Parcel size greater than 5 acres

[Bamba]

I am going to open a new thread here, since it seems on the Fannie forum nobody sees it

Here is what I got from Citizens, apparently starting 1/1/2009:

"For properties with a parcel size greater than 5 acres, the following guideline will be used:

The first 5 acres will be considered for the primary site; half of the remaining acres should be valued as excess land and included in the appraised value; remaining acreage will be commented in the addendum (in the lines that it has zzz value but at the request of the lender the value is not included in final appraised value)"

Anybody ran into this? any thoughts?

 

[Thomas Fiehler]

no.No.NO! What is "the first 5 acres"? It is a FNMA requirement to appraise the total parcel. I'm sure others will respond that in some parts of the country, the minimum lot size is greater than 5 acres. You need to appraise what the parcel is, in its total size. Now it may be that there is some point where the land size starts to reduce in value, and that would be the excess land but the market, and you, determine that. Not some piece of paper that originated from an office hundreds or thousands of miles away! If the lender does not want to include the excess land value in their lending, have them require a survey naming the 5 acres. That was they won't be burdened by putting a lien on the whole site!

 

[Steer]

no.No.NO! What is "the first 5 acres"? It is a FNMA requirement to appraise the total parcel. I'm sure others will respond that in some parts of the country, the minimum lot size is greater than 5 acres. You need to appraise what the parcel is, in its total size. Now it may be that there is some point where the land size starts to reduce in value, and that would be the excess land but the market, and you, determine that. Not some piece of paper that originated from an office hundreds or thousands of miles away! If the lender does not want to include the excess land value in their lending, have them require a survey naming the 5 acres. That was they won't be burdened by putting a lien on the whole site!

Thomas' comments are right on.

Another thing to consider, is that 5 acres may very well be the common lot size, or minimum lot size for zoning purposes.

These lenders have to stop this "everything fits into the same box" mentality.

Your job is to consider H&BU, and surplus/excess adjustments

 

[Carnivore]

Tell them your report will not be AS-IS. That will stop them in their tracks.

The purpose and intended use is to loan on the total parcel, not the five acres.

I can not stand much more of this madness.

 

[The Warrior Monk]

Appraising the property in the manner that the is put forth in the assignment conditions results in a value conclusion that is not market value. Are they looking for an investment value conclusion?

 

[Bamba]

Appraising the property in the manner that the is put forth in the assignment conditions results in a value conclusion that is not market value. Are they looking for an investment value conclusion?

I am not talking about a particular assignment. All Citizens orders from different sources are coming with the same guidelines effective 1/1/2009.

 

[PropertyEconomics]

Such an appraisal would require appraisal under the Hypothetical Condition that values are allocated as noted, and IF, Citizens is a federally regulated institution, an "as is" value would be required in addition. The fee for such an assignment should be considerably more than that of just an appraisal because of these additional "assignment conditions".
The last thing you want to do is prepare a misleading report, and Id have a hard time believing that anyone other than Citizens, would understand the need for use of the Hypothetical Condition and misleading would extremely possible to others reading the report. Such conditions will require good verbage and discussion of both values .... the as is and that of the hypothetical condition.
I think even if Citizens is not federally regulated, conclusion of both values would be most prudent on the part of an appraiser.

 

[Riick]

And... as always, exactly WHICH 5 acres?
The five surrounding, but not beneath the house?

 

[Restrain]

Thomas is right on. Your job is to value the property based on the market, not some formula concocted by the lending division. If you accept the guidelines, they would have to be in the SOW, and a disclaimer should be put in that these guidelines are in violation of USPAP and generally accepted appraisal practices, as well as Fannie/Freddie guidlines (that'll get their attention).

You value the land based on the market. When you get afoul of Fannie is if the 5 acre hypothetical site does not have a specific legal description (survey or plat). You may have 20 acres overall, but be platted into 5 acre tracts, as an example. The lender may have an issue when it comes to selling the loan on the secondary market if the acreage is not typical for a residential property. For example, in some areas of Colorado, there's 20-40 acre minimum site sizes and they would be considered acceptable and typical. Conversely, if the site is 75 acres, and the market shows that most homes are on up to 10 acres, the lender will have difficulty selling the loan on the secondary market. That's why you see the "5 acre site" requirement so often.

Hope this helps.

 

[PropertyEconomics]

Thomas is right on. Your job is to value the property based on the market, not some formula concocted by the lending division. If you accept the guidelines, they would have to be in the SOW, and a disclaimer should be put in that these guidelines are in violation of USPAP and generally accepted appraisal practices, as well as Fannie/Freddie guidlines (that'll get their attention).

You value the land based on the market. When you get afoul of Fannie is if the 5 acre hypothetical site does not have a specific legal description (survey or plat). You may have 20 acres overall, but be platted into 5 acre tracts, as an example. The lender may have an issue when it comes to selling the loan on the secondary market if the acreage is not typical for a residential property. For example, in some areas of Colorado, there's 20-40 acre minimum site sizes and they would be considered acceptable and typical. Conversely, if the site is 75 acres, and the market shows that most homes are on up to 10 acres, the lender will have difficulty selling the loan on the secondary market. That's why you see the "5 acre site" requirement so often.

Hope this helps.

The bold statement is simply not true.