Two Parcels, Lender Wants As One

[Ray Miller]

Have a subject I looked at over the weekend. It is a subject with home on a .50 acre lot. The buyers are buying it and the lot next to it. Also .50 acres no home. They are listed on the same sales contract with two address.
the parcels are legally split and platted to the subdivision.


The lender wants it all as one lot, 1 acre in size and as one sale. I told the lender I could not do it because I have two parcel numbers and had to show that in my legals. As the sale contract also has two address and two parcels.

Lender says they can not lend on raw land/lot/.

Lender is having a fit. When I got in tonight there were 12 emails asking me to fix the problem.

What say you???

 

[Mountain Man]

If they are contiguous, maybe.... but they also need to realize that they may not get full value for the extra lot. If it's across the street, or separated in any way, heck no. I would report each one individually, even if they were reported within the same report.

Either way, it's 2 jobs in one report, so it's not a typical residential fee. :mrgreen:

 

[CANative]

The lender is probably a mortgage broker and more than likely, also an idiot.

Just posting to be posting so take what I say with a grain of salt. I don't see why you can't value the two properties together as long as you list both addresses, both apn's and both legal descriptions and disclose what you're doing. 2nd lot may be contributory and have less value or it could be valuable as a separate, buildable lot.

But in any case, as soon as your client tries to roll that appraisal through his lenders underwriting it will bounce right back (if his lender will not loan on raw land, they're not going to loan on a combined sale.)

You're client needs to find a lender with a loan program that works on a deal like this. Ask him how he want's it done - 2 appraisals or one your way. You already know how it can't be done his way.

He sounds lazy.

 

[GeorgiaBoy]

I would do what they ask. Just disclose the hypothetical. Wouldn't add a whole lot of value in my market.

 

[Restrain]

You can do what the lender wants, just disclose the appraisal requirements in the Special Conditions. You can value it as a home on two lots, one of which can be split out and have a separate home built on it. No big deal. Just support the land value. After all, the second lot is not "excess land" in that it isn't an oversized lot, but a separate lot.

Roger

 

[Jerry Bone Jr]

The Highest & Best Use Analysis would, most likely, require you to value them seperately. If you're appraising for Market Value, I don't think you can depart from H&BU.

 

[Ultraviolet]

You could make it "subject to" combining them into a single parcel with a new legal description under a new APN. Assuming they are adjacent.

What's typical site size for the market? Would combining them be out of the ordinary or would the property, as a whole, still be relatively typical for some segment of that particular market?

Just finished one where two lots were combined to provide adequate lot size for horse property. Mix and match market where anything goes and though not the norm, wasn't the only property like it.

Rae Saunders

 

[hal380]

Value them separately, the are separate and should be valued that way.

For you to give correct value to the house and lot you will have to do a full appraisal of that 0.50 acre parcel. Then to value the land only you will have to do a full land appraisal on that vacant lot.

If you value the parcel as a 1 acre with a home, and subsequently the homeowner sells off the vacant land and the lender has just lost 40% of his security on the loan, who do you think will be sitting in the witness chair trying to explain?

The lender has a problem and is trying to make it your problem, it's up to you. I would never do it.

Regards

Hal

 

[Ray Miller]

It brings less value as a one acre and home. Will not meet contract selling price. As a lot with subject home and an additional buildable lot it meets contract price by the skin of its teeth.

I sent it in as one lot and subject home, with a second appraisal on the second lot, showing the opinion of value with comparable lots.

I guess we will see what the lender has to say today.

 

[Alan Simmons]

As per the NEW Fannie Mae Selling Guide (04/12/2002), Part XI - Property and Appraisal Guidelines, Chapter 4 - Reviewing the Appraisal Report, Section 401 – The Subject Property:

“The first section of our appraisal report forms is used to identify and describe the location of the subject property.”

“The appraiser must identify the subject property by its complete property address and legal description…”

So what does it matter if the identification of the subject property includes the legal description for two distinct parcels? Together do they identify and describe the location of the desired subject property in question?



As for the other concerns…

As per then NEW Fannie Mae Selling Guide (04/12/2002), Part VII – Mortgage Eligibility, Chapter 1 - Conventional Mortgages, Section 102.04 – Multiple Parcels as Security for Mortgage

“When the security property consists of more than one parcel of real estate, the parcels must be adjoining and zoned as "residential"; only one parcel may have a dwelling unit; and the mortgage must be a valid first lien on each parcel. For example, the mortgage may be secured by two parcels-one parcel on which the borrower's residence is located and another adjoining parcel that can have either no improvements or limited nonresidential improvements (such as a garage). The lender may amend the security instrument to include the conditions under which the adjoining lot subsequently may be released as security for the mortgage. One such condition is that the outstanding unpaid principal balance of the mortgage must have the same (or a better) relationship to the current appraised value of the property after release of the the adjoining lot that the original mortgage amount had to the original value of the property at the time we purchased or securitized the mortgage. This can be the result of property appreciation or the borrower's making an additional principal payment to reduce the mortgage balance to the required level.”


As for the contributory value of the additional lot, what does your market say? You may be surprised to find that such extra lots do sometimes contribute at or near full value.