Income Approach?

[J Grant]

Well, there's also top of page 1 with "rights appraised" and has "other", but OK.

So when you have a month to month tenant w/ a refi. and effective date is 08/17/18, you say you are appraising the fee simple rights. This is fine.

My question to you as the client and the state board, "as of the effective date, who had this fee simple bundle of rights you said you did the appraisal under?"

Answer, no one, you lied. You did a hypothetical appraisal but forgot to tell someone. I spoke with an investigator at BREA on this very topic. The investigator said "you are correct." I wanted to hear it from 1 of the horses mouths.

Just because 100% of appraisers are doing it wrong, doesn't make it right. And BREA (particular investigator) did say, they don't call it out formally. Probably because 100% would get citations and it wouldn't look good.

On a short term lease on a 1004. They correct way to go is; as-is checked, and a comment letting the reader know a HC is attached to that as-is value. You then explain, as-is leased fee interest, did as fee simple. This HC has no affect on value if it was not in place. It was used to let the reader/client know as of the effective date what bundle of rights the subject was under.

As in the USPAP/fannie thing you are intermixing concepts and jargon...I have no idea what the BREA investigator thought you were asking, who they are etc, but 100% of appraisers doing it a certain way ( while meeting client need and passing reviewer scrutiny /accepted methodology for doing it that way ) is called peer practice , and peer practice is a recognized USPAP standard.

As the post above I made with link, leased fee is an addition to, not a subtraction from or replacement of the fee simple property bundle of rights conveyed. assuming property ownership is fee simple, for owner occupant use appraisal only fee simple is appraised ( SCA and CA ), whereas in an an income use property where income approach was developed, the fee simple is appraised (SCA) AND the leased fee interest is appraised ( the addition of an income approach . )

 

[Renee Healion]

http://nerej.com/fee-simple-vs-leased-fee-in-valuation-by-steve-hurlbut

Good article, thanks for posting.

 

[Addie]

From article: The leased fee interest, which is typically used in the industry, is equivalent to the feesimple interest of a property that is leased to others. ... A lease contract does not remove any rights from the bundle of rights of the fee simple estate, but rather it is an addition to the fee simple estate.Mar 9, 2018

http://nerej.com/fee-simple-vs-leased-fee-in-valuation-by-steve-hurlbut

That opinion is bogus.

@DWiley @George Hatch

What's your take? I'll wait until they respond. I don't agree with it. Leased fee removes some of Fee simple's rights. The owner can no longer use that dwelling (say normal lease)

 

[gregb]

What's your take? I'll wait until they respond. I don't agree with it. Leased fee removes some of Fee simple's rights. The owner can no longer use that dwelling (say normal lease)

Fannie-

Determining the Property's Fee Simple Value The first step in the valuation process requires the appraiser to develop an opinion of the fee simple value of the subject. Therefore, it is expected that the appraiser will use sales of fee simple ownership of similar properties. Use of sales without a ground lease (fee simple) is preferable. However, the appraiser may use sales of leasehold properties but they will require adjustment based on their lease to reflect a fee simple interest. CLT sales may be available in the community and, if so, they should be specifically discussed in the appraisal report. However, CLT sales may not be appropriate in developing value since the prices are normally limited by restrictions in the ground lease and would therefore not be comparable to the hypothetical condition of the appraisal, which assumes a leasehold interest without resale and other restrictions.

 

[Addie]

Fannie-

Determining the Property's Fee Simple Value The first step in the valuation process requires the appraiser to develop an opinion of the fee simple value of the subject. Therefore, it is expected that the appraiser will use sales of fee simple ownership of similar properties. Use of sales without a ground lease (fee simple) is preferable. However, the appraiser may use sales of leasehold properties but they will require adjustment based on their lease to reflect a fee simple interest. CLT sales may be available in the community and, if so, they should be specifically discussed in the appraisal report. However, CLT sales may not be appropriate in developing value since the prices are normally limited by restrictions in the ground lease and would therefore not be comparable to the hypothetical condition of the appraisal, which assumes a leasehold interest without resale and other restrictions.

Sorry, you’ll have to help me a little. Are you just referring to the 1st sentence? Entire thing? I understand the entire thing. And I understand the 1st sentence. But not following it back to the question at hand (or my discussion)

 

[gregb]

Sorry, you’ll have to help me a little. Are you just referring to the 1st sentence? Entire thing? I understand the entire thing. And I understand the 1st sentence. But not following it back to the question at hand (or my discussion)

A fee simple owner is enjoying one its benefits, leasing the property just as she may encumber the property with a mortgage. The fact a property has been leased does not change the fee simple ownership of the interest owned.

"Bundle of rights refers to beneficial interests or rights attached to the ownership of real property. It includes the right to sell, lease, encumber, use, enjoy, exclude, and to make will. A purchaser to a property while purchasing real estate, actually buys all the rights previously held by the seller, except those which are reserved or limited in the sale."

https://definitions.uslegal.com/b/bundle-of-rights-property-law/

 

[Addie]

A fee simple owner is enjoying one its benefits, leasing the property just as she may encumber the property with a mortgage. The fact a property has been leased does not change the fee simple ownership of the interest owned.

"Bundle of rights refers to beneficial interests or rights attached to the ownership of real property. It includes the right to sell, lease, encumber, use, enjoy, exclude, and to make will. A purchaser to a property while purchasing real estate, actually buys all the rights previously held by the seller, except those which are reserved or limited in the sale."

https://definitions.uslegal.com/b/bundle-of-rights-property-law/

Agree.

When you buy a house in CA with a 6 month lease. When does your fee simple interest with zero overlay kick in? As in you may sleep in the actual house? (Escrow closed/prior lease in place)

In that case you bought the future rights of fee simple. You never received the as of effective date fee simple bundle.

 

[Addie]

As of the effective date with a lease. I, as the owner can throw a super bowl party inside that dwelling? (Typical lease)

Umm no. So what ownership do I have? What bundle of rights? Oh hey judge. I have cake and eat it too rights. I have leased fee on top of fee simple. So I pick and chose which days I want which.

You cannot have both at the same time. With leased fee, you gave away 1 or more of your bundle of sticks. If you’re appraising my bundle of sticks as if I have them all when 1 is missing, and you’re not telling anyone this info, that’s lying. (Even when the stick was bark that made zero difference in value)

 

[gregb]

Some cakes are denser than others. With fee simple ownership one stick is not missing if a property is leased, it only means one stick is exercised or put to use.

 

[Addie]

Some cakes are denser than others. With fee simple ownership one stick is not missing if a property is leased, it only means one stick is exercised or put to use.

So why can I not take possession as of effective date?

Is the property under some other rights than fee simple?