Fee Simple vs Leasehold

[Michigan CG]

The fee simple interest is only temporarily encumbered during the Chinese new year of the dogYES...I agree, sort of. However, if the buyer and seller have agreed to allow partial/all of those payments to apply towards the contract price, then the leased fee portion calls for the appropriate discount...The built up equity in the agreement is called the down payment, most likely in the lease....., and that's where I agree with Mr. Hawkings Who is Mr. Hawkings? --I smell a regression analysis. I smell over analysis of the situation. The banker wants a Fee Simple Value. The leased fee and Leasehold ownerships die at closing.

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[Steve Owen]

And what if the appraiser is asked to appraise the property and has no knowledge or disclosure of a lease?

That is not the situation here. Read the first post. Second answer: without knowledge of the lease you cannot analyze the contract... a USPAP requirement.

Timothy Evans is right. What may be in existence now is leased fee, but what is being sold is the fee simple estate.

 

[PropertyEconomics]

Mr Evans,

Answer these two questions ...

1) Has the owner of this property leased it?
2) IF HE HAS ... does he have full ownership interest in the property to sell?

They are yes or no questions.

Mr Owen,
What is being purchased is the Leased Fee estate by the holder of the lease which will once again create a full bundle of rights ... but this will NOT OCCUR ... Until the closing. As of the effective date of the report it does not exist. Its not one of symantics .. its one of fact.
Abolish the lease by mutual agreement and you abolish the situation thus allowing for measurement of the fee simple interest in the analysis. A seller CANNOT SELL something they dont own.

 

[Karl]

Leased Fee NOT Leasehold, Here is the difficulty MANY don't understand Lease Fee. & want you to change it to Fee Simple (why did put OTHER on the Forms) Here is the example I use to try getting them to understand & it seems to work. I ask the female Title or Underwriter girl. Suppose your renting a home it's 7 AM your taking a shower & as you step out the landlord is there. Are you going to be very happy? This is why it's a LEASE FEE on a Income Producing Property. The owner has turned over some rights depending on the contract BUT owner HAS relinguished his rights, Now IF you have to foreclose on the property The Lesase still is in affect you MAY have a problem.

 

[xm72mhd]

In general, I would say tenant buyouts are anything but simple. There is no reason for such a deal to occur at the "market value" of anything.

This is not what sould be termed a tenant buy-out
The reality of this instant situation is that we have a purchaser who became a tenant. My guess that there were circumstances that prevented outright purchase and so a sort of rent to wn was done. I see no reason that there is not a fairly accurate representation of market value in such an agreement. Both sides have most likely made concessions to accomodate their best interests.

So, you are recommending that a lease purchase must be appraised prospectively? I don't.

The deal was made when the contract was signed. The contract contemplates merger of the estates, there is nothing hypothetical to condition the appraisal. Unlike the ubiquitous and elusive five acre example, this interest does exist, the fact is that there are two owners of the to be merged interest. Nothing hypothetical about that. Market value can be on any date between then and the day of closing and serve the situation well and will meet the intended use. The estates will not be merged until payment is made and you want to appraise it then?

Maybe you meant retrospective market value?

 

[Mark K]

I dont believe the seller has Fee Simple interest to sell. I think the only thing he has to sell is that of the leased fee interest as he has granted a portion of the bundle of rights to another via lease.
Look at it this way, what if the buyer ... were NOT the lessee ... then what interest does the seller have to sell? The fact that the buyer is also the lesee and will rejoin all of the rights, honestly should not have any bearing on the interest being appraised here.
I agree with Mr. Santora, the SELLER does not own the property in fee simple as of the date of the assignment and therefore CAN NOT sell the property in fee simple. The right to occupy and enjoy the property has been granted to another by lease and as such the only rights he has to sell today are those of the leased fee estate.

I agree completely with you and Mr. Santora.

What some call "over-analysis" is merely "analysis" to others.

Neither party has a Fee interest at the moment of the appraisal.

You either appraise the property rights as Leased Fee or...

You appraise them as Fee Simple with a HC that the lease has no effect on value.

To do otherwise for the benefit of an underwriter or client is misleading.

 

[xm72mhd]

That is not the situation here. Read the first post. Second answer: without knowledge of the lease you cannot analyze the contract... a USPAP requirement.

Agreed. I almost started with contract analysis again, but this thread is headed into another bog. So I'll hold that for a future opportunity.

 

[xm72mhd]

I agree completely with you and Mr. Santora.

What some call "over-analysis" is merely "analysis" to others.

Neither party has a Fee interest at the moment of the appraisal.

You either appraise the property rights as Leased Fee or...

You appraise them as Fee Simple with a HC that the lease has no effect on value.

To do otherwise for the benefit of an underwriter or client is misleading.

NOT. There are simply two owners of the fee simple and one is buying out the other. Nothing misleading about that, it is 100% true, and it is really that SIMPLE.

 

[PropertyEconomics]

NOT. There are simply two owners of the fee simple and one is buying out the other. Nothing misleading about that, it is 100% true, and it is really that SIMPLE.

Edd ... how do you see two owners of the fee simple interest .... one holds the property by lease the other by deed ... that isnt joint ownership of the FEE ....???

 

[Mark K]

NOT. There are simply two owners of the fee simple and one is buying out the other. Nothing misleading about that, it is 100% true, and it is really that SIMPLE.

Unless I misread the original post, one party is the owner, another is the lessee with an option to purchase. What am I missing?

Please explain.