Can an appraiser include two lots with separate parcel numbers in one appraisal? Maybe, maybe not. This might seem like a random issue that almost never comes up, but I’ve seen it twice very recently, and I just finished an appraisal like this. Thus it’s important to know how to navigate the issue when it does arise. I hope this helps give some context, and I welcome your comments below.
Scenario 1: NOT GONNA HAPPEN
John owns a 2200 sq ft home on a half-acre lot, and when he bought the house 10 years ago he also bought a one-acre lot next door so he could have extra space. Each lot has its own parcel number. Now John wants to sell, and he plans to sell both lots together to fetch a premium for having a 1.5 acre lot. Can he do that?
Answer: What John has are two separate lots. He can try to market both properties together, but an appraiser is not going to value them together. Why? Because the lots are not legally bound together. Since each lot can be sold, developed, and financed separately, they will also be appraised separately.
Scenario 2: GONNA HAPPEN
Imagine Anna owns a 2000 sq ft home that technically has two lots that are being sold together. The main house has a lot of 0.50 acres, but there is also a lot at 0.40 acres that legally cannot be sold separately from the main parcel with the home on it. Years ago the neighborhood was subdivided, and this smaller 0.40 acre lot became landlocked. This smaller lot is not buildable, and it is even recorded in the legal description and the preliminary title report.
Answer: In this case it is legit for the appraiser to include both lots in the appraisal because the lots are legally bound together and together they present the highest and best use of the property. An appraiser would appraise this as a home with a 0.90 acre parcel. In short, since these lots belong together, they are sold together, and appraised together.
FYI: Fannie Mae Multiple Parcel Requirements (Seller’s Guide B2-3-04):
- Each parcel must be conveyed in its entirety.
- Parcels must be adjoined to the other, unless they comply with the following exception. Parcels that otherwise would be adjoined, but are divided by a road, are acceptable if the parcel without a residence is a non-buildable lot (for example, waterfront properties where the parcel without the residence provides access to the water). Evidence that the lot is non-buildable must be included in the loan file.
- Each parcel must have the same basic zoning (for example, residential, agricultural).
- The entire property may contain only one dwelling unit. Limited additional non-residential improvements, such as a garage, are acceptable. For example, the adjoining parcel may not have an additional dwelling unit. An improvement that has been built across lot lines is acceptable. For example, a home built across both parcels where the lot line runs under the home is acceptable.
- The mortgage must be a valid first lien that covers each parcel.
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I hope this was helpful.
Questions: Any thoughts, stories, or insight ? Agents, have you sold something like this? Appraisers, did I miss anything? I’d love to hear your take.