Deed restriction on building

[finchrat]

Appraisers value the rights in the real estate:
If you are being asked to value the fee simple, then none. Value it as fee simple absolute; free of encumbrances.

If you are appraising the fee simple subject to the restriction; you should get a legal opinion on what that restriction is for and if it is even applicable or encumbering. Many restrictions have been vacated by procedure, regulations, or law.

I noticed this is a general public ?

This means you are going to need to get a specialist appraiser who understands how to value deed-restricted properties and will work with your attorney to scope the project to value what is saleable.

Thanks I get the gist of what you are saying I do have a RE attorney and sent him the doc.

 

[Russ Kitzberger]

Actually I am not looking to build anything. I am asking because I own 1/2 the property and am looking to purchase the other half from a sibling. Naturally anything that can lower the value is of interest to me and I wanted to explore this deed restriction as it might apply to the appraisal value of the property.

Also noticed you indicated a 1/2 interest, speak to the attorney about how that works in your area as a controlling or non-controlling interest. For instance, what responsibilities and control do you have over the real estate. That is a sub-specialty known as partial interest valuation. So to clarify, when you are talking about your ownership; you 'own a partial interest in a deed-restricted property".

 

[finchrat]

Also noticed you indicated a 1/2 interest, speak to the attorney about how that works in your area as a controlling or non-controlling interest. For instance, what responsibilities and control do you have over the real estate. That is a sub-specialty known as partial interest valuation. So to clarify, when you are talking about your ownership; you 'own a partial interest in a deed-restricted property".

Yes I own a partial interest in a deed restricted property thats correct. Never heard of a partial interest valuation thats very interesting. Can you elaborate as it would relate to my situation? My sister and I are tenants in common equal shares,no formal doc spelling out responsibilities or control.

 

[Russ Kitzberger]

Yes I own a partial interest in a deed restricted property thats correct. Never heard of a partial interest valuation thats very interesting. Can you elaborate as it would relate to my situation? My sister and I are tenants in common equal shares,no formal doc spelling out responsibilities or control.

Without a form agreement, control is designated by custom and (common or written) law in your jurisdiction:

Here is a good primer:

Partial interest valuation of real estate - A case study

Partial interest valuation is a technique used by appraisers and other valuation professionals to estimate the value of a fractional interest in real estate. Fr...

nerej.com

 

[finchrat]

Without a form agreement, control is designated by custom and (common or written) law in your jurisdiction:

Here is a good primer:

Partial interest valuation of real estate - A case study

Partial interest valuation is a technique used by appraisers and other valuation professionals to estimate the value of a fractional interest in real estate. Fr...

nerej.com

Thanks for that I read it over but not clear how responsibilities or control play into the valuation of the partial interest?

 

[Russ Kitzberger]

Thanks for that I read it over but not clear how responsibilities or control play into the valuation of the partial interest?

It affects the discount factor.

All ownership relationships must end in death or (some form of) divorce.

A good agreement/will solve a lot of problems.

 

[finchrat]

Ok will look into it more. I have learned so much from this and I really appreciate it. Found your forum by chance but its really fascinating to a layman like me.

 

[George Hatch]

Actually I am not looking to build anything. I am asking because I own 1/2 the property and am looking to purchase the other half from a sibling. Naturally anything that can lower the value is of interest to me and I wanted to explore this deed restriction as it might apply to the appraisal value of the property.

In an appraisal it is completely irrelevant what the current ownership thinks the value is, what they intend to do with the property or even how well informed they are about what is or isn't.

What we try to do is identify and reflect how the typical outside buyers as a group - who by definition excludes the current ownership - will react to this combination of attributes. So if the typical buyer for this property would consider redevelopment of this site or remodeling the existing improvements or whatever other possible alternatives may exist then that's how we would value the property.

If there's a deed restriction that gives the County additonal discretion on what can be built on this property then that could effectively restrict a maximum buildout that a developer might be considering. If the County decides a 1-story 1500sf home is the maximum size structure they'll allow on this site then that could also inhibit the value of the site to a developer when compared to an alternative site that doesn't have these additional restrictions. A builder looking to build a 7000sf home wouldn't consider this site equal to a competing site that could be built out with that larger home.

Under the circumstances the existing use may be the most valuable use of the property that can be expected by an outside buyer, which means the home is valued as a home. What you see is all you get. But, there are also other possibilities.

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As far as the partial interest values for residential properties the most common solution will be for the appraiser to appraise the property as a whole with the disposition of the property being left to the family members or their legal or accounting representatives to handle on their own.

 

[finchrat]

The typical buyer is deduced from the comparable sale correct? That was a problem for the last appraiser here in that there aren't really any homes nearby comparable to this one or so I was told. He also said its mostly land value here the house apparently being insignificant. Here we have a one acre lot restriction and the house is right smack in the middle.

 

[Russ Kitzberger]

Actually I am not looking to build anything. I am asking because I own 1/2 the property and am looking to purchase the other half from a sibling. Naturally anything that can lower the value is of interest to me and I wanted to explore this deed restriction as it might apply to the appraisal value of the property.

Every case is different, but where there is a will to build; someone will find a way. Engineering for hazards has come a long way since 1987.