Rural Appraisal In Ne Texas, Need Advice

[Texashome]

First....Hello to everyone reading this, I apologize for the long post, but after reading your forums and realizing how confusing this issue can be I wanted to give as much info as possible.


Here's the situation , we are trying to purchase a rural property, we have two options for financing, both conventional loans.....

- local bank, 5% down , excellent interest rate. They will not give us a mortgage if land value is greater than home value. Was told literally it has to appraise for a dollar more.
- farm credit , 15% down, interest rate 1.5 % higher, no land to home value restrictions.


Property description-
2000 sqft ranch, 1000 sqft built 1960's, 1000 sqft added in 1980's
3 bed / 1.5 bath
3 car carport with slab and concrete driveway which is as wide as carport
50 +\-acres all under one parcel ( 2 acres for homesite area, 10 acres pond/ low creek area, 10 acres open hay, remainder pasture/hay with scattered trees)
Homesite area contains all structures on property with the exception of 2 corrals, there are no barns or other outbuildings besides a small shed behind house.
Pasture/hay areas are fenced, no timber value on property.
Property is leased for hay, no income, just to qualify for ag exemption
Home is dated, no upgrades, but for the most part clean and cared for.

Property is located in NE Texas

Other possibly helpful info, after reading your forums

Bare land(20- 100 acre parcels) for sale within 10 miles from $3500- $2000 an acre( $2000-2500 within 2 miles)
average home with acreage in area parcel size 10-60 acres
Price per sqft for homes in both rural and town under 1 acre $100-$40 sqft (I did this to find home price without acreage)
Above prices are all active listings, not sales.

Area does not show any signs of subdivision development now or in near future.
Nearby properties are mostly hunting, timber, and pasture, approximately 3-5 homes within half mile to mile.

I noticed a trend with the home we're interested in as well as other comparable active listings(home with 20+ acres) as being on/off the market for the last couple years starting at $300k+ and most coming down to the mid to low $200k's.
County appraiser has home assessed for $2k more than land, this is without ag exemption. Property records indicate assessment values following listing trends noted above, previous year spikes with leveling off in 200k's, this is also the case with similar listings in county. I assume this could be attributed to oil/gas activity slowing down?

Based on my best assessment from properties without acreage I think the home would be around $50-55 sqft based on sqft, home age and the fact that it's dated. Active listings with acreage have newer, larger and upgraded homes with newer outbuilding, think expensive hobby farms, so I didn't think these would be good comps.

We would of course like to finance with local bank and get the lower interest rate, and down payment.

Our question is how would an appraiser put a value on land, I'm still confused after reading your forums on acreage assigned to homesite, excess land value, highest and best value, and I'm not sure what the standard practice would be in this area?

In your opinion is it worth taking the chance on home value being higher than land value, based on type of appraisal that would typically be ordered by bank for this property?

Thank you very much for offering us homeowners a place to ask questions,
and I appreciate any advice you can offer.

 

[Restrain]

Go FHLB (Federal Home Loan Bank) on the deal. Easier on larger tracts of land. Trying to guesstimate house value vs land can get funky. However, if concerned, go with the bank with the knowledge that the worst that can happen is to start over with the Land Bank.

Really, trying to say 'homes sell for $X a foot' is like saying 'what do cars sell for'. Way too many factors

(BTW, grew up in NE Texas -Texarkana to be exact and still have kin in the area).

 

[Texashome]

Thank you @Restrain

I looked up the land banks, and that's actually the other bank that I listed above, I didn't realize there was a difference between those and farm credit banks. I grew up in east Texas as well, residing in south Florida and now looking forward to moving back home to raise the kids! Thank you again for your advice.

 

[Terrel L. Shields]

Our question is how would an appraiser put a value on land, I'm still confused after reading your forums on acreage assigned to homesite, excess land value, highest and best value, and I'm not sure what the standard practice would be in this area?

Land is valued as if vacant and available for its highest and best use. The contributory value of the improvements are added to land value to get the final answer. I don't really buy the "surplus" land aspect of valuation for rural residences, though I see it applied from many appraisers. To me, to carve out a non-existing "site" (say 1 acre) is not what the land is "as if vacant and available for its highest and best use."

That is a cost approach way of doing it, but the CA should be the basis for estimating the land value for the subject and any comparables used in the Sales Comparison approach. You might ask for an appraiser from the Amer. Soc. of Farm Managers and Rural Appraisers (ASFRMA). If you find vacant parcels similar in utility, size, etc. then the land value can be readily determined by comparable sales. That should give you a good clue and subsequently you probably are right about the contributory value of a mixed age older dwelling. The only way to see is to pick one. There was a Farm Credit program for larger residential parcels that was lower interest rates but it's probably gone away. Local FC charters vary a lot from region to region and state to state. Some are easier than others to finance a residence through.

 

[Michigan CG]

It is my experience that when buying a home on 50 acres the Farm Credit lender is going to take care of you better than anyone. Yes, the rate is higher, but you are not asking for a typical loan.

 

[Texashome]

@Terrel L. Shields
Thank you, I will contact the bank and see if we can request a appraiser from ASFRMA if we think it's a possibility they will finance it.
I see what you're saying about the land value, I guess like everyone else we're trying to get the appraisal we want, instead of just letting the process sort itself out! Lol

@Terrel L. Shields @Michigan CG

Thank you for the lender info, we have approval through 3 farm credit and land banks, and 2 small banks, and I'm sure FC would make for a smoother process. It's just hard to give up such a great interest rate, but that's life I guess!