Tuesday , 29 September 2020

An Open Letter to Fannie Mae

Lee Lansford
Lee Lansford, Certified Residential Appraiser, Lansford & Associates

By way of introduction, I am a 30+ year residential appraiser, AQB Certified USPAP Instructor, and former nine-year member of the State of IL Appraisal Board (where I served two years as Chairman). I come to you today with an urgent concern regarding appraisal advice contained in the Multiple Parcels article in the December 2019 issue of “Appraiser Update” from Fannie Mae. The advice in that article goes against the norms of good appraisal practice for an opinion of market value and is counter to the interests of Fannie Mae and residential mortgage lending in general.

Specifically, appraisers are advised that excess land (here, a parcel separate and distinct from the improved parcel and not necessary to support the improved parcel) “is considered ‘value in use’ for the purpose of the appraisal, so the land should be described and its contributory value included in the grid.”

If this be the case, is Fannie Mae then prepared to accept an appraisal (and mortgage) where the appraiser has chosen “No” to the question “Is the H&BUse of the subject property as improved?” We both know the answer to the question, but this is what the advice in the article would have to lead to.

Real world example: I appraised an improved (SFR) parcel. Adjacent and in same ownership was a vacant parcel (also SFR zoned) with its own separate and distinct H&BUse. This vacant parcel, having a market value of $350k, would NOT in the eyes of the market be combined with the parcel with the SFR improvements. Based upon the advice contained in “Multiple Parcels,” I would “describe” this vacant parcel and then have its “contributory value included in the grid.” In this instance, value in use is NOT market value and contributory value would be wild speculation.

I am aware that many appraisers struggle with the concept of multiple parcels and the process for determining what constitutes the subject property in the development of an opinion of market value. The cited language in “Multiple Parcels” only adds to the confusion.

Thank you for your time and attention.

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About Lee Lansford

Lee Lansford
Lee Lansford, IFA/ASA, is a licensed Certified Residential Appraiser with 30+ years of experience. He holds an MBA (R.E. Finance & Urban Development) from DePaul U (Chicago) and is an AQB Certified USPAP Instructor. He served for 9 years on the State of IL Appraisal Board, where for 2 years he was chairman. Lee also serves as a “hearing officer” for real estate tax assessment appeals in the office of Supervisor of Assessments in his home county. A designated member of the American Society of Appraisers, he is in private practice in “Chicago-land.”

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