Appraising for a refinance with a life estate

[Kimberly Schott]

I need some help. I haven't appraised a house with a life estate in a long time, and I can't remember how to handle it. The owner is refinancing, and his mother lives with him and has a life estate. Is it correct to appraise the fee simple interest and mention in the report that the property is subject to a life estate? Do I have to do anything else? I'm thinking that I have to address marketability since the house can't be sold wihout the life estate being surrendered.

Thanks.

 

[Kevin Mc]

thats what I do.....

Appraise as free and clear from the life estate and let the underwriter deal with it. The title search will tell them about the life estate(as well as you should mention it in the report).....there is little more you can do on your end.

 

[Joanne Rauenzahn]

I would say the same thing - it's a title issue not an appraisal one really. Unfortunately it may keep a mortgage from being done - limits the lender's ability to foreclose (can't kick her out!)

 

[Atlanta CG]

Pray tell, how can it be "free and clear" when it has a Life Estate attached to it? Appraising it as such would be deceptive, in my opinion.

 

[Joanne Rauenzahn]

Pray tell, how can it be "free and clear" when it has a Life Estate attached to it? Appraising it as such would be deceptive, in my opinion.

It can be free & clear of liens ... monetary ones at least. Would you consider a life estate a lien? They would have to remove that for most lenders to do any financing.... whixh is probably why there is no financing on it now.

 

[Kevin Mc]

Thats exactly what they do......

It can be free & clear of liens ... monetary ones at least. Would you consider a life estate a lien? They would have to remove that for most lenders to do any financing.... whixh is probably why there is no financing on it now.

the life estate will have to be removed for a conventional refinance, again it is not an appraisal issue, it is a Title issue.

 

[MEL]

Kimberly, Call your client and let them know about the life estate. This is not something the client wants to find out about when they receive the appraisal report. They should be able to tell you how and if they want you to proceed.

 

[Fred]

The only way they will knowingly mortgage a property encumbered by a life estate, is if they can get an agreement from both owerships for simultaneous foreclosue on default.

Once they tell you they have the legals in place, they have sound collateral. They need to understand that your value is mathmatically equal to fee simple, but you need to report the actual rights in place at the time of inspection. That may create some necessity to "supplement" the form with clarifying language.

 

[Mr Rex]

I can see the scene now, "Sorry Mama, I gotta' sell", as he puts the pillow over her face.

 

[BOB PADRICK]

I've always ended up

doing a normal appraisal-"subject to the combining of the estates". Either that or a hypo-generally speaking the lender gets the release from both parties, then tells you to procede.