Acreage Appraisals for residential lending

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Various lenders handle the appraisal of acreages differently so be sure to understand how your chosen lender determines what they will lend on.  Even the major lenders ie. the big 5 have widely varied instructions to appraisers about limitations on what they may consider to provide value, and some may offer different products that have varied levels of acreage and outbuildings they may allow to be included.  Some lenders will allow the full acreage and include all outbuildings considered as residential use, excluding commercial use buildings or structures, and most often the maximum acreage is 160 acres.  Some will limit to a set number of acres ranging from 5 to 15 the appraiser is to limit the value to and exclude all outbuildings other than an attached garage or if none attached a detached garage.   Unfortunately, in some cases this can be a very large difference in value and if the borrower is not aware or does not fully understand these limitations it can come as an unpleasant surprise and in the case of a purchase may cause a sale to collapse.

We will almost always view and collect the data on outbuildings etc. unless we are performing for a lender and the lender is excluding them and does not require this information then gathering this data may not be necessary and is handled on a case by case value.  That is generally a rare case as some lenders require we gather this information even though they do not intend on including those components in the value.  In the case of a sale, or where the property was recently purchased within the prior 3 years typically, we must almost always gather this data and determine the value those components may contribute to the full market value or sale price and the appraiser must be able to reconcile any disparities.  In general, these limitations are a way for the lender to limit their risk and be more certain that in the event of a foreclosure, they will be more likely to recoup their investment allowing them to lend at a lower interest rate.