Life Estate, Will They Lend With This On The Deed?

[Deleted member 130081]

I always thought we appraised with the ordinary assumption that title was marketable. Correct me if I'm wrong here, but doesn't a life estate put restrictions on the ability of the "owner" to sell? Sounds like a lending decision, not an appraisal problem.

 

[Howard Klahr]

doesn't a life estate put restrictions on the ability of the "owner" to sell?

No

 

[Meandering]

I