Appraisers' Free Forum

Greg made a post in the peer discussion area, but it brought to mind a question.

Particulars are as follows. A state licensed appraiser did an appraisal on a house that was 3200sf on a busy intersection. The house sits on a corner. It is a three story Cape Cod design with a nice veranda all around it, a two car carport, and is sided with vinyl siding. When I say busy, the house faces a high school with 2300 students. The street is a arterial street with 17,000 cars per day. The side street is another arterial street with 11,000 cars per day.

Now, here is my question based on this information. Let's assume they have a one acre lot. I don't know the size, so that is where the hypothetical situation comes in. Or even that it has some potential assemblage with the lot adjacent to it.
I wonder how many appraisers would see this and, since it is potentially outside their competency, ignore this potential. Due to the high traffic flow, as well as the location of the school across from it, would you consider the H&BU commercial conversion? That much traffic, on a corner lot, should be able to generate a substantial income, one would guess.
Obviously zoning would have to be addressed, but the location, to me, would seem to warrant further investigation than simply my doing an appraisal as SFR. What say the minds that know?

I had the same thought as I read the scenario the first time.

I'd say you better stick with H&BU analysis. A lot of what you reccommend is very sophisticated, but unless your client wants some sort of market or feasability study you are doing and awful lot of work for a 1004 that may have no application. Are you sure you got the competency this stuff takes?

Edd, that is my point. How many appraisers simply decide to do it SFR, rather than calling their customer and presenting the situation, even if it means losing the assignment to someone who is competent and capable?

I would say you are being very creative and it may exceed your job description. I would guess if a client wants an SFR they are not interested in a commercial feasibiltiy nalaysis that necessarily will include a zoning change. I guess if you had some grounds other than your judgment, such as a master plan that indicates the zone should be changed or something like that, you should probably just do the SFR.

Nothing wrong with your thoughts as a marketing strategy with some clients though.

That is why I was asking. We're supposed to analyze H&BU on each assignment, but I was wondering how many people just see a house and say 'that must be it'. Wouldn't be a very good marketing strategy for me, as I don't do commercial. But I just wanted other opinions. Thanks.

Ben, you nailed it. H&BU was indeed one of the issues with this report.

While the subject site is zoned Low Density Residential, the land immediately to the west of it is zoned Commercial and the land immediately to the east and north Agri. But considering the location (across the street from the school), a police station and prison a few blocks north and with the development plans in the near future of the general area (commercial), a C-store would have been a better choice for this property. Obviously, the zoning would have to be changed but considering the circumstances this should not be hard to do. Incidentally, this property was originally zone Agri but was changed to Residential AFTER the house was built.

BUT .... if an appraiser bangs out reports like many do and pride themselves on fast turntimes, they obviously don't have the time to research things properly.

This is another reason why MBs need to be investigated on every loan that goes sour to see if they put time pressure on the appraiser (not that this lets the appraiser off the hook).

With a busy intersection such as the one mentioned, I would need more information in regards to traffic pattern and weave. Just because it is on a busy intersection does not in itself make the H&BU different. I have seen intersections that were too busy for a C-Store. You can get on the lot easily, but to exit is a different story.

I do not disagree the H&BU may/should be different, but not just because the zoning to the adjacent parcels are different. Sounds like a mixed use neighborhood.
How many other commercial (C-Store), unique (Jail/Prison) properties are located within the neighborhood, what about other SFR?

Just for references

This is the Subject:




This is the subject from across the street:





This is a National Geographic Satellite photo of the subject




This is a National Geographic Satellite photo of the area around the subject



This is the first "comparable" used in the report. It is located on a cul-de-sac where houses sell between $600 thousand and $2.2 million:

Those pictures are worth a thousand words.

Is there a traffic light?

Just wondering, what has the H&BU (as of effective date) been determined to be?

Annemieke Roell wrote:While the subject site is zoned Low Density Residential, the land immediately to the west of it is zoned Commercial and the land immediately to the east and north Agri. But considering the location (across the street from the school), a police station and prison a few blocks north and with the development plans in the near future of the general area (commercial), a C-store would have been a better choice for this property. Obviously, the zoning would have to be changed but considering the circumstances this should not be hard to do. Incidentally, this property was originally zone Agri but was changed to Residential AFTER the house was built.

Lady Annemieke, I am respectfully going to disagree, because whether we are discussing the specific or the general, the appraiser's job does not include speculation by way of hypothetical conditions unless the scope of work calls for it. If the client wants the hypothetical applied then fine, but let the client assert that. The appraiser is compelled to report the inventory of adjacent uses as a aprt of market analysis, which may indeed amount to external price pressures, but I think it is highly irregular and less than useful for the appraiser to choose a use other than the interim use as the Highest and Best Use. Doing so requires extensive research that is certainly beyond the scope of a 1004 assignment. And, as you can see just here, there are some very different ideas about what commercial use, if any, should be built on this property.

If the neighborhood (there's that word) is in transition to commercial or high density residential or any use other than what the subject is zoned for then maybe the H&BU is hold for development.

Edd Gillespie wrote:

Annemieke Roell wrote:While the subject site is zoned Low Density Residential, the land immediately to the west of it is zoned Commercial and the land immediately to the east and north Agri. But considering the location (across the street from the school), a police station and prison a few blocks north and with the development plans in the near future of the general area (commercial), a C-store would have been a better choice for this property. Obviously, the zoning would have to be changed but considering the circumstances this should not be hard to do. Incidentally, this property was originally zone Agri but was changed to Residential AFTER the house was built.

Lady Annemieke, I am respectfully going to disagree, because whether we are discussing the specific or the general, the appraiser's job does not include speculation by way of hypothetical conditions unless the scope of work calls for it. If the client wants the hypothetical applied then fine, but let the client assert that. The appraiser is compelled to report the inventory of adjacent uses as a aprt of market analysis, which may indeed amount to external price pressures, but I think it is highly irregular and less than useful for the appraiser to choose a use other than the interim use as the Highest and Best Use. Doing so requires extensive research that is certainly beyond the scope of a 1004 assignment. And, as you can see just here, there are some very different ideas about what commercial use, if any, should be built on this property.

If the neighborhood (there's that word) is in transition to commercial or high density residential or any use other than what the subject is zoned for then maybe the H&BU is hold for development.

While you out-experience and out-license me, I am going to have to respectfullt disagree with you.

If an appraiser is geographically competent and keeps up with the local news, this is the kind of stuff that we DO need to research and report because it may affect the future value of the property.

If we appraise to future value, would we doing a prospective appraisal now?

Lady Annemieke said, and I agree;

If an appraiser is geographically competent and keeps up with the local news, this is the kind of stuff that we DO need to research and report ...

Bt it is done because there is market data to show what ever is going on effects the value now. How do you know it will or may effect the value in the future?

But, that is quite different than nailing one future H&BU based on a hypothetical use you choose out of all the possible hypotheticals uses out there.

Bill Caudell wrote:If we appraise to future value, would we doing a prospective appraisal now?

Yes, and that is true even more so if you choose a hypothetical. It moves beyond the hypothetical and the prospective to the speculative unless that is what the client wants. For a 1004 you stop with the research and report of what is happening and do not predict what will happen.

Edd Gillespie wrote: For a 1004 you stop with the research and report of what is happening and do not predict what will happen.

so you don't comment on what could have an effect on a property should it go into foreclosure? Not saying it has a significant effect of value and may not affect the investment quality of the loan, but shouldn't a [s]possible[/s] probable alternate usage be reported and leave the decision concerning it's affect on the loan to the underwriters?