Ok,
I have a client that wants me to only value the subject as if it's on 10 acres, but it is really on 40 acres. I have told them that if I value it on 10 acres, it has to be "subject to" a hypothetical condition. I told them if I value all 40 acres, it will be "as is." They want me to call it "as is" and only give value to 10 acres, and and give contributory value to the rest of the acreage.
Any thoughts??
Thanks,
Brian
Mr. Sherrill,
A) Do not take or complete this assignment unless you call the Oregon ACLB and get their advice first. You're "Licensed", transaction value over $250,000 and have the board consider the assignment "Complex" and you are out of scope of your practice. I say any such assignment is "complex" due to all the hazards with one. They would never be for the inexperienced. Just the fact you are asking on here tells me you don't know enough to be trying one. If any aspect of your work regarding the use of the HC was later found to lack credibility, you've violated USPAP. ..
B) Find and read Barry Shea's "The "Five Acre" Appraisal" article. .. If one clearly grasps the complexities in taking on such an assignment, any appraiser who is thinking will require a nonrefundable fee, or fee per hour, just to study the subject to see if it is even possible to do the assignment using the HC. .. It is not possible to do this with any and all subject properties. For example, sometimes due to the shape of the hypothetical acres used against street access, water source, septic, location of outbuildings, location of main house, etc., the HC looses credibility because a vital element cannot be included. ... Ya can't just toss in a hypothetical septic system because you just sliced it off. .. So you cannot proceed without a few hours of your time studing all of the above... Do you want to do that and end up not getting paid for your time? .. .. If this is for a FRT, two appraisals would be required, one under a HC and one not. ..These things require a well written engagement contract, or don't take them!
C) Now you know Fannie considers such an assignment to be an "Unacceptable Appraisal Practice. ... To me such language rises to the level of a Supplemental Standard. ... Given this day and ages fraud occurring in altering of appraisal PDF files, who in their right mind would deliever such an assignment reporting it on a 03/2005 Fannie form? .. Even if you use a "Subject To" check box, those boxes just have to be one of the easiest to alter items there is. Word of advice, never use any of the Fannie forms for such an assignment. If the client can really use such an appraisal, they can live with it on a non-standard appraisal form.
D) Appraisers and clients both chronically fail to understand the differences between check boxes on appraisal forms and discussing "as-is" appraisals when loans are involved. All brains jump to the check boxes instead of to appraisal practice. An appraisal "Based" on a hypothetical condition, or a extraordinary assumption, does not have to use a "Subject To" check box on a form. There are instances where an appraiser does not have to force something into reality in order to say what a value would be hypothetically. Conversely, using a "Subject To" check box does not always mean the appraisal process was acceptable to the powers that whack the side of our heads and licenses. ... Point of fact, once a HC "the site is only ten acres" has been invoked, just exactly what has the "contributory value" of the remaining thirty acres have to do with peanuts in Spain?.. Those thirty acres no longer exist, hypothetically we just wished them away. .. But this client wants a hypothetical contributory value for them too? .. As what, a vacant lot? ... Would that be buildable or not buildable?
Do you see the logic breaking down already with the client and the intended use if this is for a mortgage loan? The client is already asking you to wish something away, but to give it value too for the loan.
Barry Dayton
