Hi Joe,

Let me work through your questions directly because a few things are going on here.

First - the acreage issue

Before getting into appraisal methodology, the acreage is the first thing to sort out.  For a HECM, HUD does not set a hard acreage cap, but value can only be given to land that is typical for the area and necessary to support the residential use of the property.  Excess land beyond what is typical gets excluded from value.  For a proprietary jumbo reverse mortgage, most lenders cap eligible acreage - often at 20 acres - so at 19 acres you may be right at or near that limit depending on the lender.  Either way, the appraiser will need to address how the land contributes to the residential value and what portion, if any, falls outside the area's typical range.

Can the Income Approach be used for subdivision potential?

No.  The Income Approach is used for income-producing properties - rental units, commercial properties, and so forth.   It is not an appropriate methodology for valuing residential land based on its subdivision development potential.   What you are describing is essentially a hypothetical condition - what the land could be worth if it were subdivided and sold to a developer.  Appraisers can analyze hypothetical conditions in certain contexts, but not for a residential reverse mortgage appraisal.  The lender needs a current market value based on the property as it exists today in residential use.

Highest and best use

You are right that appraisers consider highest and best use, but this is where it gets nuanced.  For a residential lending appraisal, the highest and best use analysis must be considered in two ways: vacant land and improved.  Even if the highest and best use of the vacant land might be subdivision, the highest and best use as improved is almost certainly continued residential use, given the existing home on the property.  The reverse mortgage appraisal is based on the as-improved value, not the vacant land value.

The comparable sales problem

If there are genuinely no good comparables in your area, the appraiser has to explain that and make the best adjustments they can with what is available.  They can use comparables from a broader geographic area, older sales with time adjustments, or paired sales analysis to support adjustments.  What they cannot do is substitute a development-based valuation methodology for the Sales Comparison Approach in a residential appraisal.  If the property is truly unique with no supportable comps, that itself becomes a collateral risk issue the lender will scrutinize closely.

The practical reality

The previous reverse mortgages on this property being completed and paid off tells you that it has been approved before.  That is useful context, but it does not guarantee the same result today, particularly if you are now trying to capture subdivision value that was not part of those prior appraisals.

Talk to your lender before ordering the appraisal.  Explain the acreage, the lack of comps, and what you believe the property is worth.  Get their read on how they will approach the collateral review before you spend money on an appraisal that may not support the value you are expecting.

Reference: HUD Handbook 4000.1, Section IV - Appraiser and Property Requirements, Valuation and Reporting Protocols.