Subject To Or As Is

[Lee SW IL]

I need some reassurance.

Subject property is currently on a parcel of 40 acres owned by grandma.

Grandma is deeding the house and 2 acres to grandson. No contract.

I completed an appraisal report "subject to" the county assessor identifing the property as the house and 2 acres.

This is the email I get from the title company.
The lender will not accept the apraisal because it says the new legal needs recorded with the county. However in Marion county that is not done until the new deed is recorded. They do not assign a new PPN # until sometime after that.
There is no zoning and no survey is required. We drawn up a new legal description. This is all that is done at this point. You should appraise it for the dimensions that were given and use the legal we provided and the PPN number that is currently assigned to the property.

I don't feel I can appraise the property "as is" since it is not identified by the county. Shouldn't grandma spilt the property 1st with the county and then deed the new parcel to the grandson? It seems to me they want to skip a step of the process. Which I don't have a problem how they do it, but I cannot see how I can change the appraisal report until it is identified by the county.

 

[Edd Gillespie]

Originally posted by Lee SW IL@Feb 27 2005, 11:16 PM
I need some reassurance.

Subject property is currently on a parcel of 40 acres owned by grandma.

Grandma is deeding the house and 2 acres to grandson. No contract.

I completed an appraisal report "subject to" the county assessor identifing the property as the house and 2 acres.

This is the email I get from the title company.
The lender will not accept the apraisal because it says the new legal needs recorded with the county. However in Marion county that is not done until the new deed is recorded. They do not assign a new PPN # until sometime after that.
There is no zoning and no survey is required. We drawn up a new legal description. This is all that is done at this point. You should appraise it for the dimensions that were given and use the legal we provided and the PPN number that is currently assigned to the property.

I don't feel I can appraise the property "as is" since it is not identified by the county. Shouldn't grandma spilt the property 1st with the county and then deed the new parcel to the grandson? It seems to me they want to skip a step of the process. Which I don't have a problem how they do it, but I cannot see how I can change the appraisal report until it is identified by the county.

I'm told that since there is lender involved you have good chance that the supplemental standards rule applies. Basically it boils down that if it applies you have to do two values and since USPAP requires a complete workfile to support a market value you have to do two appraisals. No forms for this I know of-judst have to duplicate. One, the hypothetical "subject to" and one, "as is". Different comps, H&BU, different legal, etc.-two appraisals.
Also dont forget to analyze the subdivision process. It isn't so easy or cheap here and could get turned down. Don't know about where you are.

 

[Leslie Strange]

One additional comment. Edd is right about hypothetical and the real one. You do actually have two appraisals until the county changes the legal description to one parcel.

In addition, the new USPAP rules have removed the requirement to value land as if vacant and at its highest and best use. The new 2005 requirement now leads to how the property is zoned (legally permissable.) I took the 7 hour course update in February and that was brought out

Good Luck

Les

 

[Richard Carlsen]

You should appraise it for the dimensions that were given and use the legal we provided and the PPN number that is currently assigned to the property.

The lender is right up to a point. In stead of the currently assigned property number, you simply state "New Split-I.D. number not assigned as yet."

So Grandma is deeding 2 acres to Junior. No contract. OK. State that in your report. "Subject is a new split off parent parcel with transaction between closely related parties. No contract involved. Not considered arms-length transaction. All terms and conditions of verbal contract were not reveled to appraiser other than transfer is for less than $1.00."

The report need not be conditioned upon the actual split and recording if it is properly noted in the report. "This is a hypothetical appraisal in that the subject is a proposed split of a 2 acre site 295.16 feet square containing the improvements to parent parcel #zzz-x-zzz-xx-00 aka 12587 Wilson Rd, Anywhere, Kansas. This is a hypothetical report. The client is specifically warned that any configuration or changes in the subject other than contained herein could result in significant changes in the value of the subject. Such changes could result in the value contained in this report not representing the value of the proposed split."

I am not sure where the big hang-up is coming lately with appraisers thinking that they can only appraise parcels that are split, surveyed and recorded. They are looseing some good business.

 

[Stone]

If you have the dimensions and it is ok under zoning, why do you care if there is a parcel number or if the county has identified it? It is one thing to appraise a tract that could not be split off due to zoning or other legal issues, but since that is not the case and you have a legal description it is not misleading.

This is not similar to the five acre mortgage discussion that comes up from time to time since the land has a legal description. Just explain somewhere in your report the current condition of the land and the deed and move on. I agree with Richard that people have become too hung up on this issue.

 

[Jo Ann Meyer Stratton]

Appraisers shouldn't worry about assessor's parcel numbers, that is a bookkeeping function for tax purposes. Tax year scheduling, as wells as the assessor's office work load, availability of employees, budget, etc, etc, etc, will have an effect on when they can complete their bookkeeping and assign a parcel number. None of that has any legal effect on the property. It is the documents that are recorded in the county recorder's office that counts--and sometimes the actual time of day can have a huge meaning.

