Out of Option, Need Help!

[Surf Cat]

That’s my plan! Thus why I wrote here to get opinions - I wanted to be sure I wasn’t blinded by being the buyer who really wants the property. This has all been so helpful and I’ve already collated all this info and more and reached out to the AMC, the lender, broker, agents etc. And I’m planning on making noise until this get sorted out properly

You direct all your concerns to your agent. If your agent doesn't seem to have the urgent concerns you do, you contact your agent's brokerage. They contact the selling agent and the lender, whom contacts the AMC, whom contacts the appraiser. You don't contact the appraiser directly. That's just the way it is.

Your agent "should" be all over this though. There's no way I would "not" get another appraisal or review out this....you just don't throw $600 up into the air for a "so sorry, we don't do these types of loans".

Additionally, I second George Hatch's opinion of Terrel Shields. Don't discount his opinions as these types of assignments are right up his alley of expertise.

 

[Elliott]

OP,
So you sat down with a lender, so you should be able to go back to him and reach out and strangle him, tell him/her/it to find a lender based on the original appraisal, and find a mortgage lender. I once 'telephoned' a refi with BofA, the most frustrating experience in real estate I've ever had, they wanted doc after doc after doc and I finally walked away and since I had every document under the sun, went to another lender and it was easy peasy. When a 'broker' sees thousands of dollars walking out the door, they get motivated.

 

[Terrel L. Shields]

that this is not a commercial property, nor would the value of the commercial style building make up 50% of the value

Speculating upon the contributory value of a building in a rural setting is exactly that. Some appraisers without the expertise would back off quickly. Why? Because as Surf Cat noted it is out of his wheelhouse. So, from my experience I have seen a huge number of appraisers who have nary a clue what a building contributes. They don't even own a cost book that covers agricultural buildings nor do they even have experience vetting the various styles of barns, buildings, etc. They go find some comp with a building, declare it a "comparable" building, and "extract" the value on a single paired sale to claim its worth what? 9 of 10 times they say $10,000 or $5,000... OK. Great. A shop with concrete floor, heat, maybe even air, steel truss, and metal clad compared to a dirt floor shed, with no insulation, no electrical, and pole construction compares to the former about like comparing a Yugo with a Acura. And without a cost book or a knowledgeable way of estimating the cost, age, and quality ... you might as well use a dart board. So that's an issue. And again, I see a lot of CRs guessing at the value. So if they discount the value of the buildings to a couple thousand to maybe 10k, and pull a number out their heinie for the land value, how do they get to the transaction price? Do they? Wouldn't that make your problem worse? Undervaluing it? You need someone experienced with these kinds of buildings and typically it will be a CG from an agri lender like Farm Credit. Bozo the clown isn't the one. The barns below are far far different in value and construction. No country for amateurs.

 

[djamesgoodwin]

that this is not a commercial property, nor would the value of the commercial style building make up 50% of the value

Speculating upon the contributory value of a building in a rural setting is exactly that. Some appraisers without the expertise would back off quickly. Why? Because as Surf Cat noted it is out of his wheelhouse. So, from my experience I have seen a huge number of appraisers who have nary a clue what a building contributes. They don't even own a cost book that covers agricultural buildings nor do they even have experience vetting the various styles of barns, buildings, etc. They go find some comp with a building, declare it a "comparable" building, and "extract" the value on a single paired sale to claim its worth what? 9 of 10 times they say $10,000 or $5,000... OK. Great. A shop with concrete floor, heat, maybe even air, steel truss, and metal clad compared to a dirt floor shed, with no insulation, no electrical, and pole construction compares to the former about like comparing a Yugo with a Acura. And without a cost book or a knowledgeable way of estimating the cost, age, and quality ... you might as well use a dart board. So that's an issue. And again, I see a lot of CRs guessing at the value. So if they discount the value of the buildings to a couple thousand to maybe 10k, and pull a number out their heinie for the land value, how do they get to the transaction price? Do they? Wouldn't that make your problem worse? Undervaluing it? You need someone experienced with these kinds of buildings and typically it will be a CG from an agri lender like Farm Credit. Bozo the clown isn't the one. The barns below are far far different in value and construction. No country for amateurs.

View attachment 85724View attachment 85725

I certainly understand all that. I suppose the core issue I have here is that at least with an undervalue, I can negotiate with the seller. When an appraiser decides to erase its current use and declare it as commercial HBU, I no longer have a path forward.

