Release/reconveyance appraisal

[Frederick R. Ruffell]

Here is the deal. got this request.
LOAN ENCUMBERS 9,510 SQUARE FEET WITH HOUSE AND IMPROVEMENTS. BORROWER IS REQUESTING RELEASE OF 4,419 SQUARE FEET. NEED FULL APPRAISAL ON REMAINING 5,091 SQUARE FEET WITH HOUSE AND IMPROVEMENTS. SEE ATTACHED MAPS AND LEGAL DESCRIPTIONS.
This loan/appraisal is for Release/reconveyance.
Upon inspecting the property there are two new units being built. on the rear of the lot and new electrical service ( drop line, weather head, and THREE meters) attached to the original structure. I was provided a surveyor's map but not with any record of a lot split being recorded with the assesors office. What is the bank asking, typically, in this situation? The value of the original structure and the described land area (split), as if it were recorded (obviously a hypothetical situation, reinforced by the electrical service configuration), OR The value of the original structure and the described land area (split), as part of the property as a whole subject to completion of the two units under construction. I can not get a hold of anyone at the bank who is competant enough to understand the situation untill next week and want to have this sorted out by monday. Dick Doleman are you out there anywhere??

 

[airphoto]

Gotta start with a couple of "ifs."

If I read what you wrote correctly, and if you wrote it correctly:

Sounds as if you're appraising the original dwelling on the lesser (described/surveyed) parcel. The new construction should be on the parcel divided off and is absolutely no concern of yours!

 

[Pamela Crowley (Florida)]

What Bill said plus make sure the split is LEGALLY PERMISSIBLE.

 

[Frederick R. Ruffell]

Pam and airphoto,
To expand on what I wrote before, I was provided a map by a licensed surveyor but I cannot find any evidence of the lot split being recorded. My plan is to go with a hypothetical siuation to cover the unfinished units being finished and the appraisal report subject to the lot split being recorded. That way if it does not get recorded for any reason I am covered. what do ya think?

 

[airphoto]

Think you're reading too much into the request .. why do you feel obligated to get involved with the new construction? Have you been provided with plans and specifications for the new construction? The manner in which you phrased your question implies only an interest by the lender in the value remaining after the portion containing the new construction has been separated. In the general case, they would be interested in knowing if they'd have appropriate equity in the portion they continue to encumber .. or what amount of payment they'd require to allow the partioning to occur ..

 

[Frederick R. Ruffell]

AirPhoto,
I do not feel I need to address the new construction, what has me miffed is why is the electrical service for the two new units attached to the soon to be seperate existing improvments? Could be a contractor mistake or is a lot split actually going to take place? My question is does a lot split actually get recorded when a release/reconveyance is performed by a bank, is it required by the bank typically? I want to know this because if it does not (get recorded or required) then my value could/should/will be different if the property consists of three units and they want me to value the existing improvements and partial lot as a part of the 3 unit property(sum of the parts does not equal the whole).

 

[Frederick R. Ruffell]

AirPhoto,
Oh one more thing, the hypothetical situation of the units under construction being completed is necessary (in my opinion) as they will pose external obsolesence to the SFR as it will back to the units once they are complete. I have market data that supports this. So maybe thats where you think I am paying too much attention to the new construction?
Thanks
FRR

 

[Ben Vukicevich SRA]

FRR,

Airphoto has it correct.

First, what the owner wants is the rear site free and clear. He has asked the bank to release it from the existing mortgage. What the bank wants and what they are expecting you to do is value the original home on the new site to see if they have an 80% LTV ratio (or whatever LTV ratio they are using). If the LTV is not there, the owner will have to up some cash to obtain the release. This is the excess land concept we discussed over on the FHA forum and is the reason why lenders don't like subdividable sites-lots of paperwork and lots of problems.


If you're in a rush, use the survey they gave you to complete the report and condition the report on "review by the bank's attorney as to the acceptability/legality of the subdivison." Throw the final decision onto the bank's attorney via the appraisal condition-they get paid lots to review documents to protect the banks' interest. Let them look at this one so that you're off the hook and USPAP happy.

You may also wish to add an addendum to explain in detail what you have valued in the report.

I don't know why the electrical service for the new units would be attached to the existing structure unless it was a temporary service while the new units are being built.

Ben

 

[Frederick R. Ruffell]

Ben, Thanks for the reply. Does the lot split actually have to take place before the bank will release the (proposed) rear lots from the mortgage? If it does not then I have a three unit property (as evidenced by the electrical service) which is a different valuation altogether. what do you think?

 

[Ben Vukicevich SRA]

FRR

Yes, the subdivision will have to occur before the bank will release the rear lots. They will need the approved subdivision survey to draw up the new legal description for the front section with the home which will be their only security for the remaining loan balance.

Now for your part, you don't care if the subdivision ever takes place. Value the front parcel on the site size/survey they gave to you, condition the report on the bank's attorney's review of the subdivision for acceptability and let it go. Think of it like a new construction appraisal subject to completion. You value "subject to" but if it never occurs, it's not your problem. Same scenario here. Value "subject to" approved subdivision. If it takes 6 months to get the town approvals, it's on the owner. Not your problem.

Ben