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Using Departure

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Pat Butler

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Illinois
I'm doing an appraisal of a small house in a low value area (~45K) that includes an adjacent vacant lot. The owner didn't tell me that two parcels were involved when I took this order. Anyway, this lady is going to be selling the lot along with the house and wants a value based upon that configuration-- regardless of whether the vacant lot has its own highest and best use and could be sold separately.

So, is it as simple as stating that I'm departing from SR1-3(B) and am assuming (extraordinary assumption) that the two parcels will be sold together?
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
Bascially yes. And be sure to state your scope of work, which is just what you stated about combining the parcels.
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
Pat,
I agree with Jeff to the extent that you just stated everything you need to state about what you are appraising.

However, I do not see departure. The intended use 1-2(b) is for a sale of the combined property, so you identify the subject 1-2(e) accordingly. The subject of an appraisal can be part, a combination of parts, all the parts or the whole property or a combination of whole properties. I would say you are complying with 1-3 because you have “identified” regs (ie two legal properties), and “developed an opinion” (of HBU) that the two properties are probably more profitable sold as two instead of one.

Even though, I do not see departure here, IMO it is a minor point and no one should make a fuss over it either way. And as long as you state, “the value of the combined properties is” or something like that, there is no misleading.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
I LOVE this forum!

Steven or anyone else with two cents to spare!

Would you be so kind as to address this rather similar but still even more quirly one that just landed on me...


Similar situation, two parcels rural residential with house and 'barn'...
The parcels are small acreages, which combined form a legal 'flag lot shaped lot'. Adequate road frontage for permitted SFD: the quirk is that the rear lot has a recorded access easement down one side of the front lot, which is GRANDFATHERED to be a buildable lot!

Gut feeling (based on not yet enough research) is that the H&BU at present is as a single sale 'horse property'.

ASSuming that this still flys after further research...

How should I address the buyer perception which I think I see in the market (and is patently present in realtors' listing sheets :rolleyes: that the 'amenity' of the potential sale of the rear lot have added value to the valuation of the "whole" ? - am I just tripping over my own feet by thinking this is more complicated than a line item with adequate research behind the adjustment(if any)!?

Any suggestions as to how to handle this in the cost approach?!?!?
a positive functional "appreciation"?!?! :eyecrazy:
 

Frederick R. Ruffell

Senior Member
Joined
Jan 21, 2002
Professional Status
Certified General Appraiser
State
California
If the lots are not already assembled then you would make your appraisal subject a hypothetical condition that they are assembled. This is not an Extraordinary assumption! I guess you could/should invoke departure for SR1-3 (B) if the highest and best use becomes something other than the current use once the 2 parcels are assembled,...unless doing so would be misleading. If the vacant lot is not buildable (for any reason) in it's current condition and/or proposed condition then I would treat it as excess land and would adjust according to the market. If it is buildable then you gots yerself a complex appraisal assignment and need to up your fee accordingly.
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
Frederick...

Thanks, I think I want NOT to make that assumption, as the value of the additional lot (or perceived value thereof) DOES add buyer interest (jury is out on how much the $$ comes to) AS long as it is NOT combined! combinations 86's the grandfatering and potential alternate use which is attractive to potential buyers 'as is'....

(I definitely have to wrestle with some H&BU issues... :( )

The FEE is under negotiation as this did turn into more than a house on small acreage :rolleyes:

What I am trying to do is stay USPAP compliant, describe as Steven mentions and I think he has it aright as to how to compliantly describe the thing under 1-3, but I still need to (*) do the cost approach :blink: , and get the buyer his needed highest and best value on this purchase.... :eek:

no_ sorry _ my fingers slipped. For any newbie readers :p , actually I want to do an honest appraisal, but it is no longer a "simple residential appraisal"!

I have just never had to deal with exactly THIS sort of situation where the "subject" currently exists on two parcels instead of as a parcel subject to FUTURE subdivision....

any one else with .02 and or a dollar.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
I did one in a newer platted subdivision of small acreage lots where the buyer was buying 2 adjoining lots to build on. Threw me into a real tizzy about it! I ended up doing a narrative with 3 values (and charged em plenty of coyote pelts with a couple of minks added on); separate value for each lot if left buildable on their own and a third value if a house were placed on or near enough to the center lot line to make these two lots into absolutely a single site.

Everybody went crazy because the combined value was NOT the total of the 2 separate lot values. After a couple more addendums (another mink pelt), they all gave up on trying to combine the sites. The combined value was done as a Hypothetical. I also added an explanation that IF house and outbuildings were all placed on just one of the lots with legal side yard set backs and separate property IDs, that each lot would retain it's own individual value. H&BU was definately keeping them separate.

That one was just so much fun! :eyecrazy:
 

Richard Carlsen

Elite Member
Joined
Jan 15, 2002
Professional Status
Licensed Appraiser
State
Michigan
Why would this be a problem? It is a basic assemblage which we can value as a unit despite it being joined or not. The appraisal assignment is to value the house and its site along with the site adjoining and give one value for the assemblage.

If the lot added is vacant, its value will be that of a single vacant buildable lot added to the site value that the house is on to form the total site value.

There is no departure anywhere because the site is valued in its component parts with the H&B usage considered. All we have done is take the component parts and assemble them and provide a value for the assemblage, as specifically requested by the client.
 

Fred

Elite Member
Joined
Jan 15, 2002
Professional Status
Retired Appraiser
State
Virgin Islands
“It seems a little pricey for a unique, fixer-upper opportunity.”
-- Bill Murray, in Ghostbusters

Lee Ann,
Two cents!? My consulting services usually command an entire glass of red wine (not French since 86) in exchange. :beer: I can't follow your property description, as to the signficance of size, access and subdividability. And I think I am out of my depth on "Horse property" What is that? Wilbur lives in the house and Mr. Ed lives in the barn? :D

Your situation is fundamentally different than Pat's, I think. You say you seek value at HBU. That's pretty much "as is" value. Pat's client is imposing a condition, ie packaged a certain way. Obviously, Pamela has the right idea. Figure it out every possible way, turn it into consulting assignment, and charge them by the word. Enjoy the pelts.

Frederick.
I have to depart from your USPAP-ery. A "hypothetical" in USPAP must be false, ie "contrary to known facts." If the two properties can legally sell together, then appraising them that way is not contrary to known facts.

"you could/should invoke departure for SR1-3b ( if the highest and best use becomes something other than the current use once the 2 parcels are assembled"
Why? The rule says "form an opinion" of HBU, that does not limit you to finding a value ONLY in that use; or even require you to find a value for that use at all, if it is not "necessary" to answer the client's question.
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
It is late and I am sleepy but I think all of you guys missed the mark on this one. Read standard 1-3B
“develop an opinion of the highest and best use of the real estate.”
If the highest and best use of the house and lot are a house and residential lot, then you just appraise it under the obvious highest and best use. If the H & BU is one parcel then you must appraise it as such. To do otherwise is totally misleading and rendering an appraisal & report in a false and misleading manner. I don’t think you can use a hypothetical in situations such as this because you can’t hypothetical your way around presenting a misleading appraisal and report. There has to be a valid reason for a hypothetical or extraordinary assumptions and this ain’t one of the reasons.
 
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