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Appraising life estate

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...Conor watches the door, still waiting for Rex & Webbed Feet to come in and provide a better method....taps his foot.....looks at his watch.....notices that Calvin has fell asleep face down in his cards.....listens to him snore....
 
Is this is a the case of a duck laying a goose egg?!
 
Conor pokes Calvin..."Wake up buddy....I don't think they're coming back...."

Calvin sluggishly sits upright....cards sticking to the drool on his face...."huh?"

"Yeah" says Conor, "I think they went looking for some girls scouts to roll and probably got beat up themselves..."
 
There are plenty of Life Estate SALES that take place. The problem is that no two are alike. Anywhere.

First, the remaining ages and physical conditions of the estate holders are different.

Secondly, the rate of risk differs from property to property and scenario to scenario.

It would seem to me that this information would provide parameters for value. The problem I've also had with valuing life estate/remainderman interests for a (fair) market value appraisal is the lack of reliance on market data. The calculation is simply mathematical, and the calculation of the yield rate (risk) is shrouded in mystery.

FWIW, this isn't something I came up with. An expert in these valuations brought up this point to me a long time ago.

Its easier to defend a "formula" for valuation than a "comparable" for valuation, to laypeople and valuation practitioners alike.

IMHO, it's easier to defend because everyone does it, thus giving the appearance of credibility, and it's simple to calculate.

The act of rounding is a clear statement that the conclusions are an approximation of value. As appraisers, we are estimating what a prudent purchaser would pay for the partial interest, not "determining" what that purchaser will pay.

I completely disagree with this statement, unless we are talking about something other than market value. The market is the market, and prudent purchasers are part of the market. If there is no market evidence to demonstrate that "prudent" purchasers are paying to the nearest dollar, then the appraiser is concluding a degree of precision that simply doesn't exist.
 
How many Life Estates have you been involved with Dave?
 
Conor;
Having read the thread to date, and noting the missing action requested, what might your impression be of the "worth" of the future benefit ? If there is one........

It would appear to me that your input is a basis from which work can be started and tweeked to fit the assignment. Have done very few life estates, but anything to do with "future value" in real estate needs a basis from which to start, your example appears to explain that. Thank You, hope you don't mind if I add it to the snowglobe library for future reference.


It's been a couple of days, are you sending out the helicopters or dog sleds ? there's 2 missing.......
 
How many Life Estates have you been involved with Dave?

None.

However, my experience level has nothing to do with whether the questions are valid or not, because, as noted earlier, these questions and points are not my own. They come from experts in the valuation of life estates, and, more importantly, experts in litigation.

The person that derives their data from the market, in a (fair) market value appraisal, will likely have the more credible appraisal than the appraisal that uses a mathematical formula.

Please be the first to answer the following questions:
  • Where does the mystery yield rate come from in your cited example?
  • Are there no prudent purchasers purchasing life estates, because the purchasers are not paying prices to the nearest dollar, as cited in the example?
 
Appraising is not math. Appraising is not science. Appraising is not an art. It is an amalgam of trite conventions, preached methodology, simplified analysis, and limited by the legal constraints of settled law and administration.

One of those trite conventions is to value a life estate by discounting over the years of remaining life of the life estate holder using an actuary table. Which table and how it is used affects the outcome. The discount used affects the outcome. But so does your opinion of the "as is" value of the estate in the first place. Our "opinion" is not very precisely bracketed by any market evidence and that should be recognized at the very least.
 
<.....snip.....>
I also disagree that the nature of the remainder and life estate are essentially different. In essense they are merely a division of the right to use and enjoy the property. <.....snip......>

Errrrr.... A remainderman has absolutely no right to use or enjoy the real estate whatsoever. About the only right, typically, they have is to enter the real estate to assure no waste is being committed by the Life Estate holder....

That is one heck of a division of rights, not just "merely" a division of rights. So I strongly disagree with what you disagree with... ;)
 
I'll apologize if (place condition here. ) Who asked for one anyway? LOL!

Mr Larkin,

I don't care for an apology.

Your claim that you have the ability to determine something to be what you call nonsensical, and declare it to be inconsistent with a methodology, is just plain comical. But, I'll help you with it. A Fee estate is inheritable, making it the Mercedes of the world of estates. Appropriate for the highest and most complete form of ownership, don't you think? A Life Estate is not inheritable, therefore appropriate to then describe it as something less than a Mercedes, I would think, as it is a lesser estate against Fee Simple Estates. Both reversion or remainder estates are lesser estates, while inheritable, during the duration of the Life Estate there are no rights of enjoyment at all typically. You may not like the cars selected for the analogy, but it was at least as consistent as you posting this:

<........snip......>Therefore, after many years of Life Estate Valuation trials in the courts, as well as trying to provide fair compensation in the many legitimate life estate purchases that take place every day - the case study that is provided in this thread is presented (and recognized) as the mainstream and accepted method of valuation for these Real Estate Interests.
<.....snip.....>

while stating this:

III. Factors affecting use and value

A. Life estates typically cannot be sold to others.

in your own case study PDF. I find this confusing, as I do a statement that ridiculing a methodology, or it's messenger, is not acceptable unless one has a solution or alternative. And in the later case, if one does have alternatives, that somehow that is better

Then we move on to your saying:

<......snip.....> I am ready, willing, and able to discuss the merits of the methodology with both of you. But I will do it with proper dialogue, not acrimony, which is all you've offered.<......snip.....>

right on the heels of:

<....snip....>Anyone who argues otherwise, without providing a more fair and credible method sounds like an obnoxious drunk at a wedding.

after it seems you intentionally ignored the parts of my post #20 that were ripe with the proper dialogue and offerings that opinion is made of.

Making your offer of:

<....snip....>Again, I will offer my apologies to you both, should you present a more credible solution. Until then, I stand by my observations regarding your lack of sobriety and decorum.<......snip.....>
rather less than sincere in my mind, as why would presenting a credible solution sooth your damaged feelings? In fact, it would seem to do just the opposite I would think.

By the way, nice quote!

"There is a principle which is a bar against all information, which is proof against all arguments and which can not fail to keep a man in everlasting ignorance - that principle is contempt prior to investigation."

---Herbert Spencer

Let me see, what did you post? Oh yes! Something about obnoxious drunks at weddings. I appreciate why you selected that particular quote! … Regardless, I'll be happy to likewise offer my apologies to you should you stop contradicting yourself and declaring others to be acrimonious while on the heels of your own acrimonious statements. Then perhaps we can discuss forecasting the future into what are short periods of time, using historical trending, in real estate. Until then, I'll have to stand by my own observations myself.

"Oho!' said the pot to the kettle;
"You are dirty and ugly and black!
Sure no one would think you were metal,
Except when you're given a crack."

"Not so! not so! kettle said to the pot;
"'Tis your own dirty image you see;
For I am so clean -without blemish or blot-
That your blackness is mirrored in me"

Maxwell's Elementary Grammar school book, copyright 1904
 
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