Need suggestions on how to respond to frivolous non sequitar review questions.

[MMing5000]

Whether the question of is subject an over or under improvement (for its site ) is NOT the same question as why is the subject market value opinion higher or lower than predominant price.

Q 1) The subject market value opinion is higher than neighborhood predominant price because the subject is on a beachfront lot which commands a substantial premium and the predominant price represents houses in the neighborhood that are not beachfront.

Q2) The subject is an under improvement for beach front properties because the subject being a C 4 condition small cottage has minimal contribution to lot and trend is for area buyers to tear down small cottages and build new larger houses ( or the reverse, subject is not an under improvement because trend is for buyers to retain small cottages on beachfront sites and upgrade them )

The subject is not an over improvement (at least from what is posted ) , the "reviewer" just asked the wrong question. Seems many std 1 "review" are a non appraiser , clerical person trained to read a checklist and ask questions from that list. IMO these should not be called reviews but have a different label. .

I like to address predominate price and under or over improvement issues proactively rather than respond to either as a client question .

So, the question is, if the 500 sf 2 bedroom cottage has very little contributory value to the overall beachfront lot's value, how do you respond to the Reviewer's question whether the subject is over improved because it's value is significantly more than the predominant value in the neighborhood?

 

[CANative]

So, the question is, if the 500 sf 2 bedroom cottage has very little contributory value to the overall beachfront lot's value, how do you respond to the Reviewer's question whether the subject is over improved because it's value is significantly more than the predominant value in the neighborhood?

Is the lot big enough to construct a new and larger more high-end SFR? Given the Coastal Commission's development restrictions, set backs, height restrictions, etc, etc.? What are other nearby improvements (beachfront) SFR's like? Is the property more valuable the way it is now improved versus razing the SFR and preparing the site for a new use?

Just for fun, can you post the range of address numbers along Hwy 1 (if that's where the subject is?)

 

[Carnivore]

Not only is this not a frivolous question for the reviewer to ask but it indicates that the original appraisal report failed to adequately convey the point that the beachfront location is the single dominant attribute of the subject property and that it's market segment is limited to other *beachfront* homes in this location and in other nearby beachfront neighborhoods.

It doesn't matter what the homes on the inland side of the street or the rest of the neighborhood are selling for because none of those properties are comparables to the subject. Nor does it matter what the other areas of this neighborhood are selling for because they're even more disconnected from the subject's market segment.

If the structure is old/small for the area then there's a *distinct* possibility that it's an underimprovement for the site and also a possibility that the structure has no contributory value to the site and that it might be marketed for land value. A land sale analysis - using actual land sales data - is definitely in order in this scenario if for no other reason than to address the HBU issue. It is highly likely that some of those land sales will have old/small homes onsite that are an underimprovement for the site and have no contributory value. In fact, if you have similar homes among your comparables some of those listings may include a "value is in the land" or "sold for land value" comment in them.


The overwhelming majority of the new SFR construction appraisals I've performed on beachfront parcels in the last 20 years have had older homes onsite that - physical condition notwithstanding - had no contributory value to the site and were therefore demolished to make way for bigger and better.

So yeah, if a lender is asking whether or not you're signing off on what amounts to a 90% land loan that is not a frivolous question.

George gave the best answer....like George said about including the site/land analysis would have probably staid off the request. So to be even more proactive to prevent the inevitable future stip, you should in the neighborhood section have an extensive description(assuming 1004 format) See Addendum in great detail describing the neighborhood. This is setting up the Client/UW/checklist charlie for the disappointing news they were going to be securing a loan on mostly land and the AMC checklist job security by denying them justification for the important job they think the have of Aggravating you with Stips.

i started doing the following quite awhile back, because I too along with all of you am suffering from the checklist charlie stipper & UW's.

We all are suffering from the Continuous Evolutionary process of USPAP a living document & the Stuck in Time FNMA series Report Formats.

Here is my page line up for all FNMA Series Report Format
I am doing this so they don't have to hunt for all of the below and resulting in them having to hunt For Page one of the FNMA Series Report

This is what they see first before they ever get to Page one of the FNMA Series
This comes 1st & 2nd Page
1. Copy of State License if required
2. Copy of E&O if Required
Pg 3 - USPAP Addendum Very important to be 1st, 2nd or third page page of Report

All other addendum & exhibits i.e not necessarily in this order But always before page one of a FNMA Series Report
Flood Map, Aerials,
1004MC,
Supplemental Statistics
Subject photos,
Subject Interior Photos
comp photo pages
subject/comp Location Map
General comments addendum
Highest & Best Use analysis (if needed due to space limitations on URAR
Site Evaluation/value determination
Detailed Cost Approach(if needed)
Tax Card subject & comps

and Finally
Page one of the FNMA Series Report

 

[jay trotta]

CARN; i started doing the following quite awhile back, because I too along with all of you am suffering from the checklist charlie stipper & UW's. - lost my mind for a minute, thought it said, checklist Charlie Stripper.

