Forest Service cabin/leased land/estate appraisal

[Oregon Doug]

I have been asked to appraise a 812 sf, 44 year old recreation cabin on land leased from the forest Service for an estate (dod - jan/02). The use permit expires 12/31/08 and MAY/MAY NOT be transferrable at divesture at the whim of the authorizing officer.

I can omit the Income & Cost Approaches with no difficulty. There have been NO market sales of similar properties forever. There was a sale (2 years ago) of a MUCH/MUCH superior cabin, there have been a couple of expired listings (pretty telling) and there is one current listing. I have a couple of sales of similar cabins on owned (fee simple) lots from which I may be able to extract a contributory land value adjustment. Looks like a Sales Comparison Analysis is the only way to fly - but I've got 60+% total adjustments.

Now, my real question: What are the assumptions regarding the potential transferrablity of the lease/permit that need to be recognized and how do they impact its value/marketability? That is: what was the value of the cabin at the dod if the lease/permit is NOT renewed?

Just looking for a little hand holding 'till I get through this one, thanx

Oregon Doug

 

[airphoto]

IMHO, Dug ..

You'll develop your value presuming it's transferred at renewal and has a continuing value .. THEN capitalize that value at date of transfer and report both values (with and without transfer.) Include the agreement that may/may not allow for transfer and allow the user of the report to make the judgement ..

 

[larryhaskell]

Doug:

If I understand your post, it appears your client owns the improvements situated on a parcel of land that they rent and do not own. If the lease is not renewed, I guess they would either have to move the improvements or lose them to the land owner. Based on this information, I don't see how you can estimate the market value of something they don't own unless its the value of the improvements which would become personal property if they were moved. Kind of a stick built but mobile home. I belive you should consider a value in use until 12/31/08.

 

[Oregon Doug]

Thanx for the comments guys. I been a workn' at this one most of the day and polished the crystal ball prety hard - a fuzzy number is beginning to appear. These land leases are typically renewed when ownership of the improvements changes so I'm going with that assumption.

How would you address the H & B use issue in this appraisal? I'm betting that I don't need to because ownership of the land is not an issue to this assignment.

The cabin owner pays RE taxes on the improvements only - no taxes on the land -a plus for sure. The annual ground rent is supposed to be 5% of the fee simple value of the land (as if vacant) by contract - a negative as the ground rent exceeds the tax liability (if there was one). Would you recognize that portion of the ground lease that exceeds the appropriate RE tax for the land as a detrament - if so, how?

Thanx, Oregon Doug