Life estate VS fee simple

[Mztk1]

Understand? No I don't understand.

The word "Understand" is a classic example of a dead metphor. I know you like language, thought you'd get the joke. A lot of technical terms are metaphors. In fact there is a school of thought that believes all language is a metaphor.

The first thread Steve is a question that pertains to a lender stip. I reread it.

 

[Fred]

There is nothing that says such a report cannot be valued on a form. I would like to see this regulation .. anywhere if you can find it.

I would tend to go along with Pat on this. There is no such regulation. However, I don't think it is reasonable to expect that every application of common sense is codified into regulation. He referred to the LE, which is an interest that would have to be appraised by discounting, if one had comps - and it would be so difficult to squeeze that into a residential comp grid, it's probably better not to try.

 

[Fred]

The word "Understand" is a classic example of a dead metphor. I know you like language, thought you'd get the joke.

The first thread Steve is a question that pertains to a lender stip. I reread it.

I didn't have to. I got it the first time.

 

[Fred]

Actually it is not a partial interest at all. It is a complete interest in real estate so long as the life estate owner lives. It is however a defeasible interest. It is defeated by death of the life estate owner.

I would agree with Pat in calling it a partial interest. I am not sure what you mean by "complete." The property is divided temporily (by time). One partial interest controls some rights for a period of time, and the other partial interest controls rights for the subsequent time period. I am pretty sure most texts would classify a life estate or the remainderman interest as a partial interest.

 

[Pittsburgh Pete]

Minimal effect (impact) on the value of what?

That both the market value of the fee simple interest and leased fee interest are similar, minimal variation between the two figures.

A PNC Bank appraiser has long argued that when valuing an apartment building you are valuing a fee simple interest subject to existing leases. The other approach is that its a leased fee valuation. But in either instance, given the typical lease term (one year or less), the impact on the market value of the existing leases is typically minor.

 

[Otis Key]

That both the market value of the fee simple interest and leased fee interest are similar, minimal variation between the two figures.

A PNC Bank appraiser has long argued that when valuing an apartment building you are valuing a fee simple interest subject to existing leases. The other approach is that its a leased fee valuation. But in either instance, given the typical lease term (one year or less), the impact on the market value of the existing leases is typically minor.

Isn't that special! (Use your best SNL rememberance) And how long is that "life estate" (as this thread is "captioned")? You're to appraise the property as is! I don't seen the problem, except that some don't understand! I did an appraisal - many years ago (thank the law makers for a "statue of limitations" factor) and your WRONG! And the LENDER will come back to you!

You have a life-estate recorded that predates a mortgage - DUH???????????

AND you're going to appraise it as a FEE SIMPLE ESTATE????????????????

You had better have a DAMNED good SOW and GOLDEN PARACHUTE to the islands.......(IMHO)

 

[Mztk1]

I didn't have to. I got it the first time.

Well then the first part of the post I was responding to makes no sense.

 

[Pittsburgh Pete]

Isn't that special! (Use your best SNL rememberance) And how long is that "life estate" (as this thread is "captioned")? You're to appraise the property as is! I don't seen the problem, except that some don't understand! I did an appraisal - many years ago (thank the law makers for a "statue of limitations" factor) and your WRONG! And the LENDER will come back to you!

You have a life-estate recorded that predates a mortgage - DUH???????????

AND you're going to appraise it as a FEE SIMPLE ESTATE????????????????

You had better have a DAMNED good SOW and GOLDEN PARACHUTE to the islands.......(IMHO)

Sorry I got off target responding to an earlier question from my good buddy Steve, but what the hell are you talking about?

 

[Mztk1]

Those two choices are their for a obvious reason...that's what Fannie will lend on. If the property rights that actually exist aren't either one of those choices, that is a big red flare in the SOW. The appraiser should not be checking either one of those boxes. Consultation with the client at that point is a must.

That's not so obvious to me Dave. Technically a house in a PUD doesn't have Fee Simple absolute rights either. The slippery slope of your argument tells me I cannot check "Fee Simple" for a deed restricted community either; so then a PUD project would be, by extention, a red flag we should contact our client about too. But we know Fannie will lend in deed restricted projects; so your argument lacks consistency.

Furthermore, the appraiser may not be an expert in title matters, but that actually is not relevant for two reasons:

1. The appraiser must identify the property rights being appraised

1. 
   
   The property rights being appraised are being identified: Fee Simple
   
   
   

   [*]The appraiser knows that the fee simple estate does not exist and cannot ignore a relevant fact.

   
   It is not being ignored, it is being disclosed, just like when we appraise a 55 and older community and we disclose the fact that there are deed restrictions. We simply disclose the property has a life estate occupant, but that the appraisal is not for the value of the life estate nor the value of the remainder interest, it is valuing the Fee Simple interests as per the scope of work. There is no hypothetical condition placed on the appraisal of a property in an age restricted community; nor is there one needed in the house encumbered by a life estate.
   
   As for whether the Fee Simple interest exists or not, I'll leave that battle to Plato and Aristotle.

 

[sbb04]

The property is the collateral. They're not loaning money on anyone's interest in the property. If it's a reverse mortgage then I don't even believe payments are made so there can't be a default. As long as the remainderman is on the note I don't really see a problem. other than identifying that the property is presently encumbered which any title company would also find out.