This is Diana with ABC-The Appraiser’s Business Companion. There was an interesting question that arose over the past few weeks. The single-family improved parcel also had a Metal Shipping Container that was being used as a Storage Unit on site. The appraiser treated it as Real Property because it weighed approximately 8,500 pounds. To quote the Appraiser, “The lender wants me to remove it’s contribution since its considered personal.” The appraiser was perplexed. When does personal property become real?
We can start simple with the acronym MARIA. When trying to decide consider:
- Method of attachment
- Adaptability of the item
- Relationship of the parties
- Intent of the parties
- Agreement of the parties
Chattel property is moveable. Accession can make the personal property of one owner become a substantially more valuable chattel as a result of the work of another person. This transformation occurs when the personal property becomes an entirely new chattel, such as when grapes are made into wine or timber is made into furniture. Subject to the doctrine of accession, personal property can become real property through its transformation into a fixture. A fixture is a movable item that was originally personalty (personal property) but which has become attached to, and associated with, the land and is, therefore, considered a part of the real property. “
Portable storage buildings can offer a great utility to the property owner but often they are valued under $1,000 if anything at all. In some instances the building may be worth more. Generally, they are reported as “portable sheds” with no contributory value. The fact that the storage container weighed 8,500 pounds was not the issue. If the storage container was delivered it can be transported. A manufactured dwelling is delivered and set up by connecting to utilities but still considered personal property unless the traveling gear is removed and permanent methods of affixing the dwelling to the land is completed as well as an “act of annexation”. Each state within each of their own jurisdiction will have certain protocols for the process.
Timber, which begins as real becomes personal by an act of severance once the timber is cut. Personal property changes from Chattel Personal to Chattel Real by physical and legal actions that convert personal property to real property.
When making the decision about portable buildings remember MARIA. In the event you find sufficient evidence the market reacts to the improvement with expectation that the improvement is part of the real estate and you can identify the contribution you must argue persuasively in the Appraisal Report. A technical report, such as an Appraisal Report, begins with identifying the problem, defines the scope of work, the analyses performed and the results of the analyses which are used to form the opinion that resolved the problem. Always, there must be evidence, understanding of how the evidence was treated and the results. If the results were that something exist but has no contribution, explain why it has no contribution. Conversely, when evidence clearly indicates there is contribution, explain the evidence and how it was used in the reasoning process that lead to the conclusion.
This is Diana Jacob, and you’ve just had a “Tip” from ABC-The Appraiser’s Business Companion.