Second Lot on VA Purchase

[Carnivore]

None of the Movers and Shakers have ever answered the question this Conundrum has created or how to solve it.

 

[Carnivore]

interesting that it mentions water and sewer. this is a typical private septic system area but the first one i've seen in years that relies on 'hauled water'. What Fun!

In my county we do not have county wide water let alone sewer. The People spoke against the Bond referendum and subsequent result is we are a very slow developing county. Even though we adjoin Charlotte Mecklenburg Cnty which is busting at the seams.

So my interpretation of the Gaston County Rural Residential Zoning is, the HBU is what you want it to be ...as long as you have adequate area for a Septic Drain Field.

When it comes to comps ...well that is where the work will be in ...site value differential

 

[GWISC]

I appraised one recently with the same situation. I did one appraisal on a house that had an additional adjacent buildable vacant lot. I wrote up two HBU's within the report; one for the improved site and one for the vacant. I treated the 2nd lot as excess land, not surplus land. This was determined through the HBU analysis. I determined the HBU for the additional lot was as a vacant residential lot that was available for development as a single family house.

I treated the 2nd lot as a separate element of comparison rather than lumping it together with the main lot. In other words, I put the additional lot on it's own line item. There are blank line items in the 1004 towards the bottom of the grid. Use one of them. I labeled it as Additional Lot/Excess Land and then put the additional lot's size in the blank.

I was able to find a property that sold as as 2 parcels in a single transaction; a house on 1 acre and an additional adjacent buildable vacant lot an approximately 1 acre. I called both agents and asked what the allocation of the total sale price was (how much of the price was for the house on it's lot and how much of the sale price was for the additional lot). In this case, the total price was $420,000. The house on 1 acre was $390,000 which was negotiated separately. The buyer, at first, did not want the additional lot, but then they changed their minds. They offered $30,000 for the additional lot which was accepted.

I asked the agents if the vacant parcel sold at market per their estimation, or if it was discounted. The listing agent speculated the vacant lot sold for less than it would have if it could have been marketed as a stand-alone lot, but more than it would have as surplus land to the improved lot. The property was marketed with just the house for $399,900 with a mention within the listing profile of an additional lot that could be purchased if a party was interested. The agent told me she thought the vacant lot should have sold for $39,000 ($39,000 was the separate asking price of the additional lot within the listing). The agent indicated the buyer expected a larger than typical discount from the asking price as it was going to be one transaction and more convenient for the seller. The offer was submitted well below the $39,000 asking price at $30,000. The discounted offer was accepted by the seller.

So, $39,000 Estimated MV of the lot - $30,0000 actual allocated sale price = $9,000. $9,000/39,000 = 23.07%, or 23% rounded discount from MV. I applied this estimated discount my subject's vacant lot. I had no other examples of sales with multiple parcels, so this was my only support to show a discount for the additional lot.

I first determined the market value of the subject's additional lot/excess land. Then I applied the discount (MV - 23% of MV). I rounded the resulting figure to the nearest $1,000 and used the rounded figure as my calculated adjustment in my grid. I was lucky enough that the property I used for determining the additional lot discount was similar enough that I could also use it as one of the comparables in my grid as well.

The sale of the property with an additional lot showed that the market will pay a premium for an additional lot that is buildable when combined with another property. In this case, the buyer payed more than the contributory value as surplus land, but less than the full MV as a stand alone lot.

I also did a cost approach. I inserted the same contributory value I determined above and inserted it below the depreciated cost of improvements just above the line for site improvements. I marked that line as Excess Lot.

Hope that helps.

 

[GWISC]

Then again, for VA, you should call your VA regional loan center. Often VA wants appraisals with situations such as you describe appraised in their specific manner. They may want the additional lot treated as surplus land. In that case, I would make a statement in the report to cover yourself that you are treating the additional lot as surplus rather than as excess (even though a separate HBU would show otherwise) as per VA directive.

 

[CindyR]

I appraised one recently with the same situation. I did one appraisal on a house that had an additional adjacent buildable vacant lot. I wrote up two HBU's within the report; one for the improved site and one for the vacant. I treated the 2nd lot as excess land, not surplus land. This was determined through the HBU analysis. I determined the HBU for the additional lot was as a vacant residential lot that was available for development as a single family house.

I treated the 2nd lot as a separate element of comparison rather than lumping it together with the main lot. In other words, I put the additional lot on it's own line item. There are blank line items in the 1004 towards the bottom of the grid. Use one of them. I labeled it as Additional Lot/Excess Land and then put the additional lot's size in the blank.

I was able to find a property that sold as as 2 parcels in a single transaction; a house on 1 acre and an additional adjacent buildable vacant lot an approximately 1 acre. I called both agents and asked what the allocation of the total sale price was (how much of the price was for the house on it's lot and how much of the sale price was for the additional lot). In this case, the total price was $420,000. The house on 1 acre was $390,000 which was negotiated separately. The buyer, at first, did not want the additional lot, but then they changed their minds. They offered $30,000 for the additional lot which was accepted.

