Maximum number of acres allowed for appraisal on a form 1004?

[gregb]

Every market features its characteristics. Not sure if the property dictates the appraisal form, but GSE guidelines may come into play.

Land For Sale In Montana: The Top 5 Things You Need To Know - Mirr Ranch Group

Here are the top 5 things you need to know about the Montana real estate market and land for sale in Montana today.

www.mirrranchgroup.com

#1: AGRICULTURE IN MONTANA IS KING

In comparison to other western states, Montana’s economy is still fundamentally driven by agriculture. With the exception of the more developed mountain valleys in the western region, the ag industry still reigns supreme in Big Sky Country. By the numbers Montana has:

• Over 27,000 farms;
• Spread across 60 million total acres with each property averaging 2,207 acres in size,
• That altogether produce around $4.6 billion in annual revenue 1.

In general, 2018 was a strong year in Montana mostly driven by larger acreage land sales located in the western half of the state. By the numbers, below are a few statistics illustrating how ranch sales stacked up:

• 194 total sales (over 200 acres);
• The average price per acre was $1,750;
• Which was a 26% increase from the year before 4.

While there is a large inventory of available listings, the top-quality properties seem to be moving quickly if priced accurately. In 2018, those sales considered to be “top tier” spent on average less than 70 days on the market and accounted for approximately 40% of the total sales dollars for the year 3. In our experience brokering ranches up and down the Rocky Mountain West, the average land listing is on the market for 18-24 months.

“The outlook for 2019 is strong as we continue to see a healthy trend of moderate growth,” according to Andy Rahn, a respected ranch appraiser and founder of Montana Land Source, a website and robust resource that tracks listings and sales data across Montana.

A snapshot of current market data from earlier this spring seems to support that notion:

• $2,064,700,000 in total listing volume;
• 595 active listings (over 200 acres);
• Average property size of 2,103 acres;
• With an average asking price per acre of $3,077 5.

Ranches ranging from $2.5 million to $10 million seem to be the sweet spot and make up over half of the market currently, as referenced by the below chart.

Although we can also glean that pricing is sensitive as about 30 percent of the current listings have had their asking price adjusted on average by 23 percent 5. This is an indication that buyers still have leverage and that some sellers are responding by becoming more motivated.

 

[Terrel L. Shields]

With an average asking price per acre of $3,077 5.

Suggesting a value of 257 acres is possibly north of $750,000...and therefore, it had better be a heck of a house to contribute more to the site than the value of the site. I see Land Broker by Open Fences has a couple of listings in Montana - $8.5 million for 145 acre 9440 Bridger Canyon, Bozeman. Lots of expensive land tracts...for sale. Not many improved. Many touting their ranch utility, irrigation, etc. ... Tough sell if you have to make the ranch pay off...I don't think it will.

 

[Lee Lansford]

Hello all!

I have been asked to appraise a rural property with 257 acres on a form 1004. The property consists of a large home built in 2010, and older home that has heat and plumbing, but is in poor condition and currently used as storage, and a barn that is also used for storage. It is primarily dry land and there are no crops or livestock. The owner does not even have a horse! This is Montana and many residential properties are on 20+ acres and have a few horses, cows, etc. and these properties are routinely done on a 1004. Sometimes land values exceed the preferred 30% of value, but those that do generally are in a desirable location. The subject's land value is probably going to be in the $500-$1,000 per acre range, so not too outrageously high for the amount of acreage. Given the owner's use of the property which is essentially just for privacy, I do not consider this to be a farm or ranch property. I am a Certified General Appraiser, but I do not do farm and ranch appraisals. I am wondering if there is a maximum number of acres allowed when using a form 1004. The lender is, of course, trying to get this approved for secondary market so the umberinterest rate is lower. Also, while this property could be subdivided, it is not in an area of high demand so I do not consider that to be the highest & best use at present.

Thank you!

It's not "number of acres", it's the necessity that the H&BU must be SFR.

 

[Sand]

No llama and I just looked at the photos and I think it is a Ford sedan in the garage...not even a truck!

I spoke to the real estate agent that sold it 2 years ago to the current owners. He said that the previous owners lived in Florida and used it as a vacation hunting property. The current owners are also very much into hunting as noted from all of the dead animals in their house! They did move from out of town, but one of them still works in a city about 40 minutes away. The real estate agent stated that the property does not lend itself to farm and ranch because most of the land is sandstone cliffs and ravines. That said, there is considerable interest these days in large tracts in this area for second homes or to live on, but not necessarily for livestock or other agriculture production. And hunting Montana is huge. I do have sales of a properties 160 acres and a 106 acres that were definitely just for the space, though the second one sold just over 2 years ago!

 

[Sand]

Suggesting a value of 257 acres is possibly north of $750,000...and therefore, it had better be a heck of a house to contribute more to the site than the value of the site. I see Land Broker by Open Fences has a couple of listings in Montana - $8.5 million for 145 acre 9440 Bridger Canyon, Bozeman. Lots of expensive land tracts...for sale. Not many improved. Many touting their ranch utility, irrigation, etc. ... Tough sell if you have to make the ranch pay off...I don't think it will.

Bozeman definitely attracts more wealthy buyers than this area. The house on my property is nice, and I think its contribution would be more than 50%, but uncertain still about the land value estimate per acre.

 

[J Grant]

The steep terrain not lending itself to ag or ranching makes a case for it as just land for an owner to enjoy/use for hunting - even for that use 257 acres is excessive but it is your appraisal, you have to believe in it ...there is no rule about land to value ratio, I've done high value waterfront where the land to value ratio is 70% -80% - when it gets up to 90% a case for HBU as vacant can be made.

