Ruben-
Terrel is making a critical point here about HBU, and the "as improved" Fannie guideline (if, indeed, you must comply with this; I would think so, since your client is Fannie itself) would seem to require a value as if vacant.
This is getting more complicated as we go along.
You want my advice (I'll give it to you anyway)? Other than disclosing everything imaginable...
1. Go ahead and use "improved properties" if you feel you must. I'd state that doing so most likely results in a value of limited reliability.
2. Give them an alternative value using vacant land approach. So what if they won't use it. It's in your report and you can even state that, in your opinion, this alternative valuation is more reliable.
(I won't take up space giving an example of how you could word this, sounds like you don't need any assistance in that area).
Give them what they say they want and give them what you think they should have (as the appraiser). Yes, lots of work, but you are covered.
Out of all the client's imaginable, Fannie would be considered one of the most sophisticated and I would expect them to understand and accept what you are doing with the two values ( the second one could be in the addendum, not on the value opinion line in the form). There's no way they could claim "We didn't understand what the appraiser was doing".
Good luck!
