Not Urgent - Just important

[Rick Neighbors]

Need some input from some of the senior, in experience, Appraisers here.

Received appraisal request from local bank in my small town. Property consists of a small rent house on 1/4 acre lot, and the adjoining lot which has been platted for 8 small townhouses. All land owned by same person. And this is for a refi.

They wanted to know if I could just roll all the property into one appraisal. I explained that would not really be right, because there are 9 different legal descriptions and 9 different tax cards. I suggested 1 appraisal on the rent house, and told them I needed to do some research on the best way to handle the 8 vacant proposed town house lots.

The property has been platted, and the city has it already marked on their maps as 8 separate lots. No construction has started yet, in fact probably won't for a good while. Right now it's just a large vacant lot.

What say you?

Rick

 

[Michigan CG]

You most certainly can do it, however you must disclose exactly what you said above in the report and that may be the problem.

But you say it is a local bank, if they are going to keep the loan in house I don't see a problem with it. If your was a typical post here it would be some idiot from India asking you to put it all in one report without the proper disclosure of what it really is.

I am not saying every phone monkey with a foreign accent is an idiot.....just the breathing ones.

 

[Mztk1]

The vacant lot with 8 plotted sites is non-residential in nature. Residential is 1 to 4 units and since you have the potential for more than 4 it is not a residential property and you should inform your client that it cannot be appraised as a residential property.

The cottage or small house on a 1/4 acre can be appraised separately but if it is part of the same property as the 8 unit townhouse in title you'd have to make the report subject to a survey and based on the hypothetical condition that it was a separate property, i.e., subject to subdivision from the other lot.

That's my 2 cents. I'm sure you'll get much better insights from others.

 

[Kevin Mc]

I am not saying every phone monkey with a foreign accent is an idiot.....just the breathing ones.

Excellent!!!. I was hoping becoming a moderator wouldn't tone you down all that much.... I agree. If is for a portfolio lender and this is the way they want to approach it can be done (ugly but possible). If it is for a GSE loan, can't do it. It would all have to whacked up and individually appraised.

 

[PropertyEconomics]

Need some input from some of the senior, in experience, Appraisers here.

Received appraisal request from local bank in my small town. Property consists of a small rent house on 1/4 acre lot, and the adjoining lot which has been platted for 8 small townhouses. All land owned by same person. And this is for a refi.

They wanted to know if I could just roll all the property into one appraisal. I explained that would not really be right, because there are 9 different legal descriptions and 9 different tax cards. I suggested 1 appraisal on the rent house, and told them I needed to do some research on the best way to handle the 8 vacant proposed town house lots.

The property has been platted, and the city has it already marked on their maps as 8 separate lots. No construction has started yet, in fact probably won't for a good while. Right now it's just a large vacant lot.

What say you?

Rick

Rick ...
You can absolutely do one report and include all of these properties, however, there are a few issues to consider. If this is for a refinance loan, you will need to have your client tell you their intentions with the loan .. ie is it going to be a portfolio loan, is it intended for sale on the secondary market, is it being done to Fannie guidelines (no can do).

What are the chances these properties would be offered for sale together? It seems to me you have a highest and best use issue that you must address first. Doing this on a form will present many challenges to you but USPAP doesnt address how an appraisal has to be reported, only that it cant be misleading.

I think with that many townhouse lots you will have to have some sort of absorption analysis unless you have sales of bulk lots that you can do comparisons with in order to accurately reflect the value of those townhouse lots. Simply determining their retail value and adding each to the value of the improved property will not work, as I am sure you know.
Lacking sales of bulk lots like your subject, how comfortable do you feel with discounted cash flow analysis? Being able to determine the retail value of the lots, deducting all expenses associated with holding these lots (ie taxes, liablity, etc), estimating an absorption time and then discounting all to a present value (determination of the appropriate discount rate may also be a bit interesting) to be added to the value of the improved property.

