instead of an EA if no newer inspection date is employed?
 

Bob1969

Freshman Member
Joined
Aug 30, 2017
Professional Status
Licensed Appraiser
State
North Dakota
Thank you very much. That was kind of my train of thought as well. The property is located about an hour and a half away so I was thinking my way through not re-inspecting if possible. I really do appreciate the help. I have read many topics on this site but this was my first post. I really is a terrific resource and I appreciate the help.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Would this be better suited for a HC instead of an EA if no newer inspection date is employed?

That's debatable, but upon second thought, your HC suggestion might be the better of the two.
I believe an EA could be constructed, appropriately so, under the scenario as provided.
An HC for sure would solve the problem as well; without question (from the appraisal perspective).

Good one.


The "risk" here for the appraiser is what was actually done. Since the lot has been subdivided, employing the EA is no risk IMO; the argument would be, "Should it have been an HC? :LOL:" I wouldn't have an issue making the counter-argument, but that's me. By definition, the HC is no risk (wouldn't matter if it was or wasn't split eventually). I'd be comfortable either way. The alternative, start fresh, is a no-risk option as well.
 

Sid Holderly

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Gold Supporting Member
Joined
Jun 16, 2005
Professional Status
Certified Residential Appraiser
State
Indiana
Yes, either way, I get these in farm country. Generally a local bank or Farm Credit are the lenders, in most cases, they want it as an EA and the value is subject to the split being completed. The split process has been started but does not show in records yet. most of the time I get a general description of the area (acres out of SW ...), but sometimes a survey. I can see how either works.
 

Carnivore

Elite Member
Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
Interesting in that one or the other or even both could be used in this assignment. After reading over both definitions and everyone's comments I would say use HC only. Not saying you cant use EA, but what I am saying is don't use both and it seems more appropriate to use the HC, in my way of thinking.

There are times you can only use one and other times you can only use the other. That's dangerous if your not careful. For example zoning change can be a dangerous area. I know of a case that the zoning change was never going to be possible and in the end the Investigative Board found the appraiser in the absolute wrong and he should have known better. If I recall correctly it all centered around HBU. Apparently if done properly the zoning change was not possible. Something like that.

Then it goes without saying; make it subject to; recordation and parcel number, plus a final. Final is interesting because you could do this from your desk.

Nice thread; This is what the forum is all about.
 
Last edited:

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
The property is located about an hour and a half away
In the Dakotas that's only around the corner, :) :unsure: Seriously, I agree to find out from the lender. An in-house loan might not matter.
 

timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
This is for a lender, so I assume they are going to want an as-is value.
However, that as-is value could be subject-to the extraordinary assumption that the lot has been split.

Ask your client how they want you to do this assignment:
A. It can be done as of the original inspection date with an extraordinary assumption that the lot has been split and your subject is 10-acres. You would need to verify that the original 10-acre parcel you thought existed is consistent with what was actually split. If the answer is "yes, do it that way", then do it that way. Describe the situation in the report. On the surface, I wouldn't necessarily consider this a new assignment. However, if you do, be sure to include a prior services statement.
B. It can be done as a new assignment with a current effective date. This, obviously, is the fool-proof way to proceed. Charge for the last trip (if you like) and re-inspect the property; assuming nothing material has changed, that re-inspection won't take that long. You may have all the necessary data from the first go-round. Just make sure that the site area of 10-acres is consistent with what you thought it would be when you picked the original comparables. If you do it this way, make sure you include a prior services statement.

Good luck!
Denis,

I disagree with your assessment regarding using an extraordinary assumption. Per The Appraisal of Real Estate, extraordinary assumptions presume uncertain information is factual In this case, the information is not certain since the appraiser knows for a fact that as of the effective date of the appraisal report in this case, the lot was not split, thus an extraordinary assumption is not appropriate. Quite simply an assumption cannot be used to assume away a know fact. On the other hand, the use of a hypothetical condition works quite well here as hypothetical conditions are contrary to what exists.
 
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