Lender Wants Only 5 Acres Valued Out Of 13?

[Carnivore]

Originally posted by T.E. Faravelli@Sep 4 2005, 02:56 PM
Lee Ann,

I use common sense. There must be a compelling reason to use a HC. As stated in an earlier thread "for the purpose of reasonable analysis." Given the facts, I don't believe a HC is necessary to produce a reasonable analysis and credible report. In fact, lending on a HC property that will never exist is troubling. A fictional property, a fictional appraisal report, a fictional mortgage-what's next? Fictional debt service? This a game of Monopoly pure and simple.

T.E.

I think there are legitimate reasons to use an HC when it comes to dividing up land.

Would you agree with this for discussion purposes? I am one of several heirs to a large parcel and I need the value of my portion. The parent parcel is not yet subdivided. My portion is 5 acres of 20. I can show you what acreage will be mine. The acreage will be divided. I will not have to sell mine, but I need to know the market value before its legally divided.

 

[Farm Gal]

Originally posted by Denis DeSaix@Sep 4 2005, 12:42 PM
“And how, sir, are you going to determine what might have happened in a situation that is not physically possible and in no way reflects the current reality?”. I say, “Boy, you guys are dense. I’m going to get an appraisal, and have them base the value on the Hypothetical Assumption that the factory exists, and that the economic trend was consistent with the overall region!”.

The HC used in my example is, by any measure, impossible. Put it is critical to my intended use of the report.

Dennis:

The difference in most of MY cases is fine, but a really sharp fine: the example you cite is not economically feasible, but with enough money that factory could be rebuilt and SOLD as of a future date.

The 5 acre hypos are often ILLEGAL and not at all likely to become legal for the simple reason the 5 acre sites may be permenantly "not subdividable"! or would fail to contain the improvements and an egress even IF subdividable (You COULD always sell the 'ecess' land to a neighbor with the stipulation that it be recorded TO the neighboring site)...

anyway this is where I havea problem with the theory: the rubber meets the road with a giant screech! on that part! Cain't do it now, won't be able to do it in the future, and no way the county is gonna change the rooles. Unless and untill the entier are zoning/charicter changes!

besides you don't have any comps anyway

 

[rtubbs]

I just email the LO a copy of the pertinent section of Fannie Mae's Handbook for Appraisers.

 

[Otis Key]

Even if the ownership changes from fee simple to condo, the project owner still has the right to lease out these units - so “fourplex” remains a permissible, possible (though maybe not most profitable) use of the property as-is.

From the financial aspect yes. If there was a required zoning change to convert it then that would be a different aspect.

besides you don't have any comps anyway

You mean you're not making up the sales? :rofl: :rofl:

 

[rtubbs]

Don't know if its been stated but Quest. 109 of the 2005 FAQs says that:

Failure to recognize this supplemental standard would be a violation of the ETHICS RULE or the COMPETENCY RULE.

 

[Mike Boyd]

You are NOT appraising a 5 acres site. You are appraising all 18 acres but limiting value only to 5 acres per the intructions of the lender. All land over 5 acres is considered to be excess land for the purpose of this report.

Comparables should be 5 acres or less with the predominant SIZE 5 acres ir less. No site adjustments to be made if a comparable involves more than 5 acres.

Yes, Ray. I realize that in some areas a 5 acre site might be worth more than a 160 acre site. If that is the case, you might have to make an adjustment for loss of appeal or a location adjustment. Maybe the buyers in a specific market have agoraphobia.

 

[T.E. Faravelli]

Sure there are legitimate reasons for a HC analysis. Going all the way back to the beginning of the thread, is this one? A hypothetical condition made "subject to". Subject to something that will never transpire! It is an illusion. A facade. Make believe. I guess if you live on Fantasy Island anything is possible.

 

[Rich Heyn]

T.E.,
What's the difference between this and the guest house HC that we discussed a week or so back? I'll admit that the majority of requests for this type of HC are an attempt by a TPO to defraud the funder but not all.

The four steps to happiness:

1) Are supplemental standards involved? Or, in plain English, are you selling the loan to Fannie or Freddie? If so, I can't do it.

2) Let's talk about intended use. Why do you need the HC? Oh, need to establish risk management parameters for underwriting analysis. OK, seems reasonable.

3) Can this be done in a USPAP compliant manner that results in a credible analysis? (Shea article is good here)

4) Disclose HC and state report is not intended for use in a secondary market transaction involving Fannie or Freddie.

OK, what did I miss?

 

[Otis Key]

Ah Rich, not that I can think of right now, but then I just read your post.

OK, what did I miss?

I, after reading all these lengthy threads about 5 of ## acres, wonder what you're going to do for a legal. Could it be something like:

An undisclosed 5 acre parcel somewhere within the 160 acre parcel legally described as ..................... Should make for some interesting UW feedback and new grey hairs on the LO when you state in a return email, "well, I did what you requested and gave you an appraisal on only the improvements and 5 acres"! :rofl: :rofl: :rofl: :rofl:

Any additional correspondence, changes, corrections or replies to "YOUR scenario" requires advanced payment of additional fees for additonal services to CORRECT your **!

 

[Farm Gal]

Originally posted by Rich Heyn+Sep 4 2005, 02:31 PM--></div><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (Rich Heyn @ Sep 4 2005, 02:31 PM)</td></tr><tr><td id='QUOTE'> OK, what did I miss? [/b]

<!--QuoteBegin-Barry Shea
an assignment where the subject property has 10 acres and the minimum new lot size in the subject’s zoning district is 10 acres may be such a case. If the appraiser properly explains this to the lender/client, they will typically agree that it makes no sense to use a hypothetical condition that is not allowed under the jurisdiction’s zoning ordinance[/quote]

Rich:

The above is the primary issue... Barry skirts it, your response fails to address it, and it IS the world in which I live and *try* to make a living...

I got news for ya folks: Non-Fannie Lenders do NOT "agree" that this "makes no sense".

Fannie precludes the issue by directive.

I am not sanguine about providing a value on a hypothetical property which is ILLEGAL, improbable, and unlikley to even occurr.

Mainly because some dim-bulb lenders have foreclosed, sold the 'parcels seperately', and created 1 unbuilable illegal unimproved lot (attributable to the split), and 1 improved property with illegal improvements subsequent to the lot spilt! In case of significant damage to the improvements the property may not even be issued a repair permit!!! There are some interesting lawuits winding their way through the courts as a result. I won't be listed as a correspondant in any new ones, because I will not follow that practice!

But I'd surely like someone (besides Fannie) to come out with a definitive statement as to this issue!