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Two Adjoining Lake Parcels On One Deed- How Do I Value?

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Ron Patton

Sophomore Member
Joined
Sep 5, 2004
Professional Status
Certified Residential Appraiser
State
Tennessee
Hey all,

Just received an order from my best client to appraise two adjoining lake lots. The current owner has two adjoining lots located directly on the lake. One lot has an old, very low quality 1-BR fishing cabin near the end of its economic life, while the adjoining lot has the gravel drive to access the fishing cabin. Each lot has its own wooden dock. Both lots are on the same deed but have separate legal IDs, tax parcel numbers, etc.

I have read as much as I can on the forum but am still confused. The highest and best use is for each site to be sold separately. Lake lots in this market in Tennessee sell for around $200,000 each. Similar competitive properties with small fishing cabins sell for $250,000 to $285,000. It is legally possible to build on the two lots (new homes in the immediate subdivision sell for $460,000 to $560,000). The highest and best use is clearly to sell each lot on its own since each lot has its own highest and best use. How do I address this in the 1004 report? Does this require two separate land appraisals? Clearly, we are dealing with excess land here and I can not simply add the value of two lots together.

Any insight would be greatly appreciated. Thank you all!
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
If both lots each have own parcel Id it would be very easy to separate them with a new deed for each ? I would call client If i were you, because if HBU is each lot to be sold separate of the other, sounds like 2 appraisals, one for each lot might work best. Exception would be if a double lot vacant property has aprox the same value...have there been sales of two combined parcels ( large lots like subject on lake)
 

Renee Healion

Elite Member
Gold Supporting Member
Joined
Feb 21, 2004
Professional Status
Certified Residential Appraiser
State
Connecticut
Sounds like one parcel is landlocked without access across other. Is that deeded?
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
and I can not simply add the value of two lots together.
If separately deeded why not? No appraisal outside of secondary market is going to require only one lot per report. You can appraise 100 lots in one report. If FHA I suspect you can only value the improved lot (ignoring the less than ideal approved lot.) So first you need to tell us what rules you are asked to play by. In-house, FHA, VA, or Fannie Mae, etc. Each has their own rule book.

The value of the two lots as you describe would, in my world, probably be the sum of the individual value and the buyer would recognize that there is a separate value to the excess land. If the lot is somehow landlocked (access wise) then it becomes surplus land, not excess, deeded or not. And would necessarily be attached to the accessible lot. That would likely involve a discount. Merely lumping two properties in the same report does not change the value of either. However, to support the value of both improvements and lots, you may need comparables for the primary dwelling, and comparables for the lots and/or lots with older improvements of marginal value. Six comps ... same as most of my reports where I have 3 improved sales and 3 vacant lot sales. If you do the cost approach that is almost always a given anyway.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
If this is for a loan the parcel is probably being encumbered by both lots and that's why both are on one deed. If the property is currently encumbered by a loan the owner could not sell off one of the individual lots unless he paid off the mortgage. 95% of the time this is the case so if your client says both are encumbered or being encumbered by a new loan you appraise it as one parcel and that is fine with FHA, VA,Fannie etc.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
this is a key factor....
I think it is clear from the OP that the lot is excess to the other, not surplus (landlocked).
Until we know whether this is secondary market or not, why so? There is no issue with valuing both lots under one report even when there may be two HBUs. The only issue is what the secondary market wants if this is indeed a secondary market appraisal and again, many appraisals are NOT going to secondary market and unless your letter of engagement specifies that it is, then the Interagency Guidelines are all you are worrying about and they are completely silent upon how you appraise it....or even if you appraise it with a form report or not.
 

TRESinc

Elite Member
Joined
Dec 1, 2011
Professional Status
Licensed Appraiser
State
Ohio
I think it is clear from the OP that the lot is excess to the other, not surplus (landlocked).

no way to tell. one has a drive, one does not, they are adjoining lots. that's all we know. i owned two lots on a lake and only one had a driveway however the second parcel could have easily had a drive installed, which is exactly what the guy who bought it from me did.

Until we know whether this is secondary market or not, why so? There is no issue with valuing both lots under one report even when there may be two HBUs. The only issue is what the secondary market wants if this is indeed a secondary market appraisal and again, many appraisals are NOT going to secondary market and unless your letter of engagement specifies that it is, then the Interagency Guidelines are all you are worrying about and they are completely silent upon how you appraise it....or even if you appraise it with a form report or not.

you asked if they were separately deeded and the first post said they were not. it doesn't matter if it is secondary market transaction or not.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Just received an order from my best client to appraise two adjoining lake lots. The current owner has two adjoining lots located directly on the lake. One lot has an old, very low quality 1-BR fishing cabin near the end of its economic life, while the adjoining lot has the gravel drive to access the fishing cabin. Each lot has its own wooden dock. Both lots are on the same deed but have separate legal IDs, tax parcel numbers, etc.

Sounds like each lot is lakefront...if OP clarifies would help.
 
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