Reporting Highest And Best Use

[Verne Hebert]

Steven-

You caught me. It is not good to assume.

But normally, the REO departments order them on a 1004 with some supplemental requirements in valuation and reporting.

The REO departments like to assume, regardless of a pathetic level of deferred maintenance, and any stigma, any contributory improvements have lots of value.

 

[Diana Malcolm]

I received the following email from a planning department in response to my asking about dividing subject site. (meth lab, old house, over an acre, possible 5,000 SF lots)

Diana:

There may be some setback or buffer requirements related to the pond that would limit the development that could occur but probably would not totally prevent further development.  One option open to your client is to hold a pre-application conference on a conceptual proposal for the property.  The pre-app conference would give your client a written response detailing issues related to developing the property including wetlands, setbacks, ingress/egress, utilities, etc.  The cost for a pre-app is $300 and half of this fee ($150) is credited towards any application submitted in the next six months.  It usually takes two to three weeks to get one scheduled once you have submitted your pre-app conference application. 

This may give your client the comfort level they are after.

This kind of response is exactly why I have such a hard time with Highest and Best Use. How do you know "for sure" what is possible? I will appraise it as "Use Value".

The last time I did that in this situation, the Bank listed it for $50k higher than I estimated. It has sat on the market for about 45 days at that price and now there is a full price offer "subject to" a feasability study. (they needed a bigger road and would have to get land from neighbor) I quoted the guy from the planning department in my report. I reported all the road requirements and issues. I stated that the Highest and Best Use could be different, etc. Bottom line: I am waiting to see if they can develop it. It they can, then I will be way off (almost 15%)with my estimate. If they can't we wait and see...

 

[xm39hnu]

Originally posted by Diana Malcolm asked...
How do you know "for sure" what is possible?

You don't. I think the standard is "reasonably probable." It can be based on what the zoning folks say, if you can ever get them to say anything. Or it can be based on people in similar situations receiving variances or zoning changes, absent some public announcement that the zoning board won't approve any more changes. The "reasonable" part is the appraiser's call, I believe. You need some support for the conclusion, but not ironclad proof. (No such animal anyway.)

 

[Fred]

It is hard to see how you can appraiser value "in use" when the property is not "in use."

Could it be that you have a fixer upper house and some excess land?

 

[Diana Malcolm]

STEVE: You're right I am so embarrassed. :redface:

(I changed it) I got out "The Appraisal of Real Estate" and went to Use Value and read it over and over and said "yes, it's Use Value" and then I saw what I had written in post. I didn't put it in report.

 

[Austin]

Dr. Thomas Sowell of the Hoover Institute at Stanford and editorial op-ed writer had an article today about a new law in San Mateo, CA, outlawing buildings above 5 stories. He said it would cause all land values to rise and I e-mailed him and told him that I agreed except in the case of the tracts with a H & BU for high-rise development, which land values would drop. He e-Mailed me back asking about H & BU concepts, as he was not familiar with it. We had a nice chat.

 

[Pamela Crowley (Florida)]

Congrats Austin!!! I love Dr. Thomas Sowell. What a great man!!!