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Residential with 26 +/- Acres going to Seconday Market.

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jtmilby

Thread Starter
Freshman Member
Joined
Jan 15, 2002
I would like to request some ideas on the following:

The subject is a remodeled farm house 1384 sq. with 26.917 acres. The subject land is basically steep with less than 4 acres actually usable. The best description would be basically a long ridge with a house, barn and detached 2 car on top and the sides drop off rather steep.

The problem that I am having is that I live in a small community and there has only been 3 comparables sold within the last 12 months.

Comp#1 is 1450 sq. with 19 acres with the same type of terrian.
Comp#2 is 1692 sq. with 21 acres basically same type of terrian.
Comp#3 is 792 sq. with 35 acres basically same type of terrian.

Freddie Mac will not accept the appraisal due to the size of Comp#3 house.

All other sales that I have are either land only sales, which I have a lot of, or acreage that exceeds 50 + acres with larger dwellings and are not comparable.

Is there any way to comp the house and land seperate and come up with a value that would meet the secondary markets requirements.

Has anybody ran into this problem, or does anyone have any solutions?

I would greatly appreciate on answers.

Thanks.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
Why do you say Comp #3 will not be accepted? Have you written your report and the underwriter is complaining? If still in process of writing your report, go ahead and use Comp #3 and do a lot of explaining in your addendum. List and explain some of your vacant land sales in your addendum. Possibly as #4 or higher use some of those comparables that really are not comparable but the only thing available, again with a lot of explanation. Also as #4 and higher what about some dated sales, active, pending, expired, withdrawn listings that are very similar to your property--again with lots of explanations. From out here in the Arizona desert with reports in the past that eventually got accepted that had over 100% gross adjustments! 8) I am in an isolated area with one county that has only 20 sales per year ranging from 40 year old single wides for $5,000 to very nice homes around $100,000. Site areas range from 4,000 square feet to over 100 acres. So you can see that at times why my addendums can run five pages! Detailed explanations is the answer!
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
We run into this fairly often up here in Northern Michigan. My solution is to get comps from not only the area but also the region. And give them 5 or 6 comps to demonstrate the marketability of such properties. By the nature of these residential acreage properties, the housing density will be low with the result that there will be few similar exchanges in the market for any given period of time to choose from. Therefore you need to expand your search area in order to find relevant sales. I can usually find some within 20 miles or so that will support value.

And don't let an UW tell you that 20 miles puts it in the sticks. The secondary market will accept rural just as well as suburban. IMNSHO, 20 miles may be rural but it is not remote. I state that in the report. As for the argument that being out in the sticks is a long way for people to drive tell them this:

1. The rural setting is one of the strong drawing points of such houses in the market. A large percentage of local buyers prefer the quiet rural setting for living as opposed to the close in city type dwelling. Hence the good resale of similar houses located on small to medium acreage parcels.

2. 15 miles from the business/economic center of the area is not considered adverse in the market. In fact, travel time to and from work/shopping is often far less than that experienced by many suburban dwellers that are forced to spend a significant amount of time just commuting to and from work.


Hope that helps a little.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Jo Ann and Richard both gave excellent advise. It is what it is. Just use those 3 comps and I would also add one of the bigger ones as a 4th. Give examples and explain the land value/sales.

One of the things I like to do in these situations is NOT look at the bottom line or total net and gross numbers until AFTER I've made all the adjustments and believe they are what they should be. Only then do I scroll down to look at the bottom lines and try to figure out if I did anything wrong. I don't care at all about what the total net and gross is until I'm ready to weight the comps and explain why they are what they are. Like Jo Ann, I've had 100% total gross adjustments, explained it and all went well.

Fully explain the neighborhood - market area. Fully explain the subject. Fully explain the comps and your reasoning for the adjustments.

Send it in with an invoice reflecting the additional time and effort necessary to complete this appraisal and report and get paid. USUALLY, :roll: if you've explained it well, there will be no additional questions.

Good luck and let us know what happens.
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama


Is there any way to comp the house and land seperate and come up with a value that would meet the secondary markets requirements.
I agree with the previous posts on this. I run into things like that fairly regular. One thing I have done once or twice might help. Depends on your client though.

You can in an addendum (if you have Excel or a similiar spread sheet program I recomend using it) create a grid and use some of the land sales breaking them down by usable land vs bluff side land. You can determine a value for the acreage on and off the bluff. Then value the land and deduct that from sales price leaving you the value of the house(s). If your lucky you will see a consistant price per acre and price per square foot. Then do the same with similar houses on more normal lots. Then you can get a value on the improvements only and add land and site values together. Of course it's hard to do all that on a URAR sometimes.

I have had a couple of jobs where there was not much else that could be done. But I could determine land values and home values seperate and then just had to combine them together. Doing it this way you can use homes that are not on similiar sites but are similar to the improvements. Of course the appraisal is not going to look "typical" and underwritting may not appreciate all your hard work either.
 

airphoto

Senior Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Pennsylvania
Jeff(AL),

What you're doing by breaking out the components is a form of what Austin likes to do with his regression analysis, and also develops some basis for ye ole 'matched pairs analysis.'

However, in my learning, it was always taboo to add up the components to arrive at an appraisal. This under the theory that the parts do not total to the whole ..

What say yea all?
 

jtrotta

Senior Member
Joined
Jan 16, 2002
Don't have the same problem, very limited large acre tracts; but run into similar problems, and in some instances add in "Listings" & Pendings for reference data. I know there not sales, but it does show that the market will seek those types of properties if they're available; also shows the Realtor's support that market, even if it is a "limited area" of the market.
You mentioned "Land Sales" - can you use those for your land value support in the cost approach area??? I remember a few years back one UW said there was value attributed to the excess acereage and asked them, if they took back the property would they sub-divide & sell off the excess acerage separately, as zoning required only 4 acre minimum site's????
Of course the lied and said no??? They just love to joke you around!!
Good Luck & hope this helps*
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama

However, in my learning, it was always taboo to add up the components to arrive at an appraisal. This under the theory that the parts do not total to the whole ..
Point well taken and I stand corrected! I should have said we could use this data for comparable adjustments. That is what I actually did when I used this. Your right, adding these together would be the same as creating comparable sales. A REAL NO NO!!

Since I am bit redfaced :oops: after that one I am goign to say I was up till 1 AM moving my office. Makes me feel better anyway.
 

jtmilby

Thread Starter
Freshman Member
Joined
Jan 15, 2002
I would like to thank all of those individuals who responded with the great information.

A person can not get the response or useful info around this area.

Once again thanks.
 
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