Fractional Interest Appraisals

[Jay Faustini]

I have a new client who offers fractional interest loans and wants me to be able to handle their appraisals for these loans (TICs are common here in San Francisco due local rent control and conversion ordinances).

Since there are a limited number of banks who offer these types of loans, I never had a client who did and therefore have no direct experience in completing these reports. I do, however, have experience appraising entire 2-4 unit properties owned by a TIC as well as having personal experience in reviewing TIC agreements.

It is common for multi unit properties within San Francisco to progress in their form of ownership from single owner to TIC owners to condominiums. Due to this, my analysis of a multi unit properties (as well as condominium conversions) within San Francisco always include an analysis of the TIC market within the subjects neighborhood and district. Therefore, I feel competent in regards to my ability to analyze this niche of the market.

Additionally, I have a friend who has experience with these appraisals and has offered to be supervisory appraiser on the fractional interest appraisal orders I receive.

Given all of this, I believe that the competency issue is adequately addressed. My client agrees but requested that I also take a course on the subject.

I haven't been able to find any. Does anyone know of one?

Additionally, any comment on my competency analysis would be appreciated as well.

Thanks.

 

[Couch Potato]

Just make sure the transaction values are under $250,000. I don't know anyone who would not classify fractional interests as complex.

 

[Jay Faustini]

Since the supervisory appraiser is Certified and will be cosigning, I don't think that the transaction limit applies.

Thank you Mr. Potato, or can I call you Couch?

 

[Couch Potato]

Since the supervisory appraiser is Certified and will be cosigning, I don't think that the transaction limit applies.

Thank you Mr. Potato, or can I call you Couch?

That will indeed take care of it. Call me what ever you like, just remember it's a PG site.

The Appraisal Institute offers a seminar on Partial Interest Valuation. I don't know that it would be particularly helpful though.

 

[Terrel L. Shields]

Partial (fractional) Interests Valuation courses are available. Take one. Buy the book (AI) - you can search for it on Amazon

 

[Jay Faustini]

Thanks Couch,

I should have mentioned that the AI's course on Partial Interest Valuations that applies (the Undivided interest course) is not currently being offered. I was hoping that someone else might have a course that covers the topic.

 

[The Dog]

Really good beginning book to buy from the Institute is APPRAISING PARTIAL INTERESTS by David Michael Keating MAI

 

[Pat Butler]

The AI has a book and I believe a seminar on fractional interests. On a more practical level you've done what USPAP requires with respect to notifying your client of your capabilities. The fact that your client desires that you take a class is a requirement that I'd take seriously before doing any orders for them. Imagine sometime in the future that they have a problem with one of your appraisals. They'll bring up the fact that you told them your lack of experience and failed to get educated.

 

[Mike Boyd]

The AI has a book and I believe a seminar on fractional interests. On a more practical level you've done what USPAP requires with respect to notifying your client of your capabilities. The fact that your client desires that you take a class is a requirement that I'd take seriously before doing any orders for them. Imagine sometime in the future that they have a problem with one of your appraisals. They'll bring up the fact that you told them your lack of experience and failed to get educated.

I think having a Certified sign with him would take care of any legal liability regarding course work for a period of time. Fractional insterest certainly does require some special training.

 

[Pat Butler]

I agree Mike.