I asked the agents if the vacant parcel sold at market per their estimation, or if it was discounted. The listing agent speculated the vacant lot sold for less than it would have if it could have been marketed as a stand-alone lot, but more than it would have as surplus land to the improved lot. The property was marketed with just the house for $399,900 with a mention within the listing profile of an additional lot that could be purchased if a party was interested. The agent told me she thought the vacant lot should have sold for $39,000 ($39,000 was the separate asking price of the additional lot within the listing). The agent indicated the buyer expected a larger than typical discount from the asking price as it was going to be one transaction and more convenient for the seller. The offer was submitted well below the $39,000 asking price at $30,000. The discounted offer was accepted by the seller.

So, $39,000 Estimated MV of the lot - $30,0000 actual allocated sale price = $9,000. $9,000/39,000 = 23.07%, or 23% rounded discount from MV. I applied this estimated discount my subject's vacant lot. I had no other examples of sales with multiple parcels, so this was my only support to show a discount for the additional lot.

I first determined the market value of the subject's additional lot/excess land. Then I applied the discount (MV - 23% of MV). I rounded the resulting figure to the nearest $1,000 and used the rounded figure as my calculated adjustment in my grid. I was lucky enough that the property I used for determining the additional lot discount was similar enough that I could also use it as one of the comparables in my grid as well.

The sale of the property with an additional lot showed that the market will pay a premium for an additional lot that is buildable when combined with another property. In this case, the buyer payed more than the contributory value as surplus land, but less than the full MV as a stand alone lot.

I also did a cost approach. I inserted the same contributory value I determined above and inserted it below the depreciated cost of improvements just above the line for site improvements. I marked that line as Excess Lot.

Hope that helps.

that's the situation for sure. Thank you for taking the time to prepare that comprehensive response. and yes i plan to check with VA too.

 

[Zoe]

Then again, for VA, you should call your VA regional loan center. Often VA wants appraisals with situations such as you describe appraised in their specific manner. They may want the additional lot treated as surplus land. In that case, I would make a statement in the report to cover yourself that you are treating the additional lot as surplus rather than as excess (even though a separate HBU would show otherwise) as per VA directive.

Yes, they have some sharp cookies in Atlanta RLC. I'm sure Arizona RLC does too. They are the client. Let them tell you how they want it. Put it in work file after they tell you.

 

[Zoe]

H&B use will be your issue on max value if it is sold together or separate. You need to determine that and disclose it. VA won't help you there. I would talk to buyer and seller too if I could and get their opinions. That should be easy. You'll be fine.

 

[Carnivore]

I appraised one recently with the same situation. I did one appraisal on a house that had an additional adjacent buildable vacant lot. I wrote up two HBU's within the report; one for the improved site and one for the vacant. I treated the 2nd lot as excess land, not surplus land. This was determined through the HBU analysis. I determined the HBU for the additional lot was as a vacant residential lot that was available for development as a single family house.

I treated the 2nd lot as a separate element of comparison rather than lumping it together with the main lot. In other words, I put the additional lot on it's own line item. There are blank line items in the 1004 towards the bottom of the grid. Use one of them. I labeled it as Additional Lot/Excess Land and then put the additional lot's size in the blank.

I was able to find a property that sold as as 2 parcels in a single transaction; a house on 1 acre and an additional adjacent buildable vacant lot an approximately 1 acre. I called both agents and asked what the allocation of the total sale price was (how much of the price was for the house on it's lot and how much of the sale price was for the additional lot). In this case, the total price was $420,000. The house on 1 acre was $390,000 which was negotiated separately. The buyer, at first, did not want the additional lot, but then they changed their minds. They offered $30,000 for the additional lot which was accepted.

I asked the agents if the vacant parcel sold at market per their estimation, or if it was discounted. The listing agent speculated the vacant lot sold for less than it would have if it could have been marketed as a stand-alone lot, but more than it would have as surplus land to the improved lot. The property was marketed with just the house for $399,900 with a mention within the listing profile of an additional lot that could be purchased if a party was interested. The agent told me she thought the vacant lot should have sold for $39,000 ($39,000 was the separate asking price of the additional lot within the listing). The agent indicated the buyer expected a larger than typical discount from the asking price as it was going to be one transaction and more convenient for the seller. The offer was submitted well below the $39,000 asking price at $30,000. The discounted offer was accepted by the seller.

So, $39,000 Estimated MV of the lot - $30,0000 actual allocated sale price = $9,000. $9,000/39,000 = 23.07%, or 23% rounded discount from MV. I applied this estimated discount my subject's vacant lot. I had no other examples of sales with multiple parcels, so this was my only support to show a discount for the additional lot.

