Life estate VS fee simple

[PropertyEconomics]

The Fee Simple rights are the rights a buyer can purchase in the market place or a lender can loan on in the market place.

How can a buyer purchase rights which DO NOT EXIST? Are you saying a buyer is going to purchase both the holder of the life estates rights and those of the remainderman in order to assemble the Fee estate?

 

[Fred]

The Fee Simple rights are the rights a buyer can purchase in the market place or a lender can loan on in the market place. And in our case a buyer can purchase, and a lender can loan on, the fee simple rights to a property encumbered by a life estate if those holding the rights to sell or mortgage are ready, willing and able, just like he can buy or loan on the house next door that is not in a life estate if the owner is ready, willing and able. The rights are there to be purchased, or loaned on, and that is not a hypothetical.

I am not sure what you mean by "the" fee simple.
If by "the" fee simple, you mean the remainderman interest, yes, that can transfer by itself at the whim of the seller. That "exists."
If by "the" fee simple you mean the combined life estate and remainderman interest, no, that cannot transfer in the market place, until both parties agree to a transfer. One potential seller cannot transfer the rights of the other potential seller.

There are so many parts of this that are eluding you. I'd go back to my first posts. There are three candidates for subject of an appraisal: the life estate, the remainderman interest, the (hypothetically) rejoined interest. For all of you palabre about how USPAP only requires you disclose (state) encmberances, I read you posts and am still not sure which set of property rights you are talking about at any point.

 

[Mztk1]

Jim ... this statement is pretty clear to me ... even USPAP says that copies or summaries of title descriptions may be used to SUBSTANTIATE the real property rights.
Let me ask it this way ....

The holder of the life estate refuses to sign away their rights for any mortgage purposes ... as a result the remainder estate is the only "right" the remainderman has ... what estate are you appraising then? Will you remain convinced you can appraise the "fee simple estate" which does not exist as of the date of your report without statement of a hypothetical condition?

Abosolutely I can. In some states, perhaps most, when a husband and wife own a house jointly both must agree to a mortgage or a sale, if I am appraising a house for a refinance where the wife has not agreed, can I?

Don't see why not.

I am telling you PE, we simply have a fundamental difference of opinion. You think the rights do not exist because existence to you is a matter of interest. I believe they do exist and it is a matter of will. There must be something a buyer can do to persuade the owner of the life estate to agree to the sale...a higher price, perhaps? But the rights are there to be negotiated, from my point of view.

 

[Fred]

Abosolutely I can. In some states, perhaps most, when a husband and wife own a house jointly both must agree to a mortgage or a sale, if I am appraising a house for a refinance where the wife has not agreed, can I?

That's what we need. Now, let's confuse joint tenancy with partial interest.

Also, that's two posts in a row where you said "appraise a house." Interesting after all these pages predictated on what "rights" are to be appraised. Maybe it's just me, but it seems that your thinking that you are appraising the "house" is why the differences among "rights" is eludling

 

[PropertyEconomics]

I am telling you PE, we simply have a fundamental difference of opinion.

We dont have a fundamental difference of opinion ... we have a fundamental difference of understanding what real property rights are. You make all kinds of suppositions that the life estate holder will agree to sale or mortgage for a higher fee. Im telling you ... THEY WONT ... its my example. Please dont change it to yours. Why would a holder of a life estate jeopardize their position in a property they occupy and use for free? No arguments please, lets just assume ... THEY WONT.
Do you still maintain that you can appraise the fee estate when it doesnt exist as of the date of appraisal without making the value conclusion predicated on a hypothetical condition?
In earlier posts you stated that both the remainderman and the life estate holder had separate interests in the property. Are you changing that now?

 

[Webbed Feet]

Mr. Klos and Mr. Santora,

Encumbrance: Any right or interest in a piece of property held by someone other than the owner.

Fact: A holder of a Life Estate "owns" the life estate. A remainderman "owns" the estate in remainder. A grantor with a reversionary right "owns" the estate in reversion.

Could the two of you please, please, stop saying a Life Estate "encumbers" the Fee Simple? ..Especially, Mr. Klos? ... You're both driving me "simply" nuts with your incorrect usage. A small important matter as we are all down to parsing "will" versus "interest" at this point and usage matters. One more time, ownership is not an encumbrance!

