Appraising life estate

[Louis Pompeo]

Conor puts on a pot of coffee and contemplates the logistics of getting Webbed into a cold shower...

 

[jay trotta]

There was an article on the web regarding the "middle class" and how it is being viewed around the world; they are using Income / Age / death and some other scales to project how this is estimated.

Am not going to get into the wordsmith thing, but if this is being used by other projectors of future results, why is our world (appraising) so different ? I suppose it's just a barrell of grey matta anyway and can be argued to the best defender.


Mr Feets;
"Maxwell's Elementary Grammar school book, copyright 1904"; I never realized your age, till ya just gave it away - I always respect my Elders and therefore will respect your words for what they are, but with all that "Aged Wisdom", would have really appreciated Your version/application of the Life Estate Issue.

cheers

 

[PropertyEconomics]

I work for an outfit that values Life Estates all over the world - if not on a daily basis, then a weekly basis.
There are 100's of scenario's that require the valuation of a life estate.
Even when a life estate sells, it is NOT considered a comparable for consideration in another life estate valuation assignment.

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.

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

In response to an eariler question ... I believe the Life Tenants position could be appraised could it not?
As far as there being no sales of life estates, I have encountered many properties that were sold subject to a life estate on all or a portion of the property. So there is a market value for a life estate with the remainder man selling their interest in the properties.

Also, doesnt your "outfit" have a rather biased view of the valuation of anything? And that being the case, I can certainly see your argument for the sum of the parts methodology ... that however does not make it proper or reasonable. Actually only the sale of properties on which life estates existed would give the actual value of the property subject to the life estate. Isnt that true???

Finally ... you make note that your outfit values life estates around the world .... well lets hope you dont value them in England or Wales .... I direct you to the following:


The law of England and Wales no longer recognises the life estate at law in relation to land; instead the holder of legal title to the land (whether the freehold fee simple or a lease) will hold that land on trust first for the life tenant and then for the remainderman.


Now did you know that bit of LAW?

 

[Elliott]

The valuation of partial interests is always tricky. Minority interests are
usually worth less than their actual percentage, but not always. Every
situation brings with it unique characteristics and considerations.

I usually tell people with life estates or tenant in common interests
(50/50, 33/33/33, 25/25/25/25) that there really isn't market data
available sufficient to support a valuation other than full fee simple.
If its for a purchase, divorce, or an estate, I usually tell them I can
do a fee simple valuation.....then go see an accountant, lawyer or
tax expert.

 

[Louis Pompeo]

Conor looks at his watch and thinks "All I asked for is a simple alternate method that is credible!

He also wonders how much more of this he can take....

 

[The Warrior Monk]

David wonders why people cannot answer incredibly simple questions.

I'll answer: the rate is derived by using the Pull-From-Air method, which is why it is never discussed in these articles. Prove me wrong.

 

[Calvin the Airedale]

Many life estates are created by virtue of the long term land use planning needs of the remainderman. I have limited experience valuing life estates and have only worked on two such problems and very early in my career.

That said, I was taught that the discount rates for remainder estates should approximate the equity yield rates for the typical buyers at the anticipated highest and best uses for the property being acquired. Obviously the equity yield rates for most land users will be higher than their typical blended cost of captital, but such an approach recognizes the difficulty in raising (borrowing) capital for remainderman land acquisition.

I would be interested in hearing anyone's response on this opinion, especially Conor's given he has a lot more looks at this type of transacton than most on this forum.

I'd especially appreciate a response written in the first person that doesn't have me snoring or drooling in the scenario.

 

[Louis Pompeo]

Conor looks at his watch again.....thinks "wonder why Cal gave up?....we were buddies....he and I decided to sit here and wait for the pharisee's to present their methodology(ies)...."

He turns and heads for the door....."I'm done...I've offered the industry recognized 'best method' of valuing a Life Estate.....was ridiculed and called a heretic....asked my accusers to enlighten me.... they couldn't.....now I'm asked to defend the only method that has been presented in this thread, while my accusers gloat in their self-righteous postures...."

Conor feels like he's betting against himself....knows better....but can't help feeling that way....

He puts his hand on the doorknob and slowly turns it.....opens the door and steps into the bright sunlight.....he feels a cool, calming breeze.....

His Blackberry buzzes.....he looks at the screen.....it reads "HAVE AN 8,700 ACRE LIFE ESTATE IN KANSAS THAT WE NEED A 13 MILE ROAD EASEMENT ACROSS. CAN WE GET A FIGURE BY NEXT WEEK?"

Conor smiles and hits the 'Reply' button....types "Sure, no problem. Send it in."....hits the 'Send' key and confidently walks to his next assignment...

 

[Webbed Feet]

Regardless of Mr. Larkin entertaining himself, it happens to be a time honored tradition in our trade, and many others, to relook at and debate existing methodologies in order to be realistic about the strengths and weaknesses of them. I suspect that Mr. Larkin doesn't want that as it represents a threat to his gravy train. So threatened, he tries to derail the thread into inventing new methods, presumedly overnight, just solely for his purposes of derailing the thread.

Notably, not even his buddy Calvin would seem to completely appreciate Mr. Larkin's "stage right" exit immediately after even Mr. Airedale poised a question about the existing method. Apparently, if Mr. Larkin's promoted methods are not accepted without questioning them, he leaves. Something that pretty much sums up what has been wrong about copious numbers of CE classes for real estate appraisers. Real Estate appraisal instructors mostly all have very bad habits of teaching theory, then declaring any student to be going "off topic" if the student challenges the real life application of the theory in class. Typically, most instructors interrupt such students with a "We'll talk about that after class" and then they bolt after class without talking about it.

Maybe it's why we have so many well trained real estate appraisers.

P.S. Perhaps the above is why so many "students" in appraisal CE classes sit mute the entire time as if they are enduring a forced time out versus there to learn anything.

 

[Calvin the Airedale]

Can't anybody get a straight answer on this fricken forum?

Larkin, your thoughts on selection of the discount rate?

Webbed your thoughts on alternative methods given your notable disdain for the method presented?