Lender Wants Only 5 Acres Valued Out Of 13?

[BenRScott]

I have a lender that wants a property appraised, its a 18 acre lot with a SFD on it. They are asking for the max acreage to be only 5 acres. I told them I cant just say that the property is on 5 acres when its a single 18 acre lot. As far as I know this can not be done the way they want it. The property is not subdivided. When I told the loan officer that I couldnt just ignore any land over the 5 acers being its a single lot he tells me he has other appraisers that do it all the time.

Am I crazy or am I just missing something?

Thanks in advance.

 

[Ted Martin]

I'm sure he does.

Had the same run in on a job I did last month. It was a 10 acre rectangular site, 330' of road frontage, and the house sat at the back of the site. Local zoning office requires minimum of 300' of frontage. There is no legal way to subdivide the lot which would meet the clients request (county wouldn't agree to a Flag or hourglass shaped lot. Comps were all 10+/- acre because that's the neighborhood. Client wouldn't certify that the loan wouldn't be sold to Fannie. My answer was NO, NO and NO. What part of NO don't you understand. NO NO NO NO Besides they didn't spring the 5 acre maximum until after the report was completed and turned in. Had they mentioned it I would have told them I couldn't / wouldn't do it. After the report was completed not much I could do.

 

[BenRScott]

I have run across this with another lender they had standing guidelines not to do an appraisal over 3 acres and I turned one in that was on 10 acres not realizing it. And they kept asking me to change the lot to 3 acres and I pretty much told them I wouldnt do it. So I am not insane, if the lot can not or is not legally subdivided you have to value the land as the full 18 acres? I dont see any way to give it an as-is value with the 5 acre if the lot is 18 acres?



Thanks again

 

[David Bodtcher]

You appraise it as a hypothetical condition: appraise the subject "as if on 5 acres". you don't choose what part of the lot you're going to exclude, it doesn't work that way. you disclose how large the subject really is, then include the comment that the subject is being appraised as if the lot was only 5 acres, not 18 acres. So you find comps bracketing the subject as if 5 acres, & adjust as if the 18 acres were only 5. Perfectly acceptable IF you disclose that the subject is really 18 acres & this is a hypothetical condition.

So your appraised value with the 5 acre value most likely would be less than when you appraised it as 18 acres.

Many times, as the lot sizes get large (over 5 acres), the land becomes excessive, and/or the highest & best use may change to agriculture, vineyard, forest, ranch, ect. The majority of lenders only want to lend on the subject as a residence, not having excessive value in just the land. So they have guidelines of only a 5 acre value be given if larger than 5 acres.

 

[Farm Gal]

Ben:

1. you can't do it 'as-is' no matter who the cleitn/intended user is, unless THEY subdivide it. Balls in their court.

2. If it is going to Fannie you can't at all, unless THEY subdivide it. Balls in their court.

There are some who argue that you can do a hypothetical, but the writing of it is tricky, it is SUBJECT TO the HC, and you better make sure 'not eligible for Fannie/Freddy 2ndary markets are written all over the report in ways that cannot be exised... and you better keep a peper copy for your files

 

[Otis Key]

I had a client for a short term who stated it was a supplemental guideline of the company. I said that was okay and did just what they asked. I also inserted on each and every page:

Appraisal Report is NOT Intended to be Sold on the Secondary Market to Fannie Mae, Freddie Mac or any GSE.

Those requests stopped after a while.

 

[BenRScott]

Thanks for the support guys! I really apperciate the help.

 

[Lee Lansford]

Ben,


Tell the client that if you utilize such a Hypothetical Condition (AND, such is somewhat tricky), that Fannie Mae certainly would not accept the loan.

And, of course, Fannie WILL accept a SFR on 18 acres just as long as the property is residential (not necessarily zoning) in nature.

See what kind of response you get.

There was a long string of discussion on this very subject a couple (??) of months ago; perhaps someone can direct you to that string.


Lee

 

[JSmith43]

Originally posted by David Bodtcher@Sep 2 2005, 02:35 PM
You appraise it as a hypothetical condition: appraise the subject "as if on 5 acres". you don't choose what part of the lot you're going to exclude, it doesn't work that way. you disclose how large the subject really is, then include the comment that the subject is being appraised as if the lot was only 5 acres, not 18 acres. So you find comps bracketing the subject as if 5 acres, & adjust as if the 18 acres were only 5. Perfectly acceptable IF you disclose that the subject is really 18 acres & this is a hypothetical condition.

So your appraised value with the 5 acre value most likely would be less than when you appraised it as 18 acres.

Many times, as the lot sizes get large (over 5 acres), the land becomes excessive, and/or the highest & best use may change to agriculture, vineyard, forest, ranch, ect. The majority of lenders only want to lend on the subject as a residence, not having excessive value in just the land. So they have guidelines of only a 5 acre value be given if larger than 5 acres.

If the disclosure that the appraisal is not per Fannie guidelines or contrary to investor guidelines of an investor not revealed by your client you can do the hypothetical 5 acres. But it sure as heck does matter to describe the hypothetical acres!

Basically, H & B use it & give the best value combination of home & 5 acres as specifically as possible. You should be so lucky as to have a survey theoretically breaking out 5 acres with the improvements placement thoughtfully relating to the hypothetical 5 acres selected.

Search for other threads & survey the views on this heated topic. Why produce a report that a large percentage of appraisers will want to crucify, even if technically, it can be made USPAP compliant and compliant with some investor guidelines. It's an apple with a worm in it at best.

 

[Fred]

Appraisal Report is NOT Intended to be Sold on the Secondary Market to Fannie Mae, Freddie Mac or any GSE.

The secondary market buys reports? I thought they bought mortgages.