Fee Simple v. Leased Fee

[Carnivore]

Curious to know why FNMA placed the leasehold checkbox on the FNMA Forms?

The single family form asked what property rights are appraised. I really did not know they buy loans that are appraised as single family with a leasehold estate!

Maybe TMD can enlighten the forum.

 

[hastalavista]

I think at the very minimum you have to not only disclose the lease but also the remainder(expiration) of the lease.

(my bold)

Excellent point, and I agree!

 

[timd354]

Curious to know why FNMA placed the leasehold checkbox on the FNMA Forms?

The single family form asked what property rights are appraised. I really did not know they buy loans that are appraised as single family with a leasehold estate!

Maybe TMD can enlighten the forum.

99 year perpetually renewable ground leases are common in a few areas (Baltimore, MD area, some areas of Hawaii, and a few other locations). Fannie, Freddie & FHA will purchase/guarantee mortgage loans made on such properties. I many such properties in Baltimore, most of which had very low ground rents since they were usually established in the 1800's with no rent escalation clauses. I owned one property that had an annual ground rent of $120/yr, payable in two installments of $60 every six months, which is pretty typical although some ground rents are higher and some are lower.

In Maryland they are not difficult to aprpaise since there are usually sales of other comps that are leaseholds and even when you have to utilize a fee simple comp, Maryland law has a statutory cap rate of 6% for almost all residential groud leases (the lessee has the absolute right to buy out the ground lease for a price based on the 6% cap rate) making the adjustment for a fee simple sale versus a leasehold easy to calculate and justify.

 

[Terrel L. Shields]

99 year perpetually renewable ground leases

Them and Indian Lands.

We have an old resort development that failed in the 1920s. It sold a lot of lots...small, and probably only 20 or so homes are left from the originals and there are 500 lots or more... The owner of the land would as soon none exist. Anyone with old 99 yr. leases, however, and a home, he will deed over to you if you pay the paperwork expense. It is a problem as is. The others they are simply incorporating back into the property and managing it as a timber tract and the old golf course as pasture.

 

[stangtime]

Intent! It's my opinion the intent of that part of the form was to differentiate between ownership of the land rather than a "land lease" such as found in Hawaii and other areas. We have only a few land leases here in my marketing area.

That's what I've always read the inquiry to be.

Dan