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Lo Instruction: "only Appraise On Xx Acres.

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Lee M. Ragland

Freshman Member
Joined
Feb 12, 2003
I have received a few requests to appraise a property on less acreage than is actually being conveyed or (refi) is deeded.

Seems to me this is a theoretical appraisal as the boundaries of the requested acreage are not defined and variables which have an effect on value, ( amount of road frontage, shape of plat (100x2178 versus 500x435.6) or loss of amenities on large acre tracts such as possible a barn or pond) could be effected. Especially effected on large acreage tracts. How do you take five acres out of 500 acres when the improvements are in the middle? That is one heck of long, skinny legged flag plat with not enough left over for the barn.



Thoughts or Comments Please

Thank you for your time

Look WHAT TIME IT IS :beer:
 

Judy Whitehead (Florida)

Senior Member
Joined
Jan 20, 2002
Professional Status
Certified Residential Appraiser
State
Florida
Hi there, Lee!

We've been over this a few times on the forum, but this is one of those subjects that bears repeating for the newcomers. This happens occasionally in my area.

There are lenders who will only loan on a "maximum" of five acres and if the "parent" parcel is larger, then they ask you to appraise it on a "theoretical" basis. You can do this, but you need to be very careful. First of all, there has to be some identification of exactly what you are appraising - in other words a survey with a correct legal description may need to be done. You are correct in assuming that a home on 5 acres on a long easement may be less marketable in your area than one with road frontage.

If I can correctly identify the parcel by using what we call a quarter section legal description (The S1/2 of the NE1/4 of the NW1/4....etc.) and can put that legal description in the report and KNOW that the improvements are on that parcel I will appraise it without a survey (others will tell you not to - you will have to make a decision for yourself if you are comfortable). Chances are the lender will require a survey anyway.

As long as you make it very, very clear with legal description, disclosures, disclaimers, (I ain't responsible no how no way no where if this legal isn't correct or if a survey finds that the improvements are not where I think they are), and - the most important one of all - that you would be PERMITTED to subdivide the property per current zoning laws and deed restrictions, etc., then I believe you can do it.

Some appraisers would insist on the survey, and all of us woiuld feel much more comfortable with one. Actually sometimes an appraisal is requested first and a survey is done afterwards, so in that case you can make it "subject to" a survey. Hope this helps :D
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I have had this happen several times but not on a tract that size. I have one right now and I am waiting on a survey on because I couldn't tell if the horse barn was on the property or not.

Your can insist they furnish you a legal on the 5 acres.

Or you can make an extraordinary assumption. Assume there is a deeded easement to the 5 acres from the road and that the house is sited on the 5 acres.

Another option which I have done is make the appraisal conditional on the results of a survey. Thats probably the safest way for you.

But in my opinion it is far better for the borrower to have a legal in case of foreclosure. What happens if you don't have done? Who decides what 5 acres they get then????
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Lee,

The five acre scenario is just that.... a stupid scenario invented by lenders because appraisers don't complete a proper HBU analysis on a property. None of them want to mortgage excess land so they come up with a 5 acre site but they haven't thought far enough ahead..suppose the 5 acre site is further subdividable and has lots of value as building sites? I would read the Excess Land section of 4150.2 as a reference guide for this problem.

Here's how you present it to the mortgage morons....Dear MM, I have examined the current zoning regulations for the subject and I've found that the minimum site is 5, 10, 15 acres whatever. The remaining acreage is excess land that FNMA/FHLMC/FHA don't want to base the value/mortgage on. I will appraise the subject on the minimum site allowed by current zoning so that it is a legal conforming site. I am not valuing the remainder because I don't have a clue as to how it can be further subdivided as this is a job for a professional, licensed land planner.

Place the minimum legal site size in the Site section of the URAR. Disclose that this is a hypothectical site size for the purposes of the appraisal in the Site section, the Comments on the Sales Comparison Analysis and in the Conditions of Appraisal section....then write another hypo condition in the Conditions of Appraisal section that 1) The mortgage is to encumber the entire site as it now exists. Thus,you don't have to locate or describe the 5 acres/minimum legal site size. If the MM's foreclose, they get the entire site. They can either sell it "as-is" or if it has additional value, they can subdivide it and sell it off in pieces. So the trick is... to value it to the minimum legal site size, then to encumber the entire parcel. Why do I say minimum legal site size rather than 5 acres? Well, if you're in an area of 500 acre sites, where are you going to find comps with 5 acres? You're not, so you probably can't develop a credible value. You should, however, be able to find improved comps and land comparable sales on sites that meet the current zoning's minimum size requirements.

You are responsible for what is located on or near the entire 500 acre tract so be sure to inspect the entire 500 acres...there's alway that junkyard on the rear 40 acres :yellowblack: :yellowblack: :yellowblack:

Ben
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Sometimes you can't lend on more than 5 acres. Equity loans in Texas are restricted in site size to avoid land loans. No reason other than that's what the lawmakers said. So don't always beat up the LO.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Make VERY sure that the resultant parcel meets county minimum zoning standards. There have been recent legal issues in our area due to the lender recording a lien on the 'as we want it' parcel...

Which the county is now viewing as an illegal lot split <_< and denying building (inclusive of rebuilding or repair) permits... and everyone involved in any way is being sued by the seriously unhappy homeowner who had insured tornado, fire or other damage to the improvement, but can neither repair it nor live in the (mortgaged) house! :eek:
 

Oregon Doug

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Oregon
I'll bet this differs from state to state. Over here in Orygun, our county assessors often split large rural acreage properties into a 5 acre home site (with one tax account # and rate) and the remaining acreage on another tax account # and rate depending on zoning & use.

Its not uncommon for us to appraise a rural home on five acres with an additional 5, 10, 15.... acres of F2 zoned (impacted forest) or EFU (exclusive farm use) with the F2/EFU zoned land in a tax deferral (reduced tax) program.

There is no actual legal description for the 5 acre homesite and the lender's collateral is the total property based on the recorded legal description of record - that's the legal description used in the appraisal. Believe me, the lender is not going to foreclose on some undefined 5 acres when there is more out there for the taking.

Oregon Doug
 

Ben Vukicevich SRA

Senior Member
Joined
Feb 9, 2002
Professional Status
Certified General Appraiser
State
New Jersey
Doug.

It's the same out here in NJ. They tax the house and 1 acre at the going rate and the balance of the acreage is taxed at a reduced farmland assessment. And as you say, the lot is not subdivided just assigned a separate APN.

Ben
 
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