Appraising life estate

[Stone]

It seems like a perfectly valid and reasonable request to ask for an alternative method when the only one presented is questioned.

 

[Pittsburgh Pete]

Mr. Larkin, I'm not too keen on the sales comparison, income, and cost approaches to value--could you suggest an alternative?

Don't have the time to search myself, but if there is an alternative theory or technique for valuing life estates, I recommend searching the AI's Lum Library. Or ask your mentor!!! Isn't that the standard response when someone asks a question hereabouts--after the incompetence of the mentor, forcing the uninformed to submit himself to ridicule on this forum, is questioned.

Chutzpah thy name is Webbie!!!!!!

 

[Louis Pompeo]

Lets Get The Facts Straight

Doug in NC opened this thread with:

Is appraising a life estate any different than appraising a standard owner-occupied fee simple appraisal? I have never run into this situation before, and have never had any training on the issue. Some fly-by-night AMC rep assured me that it is nothing to be concerned with, but of course, it doesn't involve any risk to her. *I turned the order down for this and other reasons, but I would like to hear from appraisers who are knowledgeable about this issue.

Conor responded with:

Here is an excerpt from a one day seminar that I teach called "Partial Interest Valuation - Divided", for the AI.

This is an excellent reference on Life Estate Valuation that includes a case study.

Good luck,

Part 4 - Life Estates.pdf

Webbed responded to my reply with:

And other than pure theory, and a bunch of predictive conjecture, what market evidence is there that the value of one part, a different kind of estate from the other two estate types, is credibly represented by taking a current opinion of a fee value and subtracting the sum of an opinion of the value of different kind of estate?

It's like saying to start with a Mercedes, predict the estimated remaining life of Yugo and it's value at the end of that life (assuming here it is possible for cars to appreciate once they are considered antiques), calculate the present value of the future benefit of a hypothetical value of the Yugo, then subtract that from the present value of the Mercedes in order to arrive at the present value of a Volkswagon Thing.

Don't get me wrong. Love the case study! ... Great for tests! ... I just have reality issues expecting anyone to rely on the outcomes of actually trying to pull off doing things like predicting the future of real estate 2 to 80 years forward is all. In 1999 would we have predicted 20% to 30% or more rate of appreciation during 2005? Clearly, any measuring life with a limited remaining actuarial estimate would immediately cause a total lack of credibility. Only the cases with substantial remaining "measuring life" predicted existence possibly could have any statistical credibility at all.

And we have not remotely begun to scratch the surface of known health issues, of the entity that is the measuring life, being withheld from the real estate appraiser. Again, nice case study. I'd love to see what the trade thinks is needed in EAs and HCs to bring any credibility to the table when attempting one of these...

And the rest of the thread puts the onus on myself to defend the only recognized method of valuing a life estate.

Webbed goes on to say:

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.

First, I wasn't "promoting" a method, that would infer that there exists more than one method. I'm not aware of any other method that has stood the test of time, is accepted by the courts, and makes sense to buyers and sellers alike.

Secondly, as an instructor, I concede that most of us use the same tool when presented with a confrontational student in class. That is, we say "Let's discuss it on the break, or after class."

I will go back to my "drunk at a wedding" comment.....everyone with a little sense knows that you can't win an argument with a drunk. Webbed - thats what you act like.....an obnoxious drunk at a wedding.

People are trying to have an intelligent conversation, and you butt in and start spewing nonsense like it means something and getting upset when no one genuflects at your pearls of wisdom.

I can discuss ANY aspect of the valuation of a life estate. Can you?

I think not.

I threw down the gauntlet. I challenged you to bring something to the table. Show me something that has worked for you. Tell me of your experiences. Anything.

I got nothing but finger-pointing and whining.

Put up or shut up!

You're not interested in valuing a life estate. You're interested in being the smartest guy in the room. To the detriment of everyone else.

Yes. I'm an instructor. And in just about every class I teach, there's 39 students that come there to learn something. And then there's that 1 that came to disrupt the whole class every 5 minutes by challenging everything the instructor says, telling their own war stories, and p***ing off the other students because the Instructor doesn't put him in his place and tell him to shut up.

Webbed....lets talk about it after class....you must get that a lot.

 

[Calvin the Airedale]

Dear Mr. Larkin,

Any comment on my post #57. I really would be interested in your thoughts on rate selection for such problems.

 

[Webbed Feet]

It seems like a perfectly valid and reasonable request to ask for an alternative method when the only one presented is questioned.

And why would that be so?

It seems to me this forum has a long and glorious history of debating the cost approach method, when it is credible for use, and when it is not credible for use. What is going on here is we are being told we can't debate this method without presenting some other method. Excuse the duck out of me? The heck we can't! ...

Facing the weaknesses of any method is a perfectly acceptable way of possibly improving the method or, if needed, debunking it. If another method exists or not is beside the point. If the FDA approved drugs based on if something else existed or not for the purpose, we'd have a lot of dead people on our hands from drugs being approved just because nothing else had been found yet.

