Part-Time Farm Property Collateral Valuation (Chapter CV201) Questions and Answers Readers with questions regarding Farmer Mac's Part-Time Farm-related Collateral Valuation Standards and Guidelines are invited to review the following material. If your question is not addressed here, you are welcome to post your question at the end of this section. Farmer Mac's Part-Time Farm program is designed to serve the unique needs of the Part-Time Farm customer. For purposes of Farmer Mac's Part-Time Farm (PTF) program, a PTF property securing a loan must meet certain criteria, including - Rural Residential as the primary highest and best use Agricultural production use capability must exist, but it also must be a secondary - not the primary - use If the property contains 5 acres or more, it need only have capability of agricultural production If the property contains less than 5 acres, it must have shown the ability to produce $5,000 in gross agriculture production income. Part-Time Farm properties have market characteristics that are distinct from those found in urban or suburban settings and, as a result, present collateral valuation problems that may drive a need for an expanded scope of work (research and analysis) and additional report content. Farmer Mac's requirements reflect two major categories of Part-Time Farm properties, with the appraisal-related requirements tailored for each category. This is to aid a lender when discussing a loan with an applicant, making it easier for the lender to identify what kind of appraisal to obtain and what needs to be included in the appraisal report. The two major categories are - PTF 20 - A PTF property on a parcel of 20 acres or less that does not have non-residential use outbuildings with significant contributory value (i.e., all significant improvements, including any outbuildings, are rural residence use improvements). Farmer Mac expects an appraisal of a PTF 20 property will be similar to a typical Fannie Mae rural residence property appraisal, with the addition of - A legal description (as such, or a parcel map, plat, etc. to illustrate the legal description) Environmental Disclosure (Form 1010B) (Unless waived by the Seller - See [no need to reference Seller Balletin if in Guide] CV201.1 C (6) (f) and Form 1027B, page. 2) PTF 20 - Plus - A PTF property on a parcel of more than 20 acres that does not have non-residential use outbuildings with significant contributory value. Farmer Mac recognizes a PTF 20 Plus property's characteristics may prompt the need for additional analysis and support to address - The rural residence highest and best use, The market for larger size properties, When necessary, how the market responds to the difference in parcel size, and Value Allocation (Form 1033B). Note: The additional support may become necessary when the available improved property sale comparables do not reflect (bracket) the size of the subject's parcel. What forms are required in a PTF collateral valuation report? The Fannie Mae 1004 Uniform Residential Appraisal Report form (URAR) is recommended when the contributory value of the dwelling(s) equals or exceeds 30% of total property value. The Uniform Agricultural Appraisal Report (UAAR), published by AgWare, Inc., is highly recommended when the contributory value of the dwellings is less than 30% of total property value. The UAAR is also recommended when the combined contributory value of the dwelling(s) and farmstead is less than 50% of total property value. An appraiser can use a narrative style or other type of form report to document the collateral valuation, but such use will entail scrutiny and may impede processing of the transaction to handle the diverse arrangement of critical collateral valuation information in such report styles When a property includes more than one parcel or tract, can the appraiser just appraise each and add the parts together to support the value conclusion? Multiple parcel holdings that are used as security for a loan must be analyzed to reflect how the market responds to the holding. Analysis of the property may include property components, such as multiple parcels in one holding or land as one component, agricultural use buildings or improvements as another component, and the dwelling with its site as another, but the final value conclusion must reflect the market's response to the overall property, as a unit sold in one transaction between one buyer and the seller, with the property holding in "as is" condition. When must an appraiser use the Farmer Mac Form 1016 - Excess Land Addendum? This form is designed for use when the subject includes acreage that is significantly above the typical acreage in the subject's market area and market data for the property, as improved, does not include sales of improved properties that have similar land acreage. An appraiser must provide support for the land size adjustment, and can use this form (or an equivalent form) for that purpose. With regard to the Farmer Mac Form 1010B - Environmental Disclosure, is an appraiser expected to check for such things as wood-destroying insects, dry rot/mold, or the presence of lead-based paint, or to test service systems such as the electrical, heating/cooling, or plumbing (well and/or septic) systems, while inspecting the dwelling(s) on a PTF property? While Farmer Mac recognizes that appraisers are not experts in such matters, Farmer Mac relies on an appraiser's objectivity and observation abilities, and candid disclosure of property conditions. Generally, the appraiser is not expected to test systems, but may ask the dwelling owner or occupant to do so if the appraiser observes conditions that suggest a deficiency or inoperative system. Obvious health and safety deficiencies, such as lead-based paint, inoperative or inadequate domestic water supply, or a dysfunctional septic system are examples of situations where Farmer Mac expects specific disclosures. Conditions that threaten the structure's durability and soundness, such as dry rot or pest infestation, are also important. If the lender provides the appraiser with a completed Farmer Mac Form 1010B, the appraiser is expected to review the information on the form and compare that information with observed conditions at the property. If something appears to have been overlooked by the party that completed the form or is inconsistent with the appraiser's observations, the appraiser is expected to disclose that situation in an attachment to the Form 1010B. If if the lender does not provide the appraiser with a borrower/applicant-completed Farmer Mac Form 1010B (or its equivalent), the appraiser may use the assumptions and limiting conditions shown in Fannie Mae Form 479 (6/93 version) or the Fannie Mae Form 1004 (March 2005 version) without obtaining and documenting the lender's prior agreement.