House and Five Acres
Five acres where?
A house and five is a typical rural/agricultural assignment throughout Illinois. Appraisers who perform these assignments are quick to point out that, “I get these assignments all of the time.”
What does USPAP state in the FAQ?
178. APPRAISING PHYSICAL SEGMENTS (5-ACRE PORTION)
Question: A local lender has asked me to appraiser only a 5-acre portion of a 62-acre parcel. Am I permitted to comply with this request?
Standards Rule 1-2(e)(v) states that the subject of an assignment may be a physical segment of a property.
However, appraisers must also comply with any laws, regulations, guidelines or other assignment conditions that might apply.
If the assignment requires compliance with published assignment conditions, the appraiser must be aware of the current guidelines (or regulations, if applicable). Failure to recognize applicable assignment conditions would be a violation of the ETHICS RULE or COMPETENCY RULE.
Let’s unpack this question for Illinois appraisers.
It’s true that 5 out of 62 is a physical segment and that appraisers should be able to value this. However, the question becomes, “which five?”
Merely imagining a floating five-acre parcel where none exists isn’t enough. Appraisers must utilize a hypothetical condition.
Five acres where? What are the dimensions? Where’s the well? Road access?
A hypothetical condition is defined as:
a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.
Laws, regulations, guidelines
Aside from assignment conditions or guidelines imposed by the bank (client), the appraiser must recognize laws and regulations.
What if the county or township only permit a minimum of 20 acres per dwelling unit?
There goes the imaginary 5 acre tract.
“The bank ordered it like this,” is not sufficient justification for providing a misleading report.
Consider the consequences when taking on such assignments.
By Lee Lansford – Illinois Appraiser Newsletters – Volume 7, Issue 2