Ok, I feel better. ... .. Carry one everyone!

Webbed.

P.S. It is a little strange a holder of a Life Estate is the "Life Tenant," but this does not change the fact it is considered a Freehold Estate. Therefore, the Life Tenant owns an estate as a free person. It is deeded.

 

[Webbed Feet]

<...... snip ....... >
"The statement of the real property rights being appraised must be substantiated, as needed, by copies or summaries of title descriptions or other documents that set forth any known encumbrances."

Therefore, in a life estate, checking "Fee Simple" and disclosing the known encumbrance of the life estate is adequate, and is what I do. Before threatening and questioning my capabilities with your theories on right and wrong, PE, please show me one case where a person lost their license or was disciplined by their state for identifying the rights appraised as "Fee Simple" while disclosing that the title is encumbered by a life estate sans an HC.

In the meantime, I'll be waiting.

Mr. Klos,

You are a wonderful poster and forum participant. We don't have to agree for that to be a fact. But it drives me feathers when posters intentionally only parse little sections of USPAP to support their positions while intentionally ignoring other sections of USPAP. To then rapidly follow that up by playing the "find me a board violation" card is just not worthy of your nomally fine postings.

Again, there is no such thing as a title "encumbered" by a Freehold Estate. When a Life Estate is granted, a single estate known as Fee Simple has been split into two lesser estates. These lesser estates are owned, they don't encumber anything or each other when the animal type is Freehold. When these lesser estates exist as of any certain effective date, no Fee Simple Estate is owned by any party on that date. Who is your identified owner of the real property of a Fee Estate as of your effective date? You don't have a name of an owner Mr. Klos. There is no current owner of the estate you are appraising that you claim no HC is needed for the real estate appraisal.

Also, we need to stop mixing up that the means equals the form. An Estate is the means by which any person(s) own real property, with forms of ownership held by one or more parties. For example; Fee Simple is the means by which a couple can own by either Tenancy in Common or Tenancy by the Entirety which are two examples of forms of ownership under the same means. Any Freehold Estate could have been used for the example.

Webbed.

 

[Hamlet]

I believe they do exist and it is a matter of will. There must be something a buyer can do to persuade the owner of the life estate to agree to the sale...a higher price, perhaps? But the rights are there to be negotiated, from my point of view.

Mr. Kilos,

You are employing and extraordinary assumption that an owner can be compelled to sell as long as the price is high enough. Doesn’t that also take the opinion of value outside of the realm of Market Value?

 

[Fred]

Encumbrance: Any right or interest in a piece of property held by someone other than the owner.

Fact: A holder of a Life Estate "owns" the life estate. A remainderman "owns" the estate in remainder. A grantor with a reversionary right "owns" the estate in reversion.

Could the two of you please, please, stop saying a Life Estate "encumbers" the Fee Simple?

It's hard enough getting people to
1. recognize that there are two interest and not just "the" house or "the" property and not to call the whole thing "a life estate"
2. recognize that assuming a rejoined interest as the premise of an appraisal in "contrary to what exists" and is thus using a hypothetical condition,
3. realize that using the hypothetical condition without proper client communication is the easiest way possible to create a non credible appraisal, and a misleading report.
...for me to see how getting sidetracked into splitting the semantic hairs that are stuck in your craw advance the discussion.

An "estate," (as in the phrase life estate) is defined as any "interest" in real estate. Your own defintion of "encumberance" indicates it is a type of interest." The defintion of life estate and encmberance refer to interests.

I have seen a life estates written up an an interest in real estate "owned" by someone else three times - even though you say it is wrong). Calling the LE an encumverance fits every definition in Black's Law Dictionary (and even though you don't seem impressed by that, I have personally seen federal judges reach for Blacks and apply the defintion on the spot). Additionally, referring to the LE as an encumberance is also functional. As a person who actually knows how to appraise either of the two partial interests, an LE works just like a financial encumberance (like a lease for zero rent) for valuation purposes.

 

[RSW]

Ok! I've read all of your comments about the LE and the form of ownership. I am really confused about if we would do the appraisal subject to with a HC. Seems like we got off track some where.