So how has your "set up" prevented "stips" ??

 

[CANative]

The narrative section starts with a detailed neighborhood description; then market conditions, then zoning/HBU summary, then Exposure time discussion; then the sales comparison section which prepares the reader for good or bad news. The comps are descried and then the last part is the reconciliation of the sales comparison approach. Sometimes, I had a few sales in the narrative that didn't make it into the adjustment table. It's "other data analyzed." The income and cost approaches are discussed in the big comment cell on Page 3. Page two has a reconciliation of the approaches and rationale for the OMV.

 

[Carnivore]

CARN; i started doing the following quite awhile back, because I too along with all of you am suffering from the checklist charlie stipper & UW's. - lost my mind for a minute, thought it said, checklist Charlie Stripper.

So how has your "set up" prevented "stips" ??

Short Version answer to your question.. What it does is forces the Checker Dude/dudette to at least SEE all the Addenda , exhibits etc etc for at least a fleeting moment as they scroll down the report searching for and before they finally get to Page one. Hopefully that Fleeting moment will prompt them to go back and read ...instead of just firing off a Stip to you or me. Has it worked for me, YES i have noticed a Dramatic drop in Stips for two reasons, 1. I am being more thorough and the checker Dude at least looks back and often finds the stip has already been addressed.

Its not perfect...

After thought: i have some real world experience in establishing this kind of reporting system...It goes back to my Military service as a Military Pilot US Army.. Specifically my assignment to Bell Helicopter Textron as a So called Test Pilot and another Assignment as Squadron Flight Operations Officer. I can get into details but to keep it short Efficiency was important. Basically Logical Planning requires Logical Steps in the planning. Building an Aircraft is very much similar to Building an Appraisal Report. Collect all the parts, put them in a logical sequence and assemble/develop the Aircraft/Appraisal Report

The URAR is not editable and does not flow well enough. For a Cookie Cutter house it works well enough, but still has problems

So think of all those exhibits, pix other stuff, comments as a Giant Parts Department. Checklist Charlie is jumping all over your report looking for something. i made it easy for him. Go back to the part department and you will find it there. Thats the place you walk past everyday to get to your desk,

 

[J Grant]

So, the question is, if the 500 sf 2 bedroom cottage has very little contributory value to the overall beachfront lot's value, how do you respond to the Reviewer's question whether the subject is over improved because it's value is significantly more than the predominant value in the neighborhood?

They are asking the wrong question, but being that they asked it, you can respond with

"The subject is not an over improvement because the dwelling is smaller than most predominate price homes , with more value attributed to the lot. "

(It's predominate price in the neighborhood not predominate value )...

 

[George Hatch]

Try adding something similar to these sentences to the first line of your Neighborhood, Site, and Improvements Sections:

(This report includes a market segment summary and analysis that's separate from the Neighborhood section: See pg 10 of this report)

(This report includes supplemental comments in support of the site analysis. There is also a separate Highest and Best Use Summary: See pg 10 of this report)

(This report includes supplemental comments in support of the improvements analysis. See pg 10 of this report)

Then include the highlights of your analysis on the front page of the URAR and the slightly more descriptive summaries in your addenda - nothing crazy, just what you would wish they had given you room for in the main body of the report.

---------------------------------

Also, if you think about it, the HBU analysis should come *after* the improvements analysis because HBU doesn't consist only of what's legal on the site; it includes consideration of everything on pg 1: the nature of the property rights being appraised, the neighborhood influences, site and improvements - all of it. Not just the zoning. If there are neighborhood trends for redevelopment - or no redevelopment - or positive/negaitve proximate influences. If the subject property rights are a mapped condo that mapping is part of the legal permissibility. If there are encroachments or easements or flood plains or topographic elements. On the improvements side, if the improvements are atypical for the neighborhood or there are physical conditions issues - ALL of these elements are part of the HBU analysis, not just the site attributes.

Likewise, the subject's market segment analysis - including the 1004MC stuff if you're using that - logically belongs after the HBU analysis and before the valuation sections. There's no reason to be addressing the subject's market segment until you identify the entirety of what the subject itself actually is. The subject's market segment shouldn't even be referenced in the Neighborhood section - even if they share the same geographic boundaries. That single point of conflation, hardwired into the form itself, is why your readers go crazy when your subject isn't the same as what's typical for the neighborhood.