I do understand that the buildings contribute value, in no small part because of what they are. But what I’m contending is that the ‘commercial’ building itself, based on the location and market, is of limited value without being attached to a residence. Meaning that the primary buyer for this will 9 of 10 times be someone like myself, and not someone looking for a commercial property.

And I just have a hard time understanding how an appraiser could so easily conclude its HBU as commercial when it would reverse its current use, etc. Seems to me like the burden should be rather high to deny its current use.

 

[Tiffany Gibbons]

I certainly understand all that. I suppose the core issue I have here is that at least with an undervalue, I can negotiate with the seller. When an appraiser decides to erase its current use and declare it as commercial HBU, I no longer have a path forward.

I do understand that the buildings contribute value, in no small part because of what they are. But what I’m contending is that the ‘commercial’ building itself, based on the location and market, is of limited value without being attached to a residence. Meaning that the primary buyer for this will 9 of 10 times be someone like myself, and not someone looking for a commercial property.

And I just have a hard time understanding how an appraiser could so easily conclude its HBU as commercial when it would reverse its current use, etc. Seems to me like the burden should be rather high to deny its current use.

Was an appraisal even done? In your original post, you said the AMC "put out the card" and the AMC said that the appraiser concluded it was commercial, then the AMC "put it back out" and no CG has picked it up. This AMC has your money and is running the show and they are telling you whatever they want. Get your money back and get away from this AMC. Tell them you will report the AMC to the state board if your money is not refunded immediately and get the agents (who will make thousands off the sale) to help you find a suitable local lender. My opinion only, but this is a very typical farm residence property with small acreage (in my area), and I'm a CG. It should not need a narrative appraisal and you will not get a narrative for $630. The buildings in good shape should just have contributory value to the overall property. Did you ask for the Comparative Market Analysis from the agent. Get your agent to run one too. Bound to be other similar sales and listings.

 

[andrew81]

As others here, I have much respect for Terrel and his knowledge and expertise.

I do not disagree with Terrel that a typical appraiser undervalues or uses inappropriate adjustments of land and outbuilding due to lack of knowledge and experience.

I would disagree that just because there is value to the land and outbuildings that is over 50% of the total value of the property, that it should be classified as a non-residential use and therefore disqualifies for secondary market requirements.

Land and outbuildings that are not primarily used for agriculture, farming, or commercial enterprise, qualify for secondary market requirements, as long as the entire property is considered residential in nature. It is not the size or value of the land and outbuildings that disqualify for secondary market requirements. It is the primary use of the property.

This type of property is quite common in my area. It is usually sought after by people who love horses or want a farm-like environment without the obligation of significant agricultural responsibilities. The buildings you described are important in attracting potential buyers but are seldom used for commercial purposes. I live in a state where most rural areas don't have zoning regulations, so any use is allowed. However, commercial use is rare. You have a hobby or small-scale farm with all the appurtenances a buyer seeks for pleasure, not business.

edit//

Terrel, the interior photos of the buildings you posted look like personal use. Storage of an RV, truck, lawnmower, and hobby auto repair. Does not look like a commercial enterprise.

Again, I do not disagree with your assessment of valuation, just that these types of buildings could qualify for secondary market requirements.

 

[Terrel L. Shields]

FNMA
Properties that are not residential include, but are not limited to, vacant land, property primarily used for agricultural or commercial purposes

The appraisal requirements for mixed-use properties must
provide a detailed description of the mixed-use characteristics of the subject property;
indicate that the mixed use of the property is a legal, permissible use of the property under the local
zoning requirements;
report any adverse impact on marketability and market resistance to the commercial use of the property;
and
report the market value of the property based on the residential characteristics, rather than of the
business use or any special business-use modifications that were made. The total space that is used for non residential or commercial purposes may not exceed 35% (FHA is 49% for comparison)
So, the shops used for a business currently are not considered "non-residential" in utility?

Again, I am saying that an appraiser has backed off because they saw it as commercial. HBU is a non-issue. Any number of "commercial" uses can occur with "residential" property. FNMA and TILA even disagree whether a 4 plex is commercial or not. FNMA says if one unit is occupied by the owner, it is not.

What I am saying is that you are likely to have an unhappy experience trying to get a CR to value a COMPLEX property...are any of you appraisers not at least going to agree the property is COMPLEX??? Or do we just stuff it in a 1004 and ignore that complexity?