It sounds like valuation of the townhouse lots is necessary in order for there to be enough value for the borrower to obtain the desired loan. Its a bit of a tricky situation if you ask me but certainly one that can be done.
The question you must ask yourself is how comfortable do you feel in doing so knowing that being placed in one report, and particularly a form report, will require a lot of addenda pages.

Good luck with this one.

 

[Wayne Tomlinson]

I have appraised such divided properties frequently. Having more than one legal description just takes more room.

Describe what you are doing, and then do it. It is called SCOPE OF WORK. Where is it writen except here on the forum that you cannot do it.

Does the local bank have a lot of stips that you are required to follow. Do they require you to follow Fannie guidelines or FHA protocol? No? well do the job!

If you have more questions, ask the client to give you a writen request for just what they want.

They just might tell you that they will just get someone else who can to it without so much problems with the request.

Ritght now I am appraising a farm. The owners had had an "Equestrian Facility" there. They divided it up iinto 9 different tracts and attempted to sell them at acuction. Only three sold. I am appraising the remainder. The legal covers three single spaced pages.
There will be only one appraisal.

Just do it.

Wayne Tomlinson

 

[The Warrior Monk]

The most important thing is to communicate with the client to see what they are doing. The value of the subdivision can be determined, however, there are several issues involved:

1. On the lender end - What type of loan is the borrower going for? The rates for a single-and-separate lot zoned and improved with a SFR is going to be one rate, and the value of the subdivision is going to be another (likely higher) rate.
2. On the appraiser end - Appraisals of subdivisions, even if residential in nature, will require a GC. If the subdivision analysis is necessary, it will require the determination of absorption rates, discount rates, and some costs.

 

[The Warrior Monk]

Residential is 1 to 4 units and since you have the potential for more than 4 it is not a residential property and you should inform your client that it cannot be appraised as a residential property.

FWIW, licensing doesn't divide the appraisal of properties into residential and nonresidential categories. Many residential properties, such as apartment buildings and residential subdivisions, are residential in nature. The division is more along the lines of properties that can be appraised by sales comparison, versus properties that may require the income approach (more specifically, discounting...not GRM, which is basically an extension of the sales comparison approach).

Naturally, other complex properties can be appraised by sales comparison, such as easements, etc., but the these properties are not likely to be financed...and, of course, laws pertaining to appraisal are lender driven.

 

[Greg davenport]

The property has been platted, and the city has it already marked on their maps as 8 separate lots. No construction has started yet, in fact probably won't for a good while. Right now it's just a large vacant lot.

What say you?

Rick

[FONT=&quot]
Are you putting the cart before the horse?
What is the H&BU of the lots? I work in small towns, and some have platted subdivisions that are 30 years old, and NEVER started.
Will a proper H&BU analysis solve your problem[/FONT]?

 

[Rick Neighbors]

Good replys

Thanks for the input.

Further info, this is an in-house deal for a small bank, with a owner with excellent credit.

There are other "townhouses" on this same street, that would be almost an exact duplicate of this property.....probably where the owner got the idea.

This is a university town with an abundance of rental properties, and more need for the same.

The bank wants to know the "true" value of the owners holdings. Rent house on small lot is not a problem. The 8 platted lots, which have the correct zoning in place already, is the question. Right now it's a large vacant lot.....but that's where the H&B issue comes up. And, the use as town house lots would render the most return for the investment for this small area. The townhouses that are on the same street went quick! So this owner probably thinks he will have the same sucess, and I am inclined to belive he is correct.

I've lived here for over 40 years, and watched this small town grow. It's been interesting. I've been on our local Community Development Corp. for 6 years and am now it's President, so between that and my appraisal business, I have kept my finger on the pulse so to speak.

Right now I'm trying to determine the best way to handle the platted lots, and provide the best legal appraisal that I can for my client. And, as I am a Certified Residential, I may refer this one to a General. The income potential is not as important to me as doing the right thing!

Thanks again,
Rick