Montana Acreage Limitation with VA loan

[srinaldo86]

It's a short sale for 350k, we just moved here from Japan and have managed to deplete most of our savings. We wouldn't not reasonably be able to come up with 16k in the next couple months.

Monthly payments however are manageable for our current income.

Being that it's a short sale it's my understanding that division of the land is out of the question.

 

[CANative]

It's difficult to explain all this to a "civilian" that is, one who is not familiar with the finer points and nuances of appraisal.

Appraising a portion of a property is not difficult to do and any appraiser should be able to do it. But it's all about what we call "intended uses" and "intended users." What that means is that it depends on who the appraisal is for and what they plan on using it for which drives our decision and methods on how to provide a valuation that is both meaningful and not misleading.

For conventional lending, appraising a hypothetical portion of a property (say, house and 5 acres of the 92 acre tract) is explicitly prohibited. For FHA and VA and USDA I'm not sure there are specific prohibitions. But FHA has specific language regarding excess land, which is land that is more than needed to supported the primary improvements (say the house). For example if most houses in the area are on about 5 acres or so and there is a market for development land then there might by 87 acres of excess land. Under FHA the appraiser is to value the house and 5 acres and describe but not value the other 87 acres. A survey and legal description of the 5 acres appraised would have to be provided by the client or seller or buyer, for example.

It's more complicated than that because there are countless scenarios that could be relevant. But in your specific case I think having an appraiser appraise only 40 acres of the 92 acres just to get around the Montana law would produce a misleading appraisal because all of the site would be encumbered and the client would not be able to foreclose under the Montana law. I think it's a loan agent that is offering advice and he does not represent the best interest of his own company.

 

[Jim Onderisin]

I agree with CAN. Additionally, the VA requires appraisers to value properties "as is". Valuing only 40 acres would be subject to the hypothesis the property is something it is not because it actually has more than 40 acres. The appraiser would be required to disclose that the value was subject to a hypothesis. The VA would not accept such an appraisal.

 

[srinaldo86]

Jim - that was really the definitive answer I was looking for. Thank you.