It may sound fine to say that as we can't figure anything else out we've decided to declare this method to be "Credible." Only any investor, that has seriously thought about what such a statement means, won't about be ready to blindly accept that as an answer when it comes to that investor's money. A shot in the dark in the general direction of noise, in the end, is still a shot in the dark.

 

[Stone]

And why would that be so?

It seems to me this forum has a long and glorious history of debating the cost approach method, when it is credible for use, and when it is not credible for use. What is going on here is we are being told we can't debate this method without presenting some other method. Excuse the duck out of me? The heck we can't! ...

Facing the weaknesses of any method is a perfectly acceptable way of possibly improving the method or, if needed, debunking it. If another method exists or not is beside the point. If the FDA approved drugs based on if something else existed or not for the purpose, we'd have a lot of dead people on our hands from drugs being approved just because nothing else had been found yet.

It may sound fine to say that as we can't figure anything else out we've decided to declare this method to be "Credible." Only any investor, that has seriously thought about what such a statement means, won't about be ready to blindly accept that as an answer when it comes to that investor's money. A shot in the dark in the general direction of noise, in the end, is still a shot in the dark.

The words "put up or shut up" come to mind. This isn't like debating the cost approach. In those debates there are other recognized approaches. In order for this to be similar to that, you need to present a viable option and show why it is superior.

 

[Pittsburgh Pete]

The accepted methodology is adequate--when dealing with someone's life in a life estate, you want more certainty? Perhaps if people would be kind enough to schedule their deaths then the valuation of a life estate would be less of a shot in the dark!

Will keep checking the Appraisal Journal for the next groundbreaking article on life estates!

 

[Calvin the Airedale]

And why would that be so?

It seems to me this forum has a long and glorious history of debating the cost approach method, when it is credible for use, and when it is not credible for use. What is going on here is we are being told we can't debate this method without presenting some other method. Excuse the duck out of me? The heck we can't! ...

Facing the weaknesses of any method is a perfectly acceptable way of possibly improving the method or, if needed, debunking it. If another method exists or not is beside the point. If the FDA approved drugs based on if something else existed or not for the purpose, we'd have a lot of dead people on our hands from drugs being approved just because nothing else had been found yet.

It may sound fine to say that as we can't figure anything else out we've decided to declare this method to be "Credible." Only any investor, that has seriously thought about what such a statement means, won't about be ready to blindly accept that as an answer when it comes to that investor's money. A shot in the dark in the general direction of noise, in the end, is still a shot in the dark.

Translation: "I got butkis, zip, nada!"

PS. Will someone please opine on rate selection?

 

[Louis Pompeo]

Conor thinks..."I wish I could meet Webbed in person, just so I could ignore him."

 

[Webbed Feet]

Your words, not mine.

<....snip......> And the rest of the thread puts the onus on myself to defend the only recognized method of valuing a life estate.

I don't recall anyone at all saying you had to do that prior to my post number 24. And even then any call for you to defend was not made by me, I said I didn't think anyone with your attitude could. I could have cared less by then anyway. It was your choice to take umbrage over a car analogy wherein I view the estates to be three different types of estates. You may not like that very much, but you did not have to focus on that because I also posted this........

<....snip......>In 1999 would we have predicted 20% to 30% or more rate of appreciation during 2005? Clearly, any measuring life with a limited remaining actuarial estimate would immediately cause a total lack of credibility. Only the cases with substantial remaining "measuring life" predicted existence possibly could have any statistical credibility at all.

And we have not remotely begun to scratch the surface of known health issues, of the entity that is the measuring life, being withheld from the real estate appraiser. Again, nice case study. I'd love to see what the trade thinks is needed in EAs and HCs to bring any credibility to the table when attempting one of these...

Something you could have responded to, or not. If questioned I would have tried my best to explain why I thought that. Perhaps you could have responded with what are typical EA's and HC's for such assignments. You didn't. Instead, you're the one that made the obnoxious drunk crack over my point that I do not see the estates comparing with one another. You don't like that statement. That is ok. But there was NOTHING in my post number 20 that said “Mr. Connor Larkin is a blinkedity blinkette blinker!!!!” ….. Nor so much as an implied derogatory personal comment by leaving out directing it at one person but obviously doing so anyway. That came in my post #24 after you had already posted that anyone who argues otherwise sounds like an obnoxious drunk.

And, as you say, since the method has stood the test of time, is accepted by the courts, makes sense to so many people, so you seem to be saying it is the trade standard, it becomes impossible for me to have remotely attacked specifically you. Unless you think you deserve to have the reservation on personal umbrage from accusing me of attacking in all directions at once. No, I addressed the method, not the man. You Sir, were the forum member that drew first blood. I wasn't personal until after you started the name calling, when I made it clear the name calling was not appreciated. After that you invite me to put up or shut up, based on your terms only, while claiming you can discuss “ANY” aspect of the valuation of life estates, but declining to do so? You only prove that you don't have the “little sense” you claim everyone should have. After all, here you are name calling, arguing with, and taunting the very person you accuse of acting like a drunk. I guess that means you don't have even a little sense. Your words, not mine.

If anyone cares to be critical of me, I'll agree I should have just opted to ignore Mr. Larkin's little crack.

Sorry forum!