Question

ABC Lending Corp has approached you to appraise the market value of a rural lakefront acreage. The property is to be used as security for a home equity line of credit. The 20-acre site features a residential dwelling on prime waterfront. Ten Acres of the property are leased to a local farmer for pasture land for dairy cows. The five-acre parcel near the lake is rented out to campers in summer, Is this assignment with the CRAś scope of practice? If not, how might the assignment be structures to permit this?

Answer 1

The appraisal of a rural lakefront acreage, including various land uses for farming and recreation, is within the scope of the Canadian Real Estate Association's practice. The value will be influenced by comparable property metrics, the diverse uses, and features like waterfront access, which are evaluated to establish market value.

Step-by-step explanation:

The appraisal of a rural lakefront acreage for ABC Lending Corp, particularly in the context of its use as security for a home equity line of credit, falls within the scope of practice of the Canadian Real Estate Association (CREA). Appraisers must assess the market value of properties, taking into account various uses and income potentials, such as leasing land for farming or renting out space for camping. The appraisal would likely include analysis of similar properties, potential income generation, and the specific characteristics of the land such as the waterfront feature.

Farming land values can be influenced by the size and shape of the property, its fertility, and access to water sources. In the historical context of French Canadian farms, land was often long and narrow, providing both riverfront access and a woodlot. This informs current appraisals by highlighting valuable features that can impact market value. The township grid system used in parts of North America means that rural acreage can also be divided clearly into sections or quarter sections, helping in the accurate calculation of acreage.

For the appraisal in question, if aspects of the land use or structure of the property fall outside CREA's defined practices, a different valuation expert might need to be involved or certain aspects of the appraisal would need to be structured to comply with CREA's guidelines. This could involve separating the valuation of the residential dwelling from the income-generating portions of the property.

Answer 2

The appraisal of a rural lakefront acreage by ABC Lending Corp for a home equity line of credit should be within the scope of a CRA's practice if they possess the required experience and qualifications, or otherwise structured with the help of specialized appraisers for accurate valuation.

Step-by-step explanation:

When ABC Lending Corp approaches an appraiser to evaluate the market value of a rural lakefront acreage, it is important to ensure that the appraisal assignment falls within the scope of practice as defined by professional standards such as those of the Certified Residential Appraiser (CRA). The property in question includes a residential dwelling on a prime waterfront, land leased for farming, and land rented out for camping. These various uses of the land need to be considered when appraising its value.

To determine whether this assignment is within the scope of a CRA's practice, one must assess if the appraiser has the expertise and qualifications to value the different aspects of the property. If the property's agricultural and recreational uses require specialized knowledge beyond residential appraisal, a CRA may need to collaborate with experts in those fields. Structuring the assignment to ensure all aspects of the property are accurately valued could permit a CRA to be involved if they are properly supported by appropriate specialists.

If a CRA is not adequately experienced in appraising commercial or agricultural properties, they may need to decline the assignment or seek assistance from appraisers who hold the necessary qualifications and experience in valuing such properties. The appraisal could thereby be structured as a team effort, with a CRA focusing on the residential dwelling and certified general appraisers addressing the commercial farming and recreational use values.