And the problem is not whether or not it is a CR or a CG. The problem is getting a competent appraiser who knows how to value this property and is paid appropriately to do so. Too many simply cut the process too short because the fee is too low. Farm Credit appraisers are often in-house appraisers who have the necessary expertise to value rural residential complex properties. And most of them I know are, in fact, Certified General appraisers, not certified residential.

you will not get a narrative for $630
Really? How slow do you type? I can type a 35 page report is about 2-3 hours typically. I have done extra simple properties - cookie cutters with nearby comps from start to finish in 6 hours or less. I frequently charge no more than $500 for a simple house appraisal and have done many for $400. I try to charge by the hour. As for the fee, the cost of the appraisal is not as important as the report being credible. And if it comes in low, then the appraiser is cheating the seller if they get browbeat by the buyer into lowering the price based upon a report that is weak as water.

 

[Tiffany Gibbons]

FNMA
Properties that are not residential include, but are not limited to, vacant land, property primarily used for agricultural or commercial purposes

The appraisal requirements for mixed-use properties must
provide a detailed description of the mixed-use characteristics of the subject property;
indicate that the mixed use of the property is a legal, permissible use of the property under the local
zoning requirements;
report any adverse impact on marketability and market resistance to the commercial use of the property;
and
report the market value of the property based on the residential characteristics, rather than of the
business use or any special business-use modifications that were made. The total space that is used for non residential or commercial purposes may not exceed 35% (FHA is 49% for comparison)
So, the shops used for a business currently are not considered "non-residential" in utility?

Again, I am saying that an appraiser has backed off because they saw it as commercial. HBU is a non-issue. Any number of "commercial" uses can occur with "residential" property. FNMA and TILA even disagree whether a 4 plex is commercial or not. FNMA says if one unit is occupied by the owner, it is not.

What I am saying is that you are likely to have an unhappy experience trying to get a CR to value a COMPLEX property...are any of you appraisers not at least going to agree the property is COMPLEX??? Or do we just stuff it in a 1004 and ignore that complexity?

And the problem is not whether or not it is a CR or a CG. The problem is getting a competent appraiser who knows how to value this property and is paid appropriately to do so. Too many simply cut the process too short because the fee is too low. Farm Credit appraisers are often in-house appraisers who have the necessary expertise to value rural residential complex properties. And most of them I know are, in fact, Certified General appraisers, not certified residential.

you will not get a narrative for $630
Really? How slow do you type? I can type a 35 page report is about 2-3 hours typically. I have done extra simple properties - cookie cutters with nearby comps from start to finish in 6 hours or less. I frequently charge no more than $500 for a simple house appraisal and have done many for $400. I try to charge by the hour. As for the fee, the cost of the appraisal is not as important as the report being credible. And if it comes in low, then the appraiser is cheating the seller if they get browbeat by the buyer into lowering the price based upon a report that is weak as water.

Terrel, in the OP, he said the AMC was now saying they needed a Commercial Narrative, not a residential one. If you're doing Commercial narratives for $630, you are typing faster than me, for sure.

 

[andrew81]

Where did you get this? The current FNMA Selling Guide it is only found under requirements for Condo and Co-op Projects.

List of Ineligible Project Characteristics
Fannie Mae will not purchase or securitize mortgage loans that are secured by units in certain condo or co-op projects if those projects have characteristics that make the project ineligible.
Ineligible Project Characteristics Condo and Co-op
The total space that is used for nonresidential or commercial purposes may not exceed 35%.

edit//

Current FNMA Selling Guide as of December 2023
Properties with Outbuildings
A lender must give properties with outbuildings special consideration in the appraisal report review to ensure that the property is residential in nature. Descriptions of the outbuildings should be reported in the Improvements and Sales Comparison Approach sections of the appraisal report form.
Significant outbuildings, such as silos, large barns, storage areas, or facilities for farm-type animals.
The presence of the outbuildings may indicate that the property is agricultural in nature. The lender must determine whether the property is residential in nature, regardless of whether the appraiser assigns value to the outbuildings.

 

[djamesgoodwin]

Terrel, in the OP, he said the AMC was now saying they needed a Commercial Narrative, not a residential one. If you're doing Commercial narratives for $630, you are typing faster than me, for sure.

that’s correct - and that’s the part that I do not understand. It went from being a complex residential to commercial narrative seemingly overnight, and what can I do with that? It seems the AMC just decided my fate right there, no?

Or is it plausible to have a commercial narrative done and have that narrative conclude it’s a residential property with an accessory usage?