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Two Parcels Combined In One Purchase; HBU; Excess Land

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Mark Whittington

Freshman Member
Joined
Apr 23, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Hey, I have a decent understanding of the issues here and have been reading old posts here all morning. My question is this: Is there any credible way I can do one appraisal on a FNMA 1004 form that gives a total value for both parcels at the bottom of page 2 (basically do it the way that is easiest on the client). The scenario is this: New construction on one lot, however both lots were purchased together earlier in the year and are to be encumbered together. Ignoring all of the specifics with appraisal/lending issues, the owner simply wants a larger yard and purchased 2 lots; 2 acres each. There is a large drainage ditch between the two lots and the house will be constructed on one lot only. There are many lots vacant lots in the small subdivision (which started in 2006), however not many are actively listed for sale. Demand is limited at best, but the additional lot could be offered for sale and eventually sold. This is a good client that I would like to keep happy. Is there anyway to make this happen? I appreciate any help you are willing to offer up. Thanks
 

Mark Whittington

Freshman Member
Joined
Apr 23, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Thanks. I was thinking more along the lines of HBU and Excess land and do you HAVE to do it separately or?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
You are conflicted about keeping your client happy and HBU of the second lot as vacant.

What is value of subject dwelling on one two acre lot vs value on a four acre combined lot. If second lot is worth more as a stand alone lot sold vacant, then it's HBU is that and not as a combined parcel.
 

Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
H&BU includes financially feasible. You indicate plenty of other vacant sites and demand is limited. So is it really the highest and best use to split and sell separately? What if the 4 acres was re-combined, would you still consider the extra 2 acres excess?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
New construction on one lot, however both lots were purchased together earlier in the year a

What did the buyer pay for the two lots together?
What does one two acre lot sell for?(any sales in past year, listings/in contract)

The difference in price of buyer having purchased them together divided in half vs price of 1 two acre lot can see if HBU financially is as a separate lot or combined as one large site for a house
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
Based on Rex's link, I'd say the assignment can be completed as requested on the Fannie form.
The issue you (OP) face is (a) accurately identifying the configuration and (b) credibly valuing the 2nd parcel as part of the single-economic unit that defines the subject that is being appraised. Based on your original description, I do not believe that there is excess land consideration in this scenario.

I'd do a little more research on the Fannie guideline Rex linked (I just read it quickly), but if I were to go forward with this, I'd certainly include that excerpt in my report and use it as a basis for describing why I did what I did.

BTW, in my opinion, such an appraisal requires no hypothetical conditions and likely does not need an extraordinary assumption.

Someone else may interpret the link differently; so stand-by.

Good luck!
 
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J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
How could the second lot not be excess land since it meets the definition?
 
Last edited:

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
How could the second lot not be excess land?

Because they are two, separate parcels with their own legal identity as opposed to two legally separable lots which consist of a single parcel.

(Good question; at first I thought I had made a mistake. Now, I don't think so; but I've modified my prior post a bit!)
 

Mark Whittington

Freshman Member
Joined
Apr 23, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Thanks everyone. I have read that question of a 2nd lot being excess land or not and my interpretation is the idea of the 2nd lot being sub-dividable; it is already a 2nd lot therefore not excess land.

I was thinking that if I move forward as the lots being combined that I would certainly disclose everything I could and make it known that I am trying to do the right thing.

The two lots were offered separately in MLS, purchased at the same time, and with no apparent discount. There was one higher sale since and an expired listing. No real clear value indication. No more sales since 2013. No combined sales from back in the day. Being marketable may very well be an issue, and certainly there would be a holding cost and fees associated with the sale of the 2nd lot. The values are roughly $20,000 per lot.

I would decline the assignment but it is a good client, I am already deep into it, and I really feel like situations like this should be handled appropriately and not pawned off to the next guy.

Thanks
 
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