Construction Loan Appraisal

[dmccarty]

Don,

Well, I was thinking of meeting Brad and you but if Brad has
an Oranage tractor I'll have to rethink things. /forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif

The parents are in a gated community. The best thing about it
is that the subdivision has a 4 mile private road. When I'm
down there I can go run and feel a bit safer from cars. /forums/images/graemlins/grin.gif

The funny thing is that even though they live in a gated
commnity with security, they still have problems with noisy
neighbors! /forums/images/graemlins/confused.gif Hopefully the will move up here and
build on one of our lots. I have a gated community as well.
I put in four posts across the road, put up some boards,
installed two 10 foot pipe gates and posted some no tresspass
signs. /forums/images/graemlins/grin.gif The tick and chiggers are my security. /forums/images/graemlins/grin.gif
/forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif

Later,
Dan

 

[lamarbur]

you've just added a lot more to the explanation.. Only thing I can offer is for you to listen to the licensed appraisers that have answered here and I believe one person said his son does this thing for a bank system.. You'll probably have to outline, in detail, start to anticipated finish (home built) and let some of the people in the know, help guide you to where you want to be.

 

[OkeeDon]

<font color="blue"> Well, I was thinking of meeting Brad and you but if Brad has an Oranage tractor I'll have to rethink things. </font>

Well, it might be an interesting meeting, since I see you have green and I have blue. All we have to do is agree to disagree on color, then start off on that positive note.

Running in a gated community, watch out for old geezers in golf carts. You might be safer on Martin Downs Blvd.! I've calculated that each lap around the fence line on the combined 7.5 acres that includes my daughter's property is 1/2 mile. I calculated that for my wife, because I try not to walk anywhere, let alone run. God gave us legs, then realized His mistake and gave us wheels.

I can't imagine them moving back North. I have a cabin in NW NC, and I've been there in the Winter. I can take it because I know I'm heading back to Florida in a couple of days...

 

[8NTX]

</font><font color="blue" class="small">(

QUOTE: <font color="black"> </font>
...
And we did buy way below market value. /forums/images/graemlins/grin.gif We bought the
better part of a subdivision. Cheap. The developer had died
years ago. He had moved out of state. And more importantly
most of the land did not/does not perc so it is unbuildable. But
there are enough perc sites for what we want to do so it was
perfect.

I'll throw out some numbers. We paid not quite 3,000 dollars
an acre. Lots selling the year we bought sold for 12,000 and
acre. This was 4 to 5 years ago. A roughly 2 acre lot in the
subdivision just sold for over 20,000 an acre. The tax value on
the land portion of the properties used in the appraisal worked
out at $17,000 an acre. Our apprased land value is about
$8,500 per acre. Thus the 50% figure.

As an appraiser, is it your opinion we bought way below FMV?
/forums/images/graemlins/grin.gif

Perhaps you did, but like a "typical appraiser", I'll say that your perception of value may be "subjective". /forums/images/graemlins/grin.gif
The problem comes in when you say you are basing your 50% number based on the assessed value of the comps. The assessed value may be way off. I am also a property tax consultant. In most states, assessed value is supposed to reflect market value. But I have seen HUGE differences, and have successfully argued this hundreds of times with taxing authorities. Using mass appraisal techniques, it is literally impossible to be very accurate much of the time. It is up to the property owner to dispute a high assessed value if he feels it is incorrect. Believe it or not, sometimes an owner will leave an unreasonably high assessed value alone and just pay the higher tax. Too much hassle, too much money on his hands, or maybe he likes to use the high figure in his financial statement.

It's impossible to make comparisons on the comp. sales without information. Did the comps "perc"? Did they sell with favorable owner financing? Was it a true arms-length sale?. Many factors to consider. You may be right in that you bought way below FMV. But I would completely disregard basing your value on assessed values.

I've been an appraiser for 21 years. Land is often the most difficult type of property to appraise, especially when good comps are "few and far between". And I've seen it all - have served as an outside reviewer for banks and federal institutions such as the FDIC and now defunct RTC and FSLIC. I also serve as reviewer and consultant for a local appraisal district when they get sued over value disputes. I've seen plenty of garbage appraisals. But don't give up, there are plenty of good appraisers out there too. A seasoned banker will know who they are. Good luck.


)</font>

 

[BradK]

It is not the orange that bothers people it is my truck that is nicknamed the "Bario Death Machine" by a guy i work with (see pic). Can't miss it. Let me know when you are in town as the firm I work for is moving our office to Palm City out of Stuart.

BradK

 

[dmccarty]

Don,

We can aggree that tractors that are Orange, Blue and Green
are all GREAT tractors and toast TBN! /forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif /forums/images/graemlins/grin.gif

The golf carts are kinda bad but not as bad as Martin Downs!

