Life estate VS fee simple

[Fred]

If the owner of a fee simple interest leases his property it becomes a leased fee interest. In residential real estate as with most apartment buildings the leases are short in duration and as such normally have minimal impact on value.

Minimal effect (impact) on the value of what?

 

[Fred]

As Steven S. noted:
There are two owners, each owning a different property: One owns the remainderman interest, and the other owns the life estate.

Yeah, but it has about as much traction as quantum mechanics would.

 

[Mr Rex]

Jim, I might be over parsing, but repeatedly my State board has taken common sense stances when the ASB waffled. I try to emulate the desires of my board, as best as I can devine them with the latest USPAP, the latest changes to State law, and a Ouija board. My own common sense prevents me from paying too much attention to the Ouija board.

 

[Mr Rex]

The lease-fee vs fee simple debate was a couple of months ago and I took that to the guys at the appraisal standards board. I was told I can appraise the fee simple interest of a property that is leased without making it a hypothetical condition. I wish I still had the email but my computer crashed and I lost most that was in it.

In my opinion, you guys are over-parsing. Sometimes great thinkers over think and it takes the more simple minded to tell the forest from the trees.

Fee Simple and Leased Fee are a few check boxes near the top of page 1. Too bad their isn't a "Life Estate" box on that line.:new_smile-l:

 

[Mztk1]

You have some inscrutable jargon. Reports don't ask anything. SOW doesn't tell the appraiser, the appraiser determines the SOW.

All language is a metaphor Steve, and to some extent it is all inscrutable so forgive me in advance for my enigmatic style.

The scope of work for a FNMA residential mortgage assignment is pre-printed in the URAR, also Fannie's guidelines become our scope of work with accepting an assignment that is to conform. Now I suppose in some lofty tower somewhere the appraiser gets to "determine" the scope of work, but all we guys on the ground can do if we do not agree with Fannie guidelines is to quit doing their work.

The accepted scope of work for Fannie assignments states:

The appraiser must identify the property rights to be appraised as
"fee simple" or "leasehold." (Bold emphasis mine.)

There is nothing else on the topic, those are our choices. The guidelines do state that we must identify if the property is in a PUD, which of course if it is and there are deed restrictions it affects the Fee Simple title. That comment that is acceptable on the PUD is, by my interpretation/opinion, acceptable for other encumbrances a well. Check Fee Simple or Leasehold like the scope of work asks and then describe any limitations in the body of the report, which I do.

 

[PropertyEconomics]

Fee Simple and Leased Fee are a few check boxes near the top of page 1. Too bad their isn't a "Life Estate" box on that line.:new_smile-l:

I wonder if that would make it obvious enough for those that dont think its an interest in realty to mark it?

And actually Mr Klos .. because the form is limited does not mean that the appraisal can be. USPAP requires an appraisal to correctly identify the real estate, to correctly identify the interest to be appraised and to not be misleading.

My suspicion is that because there is no Life Estate Box there .. Fannie has determined they dont wish to lend on life estates. What do you think?

 

[Mztk1]

Fee Simple and Leased Fee are a few check boxes near the top of page 1. Too bad their isn't a "Life Estate" box on that line.:new_smile-l:

Rex, reread page one. Leased Fee is not an option....

 

[PropertyEconomics]

Rex, reread page one. Leased Fee is not an option....

Hmmm maybe the dont want to lend on properties with long term leases either .. what do you think Mr Klos?

Are you seeing a trend here?

 

[Mztk1]

Jim, I might be over parsing, but repeatedly my State board has taken common sense stances when the ASB waffled. I try to emulate the desires of my board, as best as I can devine them with the latest USPAP, the latest changes to State law, and a Ouija board. My own common sense prevents me from paying too much attention to the Ouija board.

If your state is active in the minutia and they have made rulings counterwise on a Fannie-Mae URAR report and ASB on this matter, then I'd follow their ruling too, that's a no brainer. But I'd definately make sure the ruling was concerning a Fannie Mae mortgage report. A different scope of work can lead to a completely different decision.

 

[Mztk1]

Hmmm maybe the dont want to lend on properties with long term leases either .. what do you think Mr Klos?

Thinking is something I don't do on such matters. I simply state what I know loudly in the report with something like "The appraised value of the subject is based on the Fee Simple interest but the subject is rented for $2,800 per month on a four year lease. It is my understanding that in the State of Florida residential leasing agreements are limited to a one year time frame, but I am not an expert in the law and any questions on the matter should be directed to a qualified professional. Long term leasing could have an effect on property value but determining the effect in this particular assignment is beyond the scope of work".