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Appraisal problem how would you solve it/approach it? What would the sow of work be?

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Ray Miller

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Wisconsin
Appraisal Math problem how would you solve it/approach it? What would the scope of work be?

Mr. Rex and Mrs. Sara Hogwash have decided to split the bed sheets and move in new partners to spend the evening hours with. They co own a farm of 199.050 acres with others Mr. Hogwash two other brothers. Sara and Rex own and undivided one-third interest in the entire acreage and Rex owns one-third of the remaining two-two thirds of the entire acreage. The lawyer needs to present to the court evidence to the court regarding the value of the entire acreage, assuming that an undivided one-third interest has a value equal to one-third of the entire acreage. The additional acreage that Mr. Hogwash owns in his name will more than likely will be declared to be gifted and not subject to the property division, however, the Court will want a value on that interest also. Please state you value per acre as it would make it easier for the Court to do the property division.

There are 9 tax parcels that make up this 199.050 acres. There are no improvements.

What say you????
 

Mike Boyd

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Jan 18, 2002
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State
California
Now I have a headache. Rex and Sarah should get back together and grow peas.
 

RSW

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Tennessee
I'd think about the ethonol subsidy offered by the Feds.
 

AnonApprsr

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Massachusetts
We'll have to talk about my fee first....
 

farmguy

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Banking/Mortgage Industry
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Texas
So if I understand the post

Rex and Sara have an undivided third or an undivided 66.35 acres out of 199.05 acres (199.05/3)

Rex and is brothers own the other undivided 132.7 acres and Rex owns an undivided 44.23 acres of that.

Brother 1 owns an undivided 44.23 acres and brother 2 owns and undivided 44.23 acres.

66.35+44.23+44.23+44.23=199.04

Is this a community property state?

Why would court say an undivided third is equal to a third of the value of the whole?
 

Ray Miller

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Joined
Feb 20, 2002
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Licensed Appraiser
State
Wisconsin
So if I understand the post

Rex and Sara have an undivided third or an undivided 66.35 acres out of 199.05 acres (199.05/3)

Rex and is brothers own the other undivided 132.7 acres and Rex owns an undivided 44.23 acres of that.

Brother 1 owns an undivided 44.23 acres and brother 2 owns and undivided 44.23 acres.

66.35+44.23+44.23+44.23=199.04

Is this a community property state?

Why would court say an undivided third is equal to a third of the value of the whole?

That is the question I have? About the problem as presented?

Unless the court feels that the farm is divided into 3 parts and that Sara and Rex only need to divide thier third in half to find what value each is to received.
 

Obsolescent

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Minnesota
If they own an undivided 1/3 interest, the value of that 1/3 interested does not necessarily equal 1/3 of the total value. Generally there is a discount for the limited bundle of rights.

I sent you a PM
 
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farmguy

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Banking/Mortgage Industry
State
Texas
If they are asking you whether there should be a discount, then it is your call and you will take into account property shape, soil differences, wells, etc., etc. to determine how difficult a partition would be and how much if any discount to apply.
If your client or the court has dictated that there is no discount then just appraise it and let them do the math.
 

stefan olafson

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Apr 2, 2003
Professional Status
Certified General Appraiser
State
North Dakota
RAY! You do get some interesting ones! I learned a long time ago that appraising a partial interest can be very very difficult! The split between parties could be quite a mess. I appraise the whole and put a value on the whole. I make every attempt to explain that the value of one third interest may very well not be one third of the value and I encourage the parties involved, the splitsville couple and his two brothers to sit down and discuss the property and what that one third is really worth!

I would not value the third in any appraisal I do, that's for the court to decide.
 

PropertyEconomics

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Jun 19, 2007
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Certified General Appraiser
State
New Mexico
Often times, when sales of undivided interests are not available, the discount could be considered equal to the amount of cost necessary to get the court to partition the property. It is most probable that a buyer would not pay market value for an undivided 1/3 interest that would be equal to 1/3 of the property value for a number of reasons. Undivided interests are messy becuase they require full and complete agreement on how the property is to be used, farmed, sold, etc.. Imagine two appraisers owning undivided interests in property ... only with the help of the court would the issue be solved.
In partition each party would be responsible for their own legal costs, expenses, and court costs and the total costs of partition would be subtracted from the total value of the property whole, becasue, each party will suffer costs to realize the value of that which they own.
Absent any comparable sales showing a discount, I think reflection of the costs of partition could be a reasonable way to estimate the discount of each property owners interest.
 
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