Overall sounds more like a huge tract of land that has a house on it, vs a house on a large tract of land - but that is far out of my area ! even for that rural area though, it would be a matter of scale and proportion - whatever the HBU turns out, the CA shows and land to value is, let it speak - don't be tempted to goose things to get it to approve as a residential loan.

If HBU is not res, fine, if your HBU is res, fine, whatever you conclude needs to be credibly supported, because that kind of property on a 1004 might draw scrutiny .

good luck, j...hope the fee matches the acreage in thousands...

 

[Sand]

Every market features its characteristics. Not sure if the property dictates the appraisal form, but GSE guidelines may come into play.

Land For Sale In Montana: The Top 5 Things You Need To Know - Mirr Ranch Group

Here are the top 5 things you need to know about the Montana real estate market and land for sale in Montana today.

www.mirrranchgroup.com

#1: AGRICULTURE IN MONTANA IS KING

In comparison to other western states, Montana’s economy is still fundamentally driven by agriculture. With the exception of the more developed mountain valleys in the western region, the ag industry still reigns supreme in Big Sky Country. By the numbers Montana has:

• Over 27,000 farms;
• Spread across 60 million total acres with each property averaging 2,207 acres in size,
• That altogether produce around $4.6 billion in annual revenue 1.

In general, 2018 was a strong year in Montana mostly driven by larger acreage land sales located in the western half of the state. By the numbers, below are a few statistics illustrating how ranch sales stacked up:

• 194 total sales (over 200 acres);
• The average price per acre was $1,750;
• Which was a 26% increase from the year before 4.

While there is a large inventory of available listings, the top-quality properties seem to be moving quickly if priced accurately. In 2018, those sales considered to be “top tier” spent on average less than 70 days on the market and accounted for approximately 40% of the total sales dollars for the year 3. In our experience brokering ranches up and down the Rocky Mountain West, the average land listing is on the market for 18-24 months.

“The outlook for 2019 is strong as we continue to see a healthy trend of moderate growth,” according to Andy Rahn, a respected ranch appraiser and founder of Montana Land Source, a website and robust resource that tracks listings and sales data across Montana.

A snapshot of current market data from earlier this spring seems to support that notion:

• $2,064,700,000 in total listing volume;
• 595 active listings (over 200 acres);
• Average property size of 2,103 acres;
• With an average asking price per acre of $3,077 5.

Ranches ranging from $2.5 million to $10 million seem to be the sweet spot and make up over half of the market currently, as referenced by the below chart.

Although we can also glean that pricing is sensitive as about 30 percent of the current listings have had their asking price adjusted on average by 23 percent 5. This is an indication that buyers still have leverage and that some sellers are responding by becoming more motivated.

Thanks! Interesting stats...

 

[Alamo Cowboy]

If he has a Llama and a Toyota he is from California.

It has utility I would call outside of mere residential. It is either farmland (E?), ranchland, or recreational/hunting land. I would not say the HBU is mere "residential". Therefore, I would not do it on a 1004, although as pointed out, there is no requirement. Much of the mountain west seems to be in conversion to residential-recreation, a lot of it second homes for the wealthy.

First and foremost in my mind is that land is valued as if vacant and available for its highest and best use. I do not deduct land values for its (lack of) utility rather I deduct functional obsolescence for any improvements. Land is land and adjusted dollar for dollar. So a central question for me is that posed by Henry Harrison many years ago. Is the LAND worth more than the IMPROVEMENTS contribute? If 257 acres is worth $257,000, and the house is worth $500,000...then yes, you can argue the appraisal is a residential report. Even though divisible, I would not argue that the acreage is in anyway either "surplus" nor "excess" if it is fairly typical for 100 acre home tracts in the market area. If the land is worth $257,000 and the dwelling contributes only $100,000, then it is a LAND report.

In any case, the 1004 is a poor choice for reporting. If it is required by the lender, is going to FHA or FNMA, then I would decline the assignment. If I can write a narrative report, then I am good to go. I, not too infrequently, value "Executive Homes" on such acreage and they are complex assignments worthy of a 4 figure fee.

I partnered with a general real estate appraiser who does ranches in Montana many years ago when doing a similar assignment. I went to college in Missoula and was friendly with some Montana appraisers over the years. My report was not a residential form report. My report was a narrative. HBU is so very important for this assignment. I think I charged $2.2K +/- for the assignment in 2002. No problem with fee. I secured assignment while attending a homecoming Grizzly football game.

 

[Tom4value]

The answer is in step one of appraising.....determining highest and best use. If the highest and best use is single family, residential, you can use the 1004. If it is something else, do not use it.

 

[Sand]

The steep terrain not lending itself to ag or ranching makes a case for it as just land for an owner to enjoy/use for hunting - even for that use 257 acres is excessive but it is your appraisal, you have to believe in it ...there is no rule about land to value ratio, I've done high value waterfront where the land to value ratio is 70% -80% - when it gets up to 90% a case for HBU as vacant can be made.

Overall sounds more like a huge tract of land that has a house on it, vs a house on a large tract of land - but that is far out of my area ! even for that rural area though, it would be a matter of scale and proportion - whatever the HBU turns out, the CA shows and land to value is, let it speak - don't be tempted to goose things to get it to approve as a residential loan.

If HBU is not res, fine, if your HBU is res, fine, whatever you conclude needs to be credibly supported, because that kind of property on a 1004 might draw scrutiny .

good luck, j...hope the fee matches the acreage in thousands...

Thanks! Sales are limited and every real estate agent seems to have a different opinion of value. But in general most seem to agree that it doesn't have much use for agriculture purposes.