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  #1  
Old 02-25-2006, 08:48 PM
Jeff Horton's Avatar
Jeff Horton Jeff Horton is offline
 
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Default Undivided interest in land

This is a strange one. I have appraised many house's that the owners had an undivided interest in an adjoining or nearby lot. Its pretty common around here for several homes to share ownership of a lake front lot.

I just got a request from a Bank for a driveby on a new construction. Very low loan to value on this one. When I got the deed from him, it turns out the owner is building on a tract of land that he has a 1/2 undivided interest in. I don't know if the both owners have to sign the mortgage or not. What happens if it were to end up in foreclosure? Just never seen this before.

It appears since he only owns half the lot then then my appraised value only includes half the lot value. I am serious considering just making the assumption that he owns the lot and disclose the mess and let the bank worry about it. Thank goodness it is a narrative and not on the forms!

Got any advice on this one?
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  #2  
Old 02-25-2006, 09:12 PM
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Is your assignment to appraise what he owns? Or is your assignment to appraiser the property in Fee Simple?
  #3  
Old 02-25-2006, 11:31 PM
moh malekpour moh malekpour is offline
 
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I assume the estate is either fee simple or leasehold. Either way, the ownership seems to be either joint tenancy or tenancy in common which means two Co- owners have equal or unequal undivided interest and equal rights to possess that property.
Are you asked to appraise the interest of the co owner or to appraise the estate as a whole? If you are supposed to appraise the interest of the co-owner, you need to know what is the co-owner's share of that property (unequal undivideded interest in common tenancy). If you appraise the estate as whole, then it is the lender's responsibility to get both co owners to sign the documents or one gives a quitclaim deed to another. It is like appraising a community property in California when the husband and wife are co-owners of the property. Usually one gives quit claim deed to the other at the date of transaction.
If you appraised the interest of the co owner and that interest was the subject of loan, the lender can sell that interest at the time of foreclosure. It is hard to sell because the buyer doesn't know who is going to be the co-owner but it is possible.

Last edited by moh malekpour : 02-25-2006 at 11:47 PM.
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Old 02-26-2006, 07:55 AM
xm39hnu xm39hnu is offline
 
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Jeff, if he owns only a 1/2 interest in the land, then he owns only a 1/2 interest in the improvements. I think I'd stop and call the client for further instructions. Instead of a $350± mortgage appraisal, you may have a fractional interest appraisal. That deed you found may kill the deal, unless there's a quitclaim laying around that you missed.
  #5  
Old 02-26-2006, 09:50 AM
moh malekpour moh malekpour is offline
 
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It doesn’t say just ˝ interest, it says ˝ undivided interest. There are two types of ownerships that can have ˝ undivided interest: joint tenancy and community property (husband &wife ownership). Tenancy in common is unequal undivided interest: one can have 1/3 interest and the other 2/3 but in Joint tenancy and community ownerships, the interests although undivided are equal. If they are two, each one has ˝ undivided interest. If they are 3 in the case of joint tenancy, each one has 1/3 interest. If they changed that equal undivided interest to unequal, it becomes tenancy in common.
you don't need to be concerned who is going to sign the docs. This is leder's job. You just put down the co-owners name in the report and mention the type of ownership: joint tenancy, tenancy in common, partenership. All co owners names should be in the deed if the ownership is joint tenancy or community property because the title should be taken at the same time but if one co owner's name is in the deed, it should be tenancy in common because they can take title in different times and seperately.
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Old 02-26-2006, 10:53 AM
xm39hnu xm39hnu is offline
 
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Moh, the issue isn't the type of tenancy, it is the fact that the property is not held in fee simple. Jeff needs to talk to the lender.
  #7  
Old 02-28-2006, 07:45 AM
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I got side tracked but I have to work on this one this morning. What is throwing me is who owns the house? Or rather half the house? From what I understand the land is owned by a lady and this ladies sister and husband. Now sister and her hubby are building their home on this lot. Whether sister lives there too I don't know? Had not considered that she might actually be living there with them too.

Another thing just occured to me, the deed given to me could be where they bought out the other sister's half. There may be another deed for the other half ownership. Obvious have to call my client but I know what he wants without calling. I have worked with him for years and he wants it done as fee-simple.

I appreciate the input. Still don't totally grasp this but since he wants fee simple I guess it doesn't really matter.
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  #8  
Old 02-28-2006, 08:11 AM
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Even if you do it as fee simple, I am sure you will remember to state the actual ownership interest, if different than fee simple.
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  #9  
Old 02-28-2006, 08:56 AM
xm72mhd xm72mhd is offline
 
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Several interesting takes on the legal issues this situation raises. Since fee simple is the name we apply when speaking of the acceptable title to real estate for mortgage, Jeff is correct in my opinion about ensuring the diverse interests satisfy his client's requirements.

Moh, my understanding is that both joint and common tenancies can be equal or unequal, the significant consequences between them, other than for encumbrance, really is in survivorship. At least here in CO.

Jim, don't you think the fee simple interest being held by diverse tenants is the issue Jeff is dealing with here? I don't quite understand how tenancy isn't related to title.

Jeff, I think you did right about contacting the client. This is definitely the client's problem to rectify. Tell 'em what you found and ask for guidance. If there is another deed out there that's his job or that the title company to find. You've gone about as fer as you should go or you're no longer appraising, but doing something else. Aside from obvious licensing issues, your job is to notify, they fix it.

I've encountered several similar, although not identical, issues, and the overwhelming initial response from the the guy on the end of the phone line varies from that is not true, so what, it doesn't matter, ignore it or fix it. All of those are the wrong response to an appraiser. You need to be prepared only to tell the client what it means to appraising per USPAP. I think the written instruction you need from the client is what interest he wants you to appraise and whether, if the instruction will be as you indicate, the appraisal development and report is acceptable with a hypothetical condition.

Last edited by xm72mhd : 02-28-2006 at 09:16 AM.
  #10  
Old 03-02-2006, 09:51 PM
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Thought I would follow up on this one. Turns out that there is joint ownership and occupancy on this one. Two sister and a husband are building and occupying the house. Ended up Appraising it as if it were fee simple.
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