I first determined the market value of the subject's additional lot/excess land. Then I applied the discount (MV - 23% of MV). I rounded the resulting figure to the nearest $1,000 and used the rounded figure as my calculated adjustment in my grid. I was lucky enough that the property I used for determining the additional lot discount was similar enough that I could also use it as one of the comparables in my grid as well.

The sale of the property with an additional lot showed that the market will pay a premium for an additional lot that is buildable when combined with another property. In this case, the buyer payed more than the contributory value as surplus land, but less than the full MV as a stand alone lot.

I also did a cost approach. I inserted the same contributory value I determined above and inserted it below the depreciated cost of improvements just above the line for site improvements. I marked that line as Excess Lot.

Hope that helps.

I really like the way you worked through this Valuation Problem. In other words you were able 'to say what you mean, mean what you say'.

Your Fortunate that you are completing this assignment directly from the VA(assumption on my part). The VA employs q lot of common sense because of their Mandate.

Editorial Note: I was upset when a Clown Act AMC tried to Corral all the VA work through them. (it seems they were not successful entirely). Woo Hoo! That would have been disastrous.

You sure did get lucky having a comparable similar to the subject. My guess is you hung your hat on that one. I also assume you used that sale for your exposure time.

This quote I liked also: " Then again, for VA, you should call your VA regional loan center. Often VA wants appraisals with situations such as you describe appraised in their specific manner. They may want the additional lot treated as surplus land. In that case, I would make a statement in the report to cover yourself that you are treating the additional lot as surplus rather than as excess (even though a separate HBU would show otherwise) as per VA directive.

From a Disabled Veteran, I thank you for all the Good Work your doing.

 

[GWISC]

I really like the way you worked through this Valuation Problem. In other words you were able 'to say what you mean, mean what you say'.

Your Fortunate that you are completing this assignment directly from the VA(assumption on my part). The VA employs q lot of common sense because of their Mandate.

Editorial Note: I was upset when a Clown Act AMC tried to Corral all the VA work through them. (it seems they were not successful entirely). Woo Hoo! That would have been disastrous.

You sure did get lucky having a comparable similar to the subject. My guess is you hung your hat on that one. I also assume you used that sale for your exposure time.

This quote I liked also: " Then again, for VA, you should call your VA regional loan center. Often VA wants appraisals with situations such as you describe appraised in their specific manner. They may want the additional lot treated as surplus land. In that case, I would make a statement in the report to cover yourself that you are treating the additional lot as surplus rather than as excess (even though a separate HBU would show otherwise) as per VA directive.

From a Disabled Veteran, I thank you for all the Good Work your doing.

Carnivore, the appraisal I just completed was for a Fannie Mae deal. I used to do VA work, but left the residential side for 2 years. I came back to open my own one-man shop. When I read both the VA and Fannie "guidelines" I realized neither set of guidelines indicated as to how to treat excess land. They basically just indicate that multiple parcel properties can be appraised within the same report (more or less), or that they will accept them. Both agencies could at least spell out how to treat an additional lot that is excess land. Fannie does not like complications, however, they won't accept appraisals with hypothetical conditions which is what you would need to do if they would want us to treat excess as surplus. Perhaps the lack of more specifics on the guidelines is their way of allowing us to figure it out.

 

[Carnivore]

Carnivore, the appraisal I just completed was for a Fannie Mae deal. I used to do VA work, but left the residential side for 2 years. I came back to open my own one-man shop. When I read both the VA and Fannie "guidelines" I realized neither set of guidelines indicated as to how to treat excess land. They basically just indicate that multiple parcel properties can be appraised within the same report (more or less), or that they will accept them. Both agencies could at least spell out how to treat an additional lot that is excess land. Fannie does not like complications, however, they won't accept appraisals with hypothetical conditions which is what you would need to do if they would want us to treat excess as surplus. Perhaps the lack of more specifics on the guidelines is their way of allowing us to figure it out.

You ought to approach the VA with a Package and see if you can get on their Direct Assignment Roster. The money is better, but the downside, the way I understand it, is you can not turn down assignments without real good cause. I can get on the Roster anytime I want because of my VA Disability Status. I choose not to because I am too emotional when it comes to Veterans. Also, I control my time not anyone else.

We had a huge thread about this issue excess land awhile back, you may have read it. FNMA is not going to do anything on this issue. The Form itself creates a problem and so they left this hanging.

Where the real problem is with these assignments(imo) with excess land is determining Exposure Time when it combined with the SFR on its own HBU lot and then with the excess site. The Data(sale) is probably going to be very sparse(in my area it would be).

I complete a lot of Review work now because of Covid(Im at risk). Fortunately I have not reviewed one report that was totally dorked, except the last assignment...Even that one was sufficiently within some boundaries. His logic was so flawed on how he approached the valuation problem. It was a purchase money assignment, had this been a Refinance it would have caused some real concern on the lender/client side.

Again, your post was very informative.