What appraisers need from their client is a legal description, it doesn't matter if it has been recorded or processed by the county or city offices or not.

The appraiser describes or includes (my preferred way) the legal description the lender wishes to encumber in their report. Full explanation then needs to be in the report.

I am currently working on an appraisal (third time in the past 15 months) for a potential purchase by a tenant that has been attempting to buy the property for the past 18 months. The property being purchased is a manufactured home with several out buildings on a one acre. Recorded documents and assessor's parcel number all indicate twenty acres. The client has provided me with a legal description of the one acre. So I have the parent assessor's number in the report with a space and a question mark after it. Then in my addendum I have the following comments:

PROPERTY TAXES:
Subject is to be split from an original twenty acre parcel. Taxes in 2004 for the twenty acres, improvements to and on the site and the manufactured home were $855.42. A recording of a new legal description and assignment of a new assessor's parcel number would apply to the 2006 tax roll.

 

[Steve Owen]

The lender will not accept the apraisal because it says the new legal needs recorded with the county. However in Marion county that is not done until the new deed is recorded. They do not assign a new PPN # until sometime after that.

How nit-picky can they get?

I think they are correct, though. If you made it subject to recording, you created a catch-22; it can't be recorded until after the loan closes, the loan can't close because of your "subject to."

Your appraisal actually does not have to be "subject to" any such condition, IMHO. What I would have done in this situation is similar to what Richard posted. Write a legal that covers two acres and appraise it with the hypothetical condition that it has been legally split.

I've done a lot of these. You don't necessarily need a survey or correct legal description, so long as you can identify the property being appraised. Under most circumstances, you can write your own legal "The southeast two acres of the following described property...." using the legal of the larger tract as a basis. You may also need an extraordinary assumption that the split is legal under zoning and other regulations.

 

[Mark K]

I have to agree mostly with the lender on this one. I'd insist on a legal description of the subject (the 2 acres) and, if as you noted, there is no zoning regulations against it, appraise the house and two acres and move on. You don't need a parcel or tax ID number to appraise a piece or real estate. As mentioned, just call it a split from #XXXXX and the taxes are estimated at $zzz per year.

As long as the described parcel includes the improvements, well, septic, driveway, etc. and it fits the local regulations regarding road frontage, size, drainage, etc. there's no need for recording the plat prior to closing.

I'd include a statement that the appraised value is based on the assumption that the subject meets all local regulations for a property split and that the value could be negatively impacted if the property is found to be in non-compliance. Let the owner/his surveyor/his lawyer provide any additional supporting county documentation required by the lender; that is beyond the appraisal scope.

 

[Robert Anderson]

Lee,

This is an interesting thread that raises some pertinent issues.

I agree with Jo Ann that you should not be concerned with the assessor, as what they do is a bookkeeping function for tax purposes. In my area, we recently had a large number of apartments that were illegally converted to condo's. The assessor picked up the grant deeds and assigned each apartment a new assessor parcel number. IN MY AREA, the assessor doesn't check much of anything.

I also agree with Richard that a hypothetical condition is the way to go. I'm not sure how I would word the hypothetical condition, but it's primary purpose would be to notify the lender that the subject 2-acre parcel is not now a separate ownership.

One thing I would do is contact the city or county planning department or other responsible agency to find out if it is legal to split-off the subject 2-acre parcel. The planning department may tell you that the minimum lot size is 40 acres and that further subdivision of the subject 40-acre parcel is not legal. In their e-mail, the lender has stated that no governmental approvals are necessary. I would check this myself firsthand.

Edd raises the issue of the Supplemental Standard Rule and the need for an "as is" appraisal reflecting the impact on value of the hypothetical condition. If there is in fact NO ZONING OR OTHER RESTRICTION ON SUBDIVISION, then I would assume that the as is value and the value under the hypothetical condition would be the same.

BTW, thanks for your original posting. Sometimes, it takes a thick skin to ask a question such as this and to risk being told that what you did was wrong. However, you are doing all of us a service by stimulating discussion.

Bob Anderson

 

[Lee SW IL]

BTW, thanks for your original posting. Sometimes, it takes a thick skin to ask a question such as this and to risk being told that what you did was wrong. However, you are doing all of us a service by stimulating discussion.

Unfortunately, I'm not always right. And I thought I was right in this case, but is proven I'm not. :redface: This is the reason for this board. To ask questions and to get different opinions.

I am in the process of changing the report with the new legal, (which I did not have before, additional reason I prepared subject to).

Thanks for all your comments. It is appreciated.