Superadequacy/Highest & Best Use/Market Area Definition

[Appraisal1]

I just finished the appraisal using 4 comps, one was larger in GLA than the 8500 sf behemoth, and 15 miles away in Orlando. The smaller 3 were 5 miles or less in Kissimmee. Anyway, the lender just kicked it back with these conditions....
1.Appraiser to comment: the lender has identified that the subject property is located in an area where the appraisal values are declining. Was this decline taken into consideration when the final appraisal value was reached? If not, then adjust using time adjustments.
2.Indicate that subject GLA is common and typical for the area.
3.Indicate if the subject is an overimprovement for the area.
4.Provide one listing and one recently closed comp with similar site and GLA to support the value.
5.Legal description indicates subject has 2 parcels; were both parcels used in determining value and do they both have improvements on them?
I noted in the report that I had to go out of the immediate area to find higher GLA. So does this constitute an overimprovement for the area? Wouldn't the market be different for the larger homes than in the overall market area? Wouldn't the subject obviously not be common and typical for any area? So, I went out 15 miles to bracket the subject to show that there is a market for large GLA and it is not a superadequacy issue, but the lender wants more clarification. The two parcels are subdivideable and one doesn't have any improvements on it. Of course, the value was based on that, I believe I did a fine job justifying the land value...I just didn't note the two parcels...I appraised it as one parcel, believing that highest and best use is 1 SFR, and that subdivision, maybe getting $100 K for the land would devalue the property by at least that much. Anyway, there is a discrepancy between the 2.2 acres of excess land shown by the county appraiser and the 1 acre of excess land shown by the survey done 6 years ago. The survey company verified the discrepancy. The land is zoned ORS1 Open Space Residential (One Unit per 40,000 sq ft). What do you suggest?

 

[Hamlet]

Mr. Klein,

I really don’t mean to sound harsh, but it appears that you did not do a very good job explaining your subject and its market, or the analysis and reasoning in your report.

Your post is very hard to understand and I’m sorry I have no answers to your questions except to ask more questions that will hopefully help you to look at this all over again. I, of course, have not read your report and know nothing about your market, but from your post, I think you need to look at your report and analysis again.

There is nothing about the subject or your analysis that is obvious to the reader of your report. It is your job as the appraiser to paint the picture for the reader so they are not forced to make assumptions, obvious or otherwise as to the subject or your reasoning.

1. Your market analysis should clearly explain what is going on in the market and if you must use comparables that are not very recent, you are going to have to show adjustments for that decline/increase, whatever the case may be. Using a year old comp and not adjusting for the decline or increase in the market will only result in either an inflated or deflated value.

2/3 What does your market tell you? What is different about the subject besides its GLA that makes it marketable? Perhaps you needn’t go outside of your market to determine that the market will not pay for a huge house. Or if there is something special about the subject that a typical buyer would go 15 miles away to buy its substitute, only these answers can come from your market. This all needs to be explained in your report.

4. How old are your comps? How many comps did you have in your market? Why did you select those opposed to the others available? Did you discuss the listings, and off-market/expired as well? In a changing market it is often more useful to discuss those listings and expired as well to help identify those trends.

5. This part is very confusing for me, because you never mention the size of the lot the subject is on, and you are talking about a discrepancy in the amount of land that you discovered for the second lot. Did your client give you any direction on how to handle this discrepancy? How can you appraise a parcel of land if you don’t really know what it comprises? Also, why would getting $100K for the excess acre devalue the subject by at least that much? Did you explain that in your report? The HBU is critical to your analysis.

I am not trying to attack you, but I think that if you explain in your report your analysis and reasoning you may have fewer stips.

Good luck.

 

[Mike Kennedy]

"the lender wants more clarification"

based on the first thread and the OP above........rightly so.

http://appraisersforum.com/showthread.php?t=140956

Appears to have been an assignment which should have be referred to, or performed in conjunction with, an Appraiser with considerable experience in this property type.

Suggest referring to the USPAP Ethics and Competency Rules.


and............this thread >>>>>> words of wisdom.......in similar cases.....

http://appraisersforum.com/showthread.php?t=81240

 

[Deleted member 77547]

Steve.

I agree with Mike. I think it would behoove you to consult with a more seasoned appraiser to read over your report before you send it back to the client to see if they can identify potential problems e.g., lack of clarity. It'll be money well spent. Appraising is experience intensive and even the most seasoned appraiser needs to consult with others when they come across quirky situations.

 

[Appraisal1]

Thanks all for responses. I did do market analysis and full explanation, even showing the two lots and appraising as one, i.e. highest and best use. I guess I didn't explain it fully to you guys. I probably need a nap or something. But I wondered why the lender would ask for additional comp and listing within 5 miles when I clearly showed the market area for these houses as expanded, and then used a larger GLA comp farther out. As if they didn't even read the report. So, if I reiterate that the subject GLA is atypical but still insist that it is not an overimprovement, would that be inconsistent? Anyway thank you for the kind...or not so kind...input. It's all helpful information just the same.

 

[Hamlet]

Mr. Klein, how helpful can this input be when you blatantly ignore advice that was already given on this subject on previous threads? Too bad I wasn’t aware of the other thread. It appears that you went full steam ahead and now have yourself in a pickle.

 

[Mike Kennedy]

So, if I reiterate that the subject GLA is atypical but still insist that it is not an overimprovement, would that be inconsistent?

"atypical is as atypical does";

Either similar properties are TYPICAL in a LOCAL or an expanded regional market where TYPICAL buyers of SIMILAR properties demonstrate the subject ACTUALLY falls within a LOCAL or REGIONAL market [ Opinion must be fully supported within the report IN DETAIL] :icon_idea:

(including LOCAL ACTIVES, CONTRACTED, and DATED CLOSED SALES (1 YEAR + if necessary) in CLOSE proximity to establish whether "atypical" or "typical" or truly a local or regional market exists for similar props}

OR...... you and your client already know the answer to quoted question above.

i.e. clearly the client is UNCONVINCED based on whatever local data, analysis, AND ADDITIONAL comparables and Regional Nuance information was contained in the report.