My old man is going to have a tough time if they move up here.
He has lived in Florida for most of his life and loves it. But both
of them want to be closer to the grandkids. I told them I'll chop
the wood for the wood stove to keep them warm in the winter.
/forums/images/graemlins/grin.gif

Later,
Dan

 

[dmccarty]

8NTX,

It's impossible to make comparisons on the comp. sales without information. Did the comps "perc"? Did they sell with favorable owner financing? Was it a true arms-length sale?. Many factors to consider. You may be right in that you bought way below FMV. But I would completely disregard basing your value on assessed values.

The comps I am using as well as what the appraiser used all
perc. The appraisers used lots with houses. I happen to know
the subdivision that two of the comps are located. And it just
happened that my EX in laws house was used as a comp. What
are the odds? /forums/images/graemlins/confused.gif /forums/images/graemlins/grin.gif The tax value on the land
is about right. The land was going for $7,0000 per acre in
1991/1992. So its current appraised value is in the ball park.

What you said about percing is one of our concerns with the
appraised value of our lot. I know how hard it is to compare
land. One of our fears is that the appraiser appraised our lot
compared to certain lots in our subdivision. There are a whole
bunch of issues with them price wise. Another long story, but
those lots sold cheap due to lack of known perc and the owner
was literally days from being foreclosed. We sold the land to
the owner at our cost when we bought into the place so the
price was way low. That would not be a good comparable. For
instance once of these lots sold for 2,500 per acre while the lot
next to it is the one that just sold for over 20,000 per acre.
One of our frustrations is that our lot appraised for such a low
number. We did not expect it to appraise for 17,000 per acre
we figured a low value would be 12,000. Heck, I sold land in
a subdivision 5 years ago for around 12,000 per acre.

We will find out the FMV real soon. We have one of our lots
on the market.

One thing that nobody has touched on is on our concern with
which number to use to calculate the ratio between the loan
amount and equity in the property. This is another issue with
the bank since the numbers they use lower our equity in the
property.

Later,
Dan

 

[StoneHeartFarm]

Dan,

Here's a link to the rules governing Appraisers. I think the client part you are interested in is here: http://www.appraisalfoundation.org/html/USPAP2004/statement9.htm

The term "Client" is defined in the DEFINITIONS section of USPAP as

Also, the GLB Financial Privacy Act of 1999 applies.

These rules were put into effect to keep appraisers from being unduly influenced, (through intimidation, bribery, etc.) by owners/buyers/realtors and so on. It has, unfortunately, often resulted in hurt feelings on the average homeowner's part, and the average appraiser is still being pressured.


</font><font color="blue" class="small">( One thing that nobody has touched on is on our concern with
which number to use to calculate the ratio between the loan
amount and equity in the property. This is another issue with
the bank since the numbers they use lower our equity in the
property.
)</font>

Which one is the bank using? Most probably the one developed from the Comparable sales. That is usually considered a more accurate indicator than either construction cost or income value. The one you should use is the one the bank chooses. It depends on who the investor is that they are trying to sell your loan to. Different investors have different requirements, and those are outside the power of the bank to control.

Steve

 

[dmccarty]

Steve,

Thanks for the link. It gives me more warm fuzzies about the
appraiser. Its not all negative with her. She is heads and
shoulders above the company that did not finish the first
appraisal. She has been very repsonsive and open to
questions. The link does make me a bit happier.

Which one is the bank using? Most probably the one developed from the Comparable sales. That is usually considered a more accurate indicator than either construction cost or income value. The one you should use is the one the bank chooses. It depends on who the investor is that they are trying to sell your loan to. Different investors have different requirements, and those are outside the power of the bank to control.

The bank is NOT using the comparable value in the appraisal to
calculate the ratio to determine PMI. They are using the
appraised value of the land which is their low number. Then
they are using the loan amount/contract price on the house to
sum up the total value of the property. This sum is less than
the appriased value from the appraisal. Using these numbers
we end up with less than 20% into the project.

There is a bunch more I could say about this but I'll stop beating
the horse.

We are moving forward on the loan. The paper work was sent
to the underwriter today so we will see what happens next. If
there are no more suprises we should close next week and
break ground soon after.

The bank says if we do another appraisal after the house is
finsihed, they use the comparable number. The HIGH number
which would give us 20%. Also at that point we will have sold
one lot at market prices. AND added to the house outside of
the loan. So we would have our 20%.

Sure seems like a big game that the bank has stacked in
thier favor....

Later,
Dan

 

[StoneHeartFarm]

Dan,

Going ahead is probably your best bet. Once the house is completed, the bank will view it differently and will use the value derived from comparable sales. Different investors, different rules.

Personally, I think all of the land should be included in value, since you can bet the mortgage will include all of it. But, that is unfortunately not the way it usually works, unless you stay with a portfolio loan through the bank.

No problem with the link. The general public has as much right to read those rules as appraisers do. They affect you too, and were written with the help of your tax dollars. Please note that these are the current 2004 rules, they are rewritten every year. (Remember those tax dollars?) /forums/images/graemlins/wink.gif

Steve