Moreover, your readers cannot understand your market segment analysis all that well until they have seen what the subject is like and how the HBU turned out. Market segment analysis is what a buyer does after they figure out what the subject is like.

-------------------------
WRT the logical sequence of problem identification and making SOW decisions what you're doing is outlining the subject's neighborhood, site and improvements characteristics before summarizing the HBU, and then using the conclusions of the HBU to identify and analyze the subject's market segment. It is only after you've reached THAT point that you're deciding which approaches to develop, which units of comparison are dominant in the way these buyers and sellers look at these properties, which types of comparables the subject is competing with and so on. So the logical sequence for an SFR appraisal would be

Property identification info
Neighborhood attributes (only)
General market conditions for all properties in the neighborhood
Site analysis
Improvements analysis
HBU analysis
Market Segment analysis (geographic range, age/size ranges, pricing trends, etc)
Approaches to value

If your forms were set up in a more logical sequence and without forcing you to using the addenda to bridge the gaps nobody would even think to ask dumb questions about why your subject is atypical for it's proximate environment or why you had to go to heroic lengths to find and adjust your comps and so on. The form would have prompted you to address these issues as you go instead of after the fact while you're reviewing what you already did and are trying to figure out how to avoid the stip.

 

[MMing5000]

Try adding something similar to these sentences to the first line of your Neighborhood, Site, and Improvements Sections:

(This report includes a market segment summary and analysis that's separate from the Neighborhood section: See pg 10 of this report)

(This report includes supplemental comments in support of the site analysis. There is also a separate Highest and Best Use Summary: See pg 10 of this report)

(This report includes supplemental comments in support of the improvements analysis. See pg 10 of this report)

Then include the highlights of your analysis on the front page of the URAR and the slightly more descriptive summaries in your addenda - nothing crazy, just what you would wish they had given you room for in the main body of the report.

---------------------------------

Also, if you think about it, the HBU analysis should come *after* the improvements analysis because HBU doesn't consist only of what's legal on the site; it includes consideration of everything on pg 1: the nature of the property rights being appraised, the neighborhood influences, site and improvements - all of it. Not just the zoning. If there are neighborhood trends for redevelopment - or no redevelopment - or positive/negaitve proximate influences. If the subject property rights are a mapped condo that mapping is part of the legal permissibility. If there are encroachments or easements or flood plains or topographic elements. On the improvements side, if the improvements are atypical for the neighborhood or there are physical conditions issues - ALL of these elements are part of the HBU analysis, not just the site attributes.

Likewise, the subject's market segment analysis - including the 1004MC stuff if you're using that - logically belongs after the HBU analysis and before the valuation sections. There's no reason to be addressing the subject's market segment until you identify the entirety of what the subject itself actually is. The subject's market segment shouldn't even be referenced in the Neighborhood section - even if they share the same geographic boundaries. That single point of conflation, hardwired into the form itself, is why your readers go crazy when your subject isn't the same as what's typical for the neighborhood.

Moreover, your readers cannot understand your market segment analysis all that well until they have seen what the subject is like and how the HBU turned out. Market segment analysis is what a buyer does after they figure out what the subject is like.

-------------------------
WRT the logical sequence of problem identification and making SOW decisions what you're doing is outlining the subject's neighborhood, site and improvements characteristics before summarizing the HBU, and then using the conclusions of the HBU to identify and analyze the subject's market segment. It is only after you've reached THAT point that you're deciding which approaches to develop, which units of comparison are dominant in the way these buyers and sellers look at these properties, which types of comparables the subject is competing with and so on. So the logical sequence for an SFR appraisal would be

Property identification info
Neighborhood attributes (only)
General market conditions for all properties in the neighborhood
Site analysis
Improvements analysis
HBU analysis
Market Segment analysis (geographic range, age/size ranges, pricing trends, etc)
Approaches to value

If your forms were set up in a more logical sequence and without forcing you to using the addenda to bridge the gaps nobody would even think to ask dumb questions about why your subject is atypical for it's proximate environment or why you had to go to heroic lengths to find and adjust your comps and so on. The form would have prompted you to address these issues as you go instead of after the fact while you're reviewing what you already did and are trying to figure out how to avoid the stip.

"the HBU analysis should come *after* the improvements analysis because" ... i whole heartedly disagree, the HBU analysis is the #1 step in the whole appraisal process after the appraisal inspection ... everything is secondary when you have improvements that do not meet HBU criteria.

 

[George Hatch]

Lets see how that holds up.

What is the sequence of factors analyzed in an HBU analysis?