How to value a non-saleable property?

[Rich(VT)]

I have the fun (?) job of appraising the following:

13 acre lot with an old 1 room school on it. The property has been placed into an irrevocable trust. The trust terminates 21 years after the death of 5 named people (ages approx 35 years to 48 years). The property then transfers, fee simple, to 2 named individuals.

The trustee shall not have power to sell or transfer the trust property until terminationof the trust. At termination of the trust, the successor trustee(s) may sell the trust property with written approval of all living benificiaries.

The trustee does have to power to subdivide any part of the premises for lease only and not for sale. This right shall include the right to construct new buildings and structures for lease only and not for sale.

So far my thoughts have been:

1. treat it like a life estate, get actuary tables, assume a future value using a projected percent per year increase until the trust terminates, and develop a net present value.

2. treat it like a leased fee estate.

3. tell the owner since it can't be sold it has no value (?)

4. post my question on this board for all of the valueable input other appraisers are willing to offer.

Number 4 outweighed the other three. Any thoughts would be appreciated.

Thanks.

Rich(VT)

 

[jtrotta]

Rich, where are you located :?: have some land in Mt Holly-may look into developing this year or next.

Quick question for you; what purpose is the appraisal for :?:

 

[Rich(VT)]

jtrotta-

I am in Northfield, center of the state, about 10 miles south of Montpelier.

The owner is in the middle of a divorce. He and his soon-to-be ex own 6 parcels of land. This one is in the trust. The rest are not.

Rich

 

[jtrotta]

Nancy In Friday Harbor said there are specific IRS rules on similar type estates; see the "Life Estate" post here, go check it out, as she may know a direct link.


Good Luck 8)

 

[AC King]

In your post you mentioned that the property could be leased with improvements added.

It appears to me the most prudent method would be to appraise the property as a leased fee estate.

 

[Larry Lyke]

If you are doing this for an attorney, have him do the consulting and come up with the factor figure. Use that factor AND refer to it in the appraisal reconciliation section in order to permanently connect that knowledgable professional to his expert pronouncement which you relied on.

Then, all you have to do is appraise it in the present the way it will finally be used in the future and apply the factor.

A bit simplistic, but close.

 

[Restrain]

Suggestion: If you are going to apply a leased fee approach for a current income stream along with the value at reversion, you had better be able to support that there is a demand for a leased fee. Unless land of the type of the subject is hard to come by, most companies prefer to purchase as opposed to a leased fee. If there is no real demand for a leased fee, then it would be better to just use the value of reversion discounted to today.

 

[Mike Garrett RAA]

Another case of my famous......."Run like the wind". You can't make chicken soup out of chicken, ahhhhhhhhh feathers!

 

[Anonymous]

You could use an extraordinary assumption that is was unencumbered, and I would check to see if that was the intent of the owners - to actually determine a value as if it could be sold. Otherwise, I would opt for the life estate approach, whatzit worth down the road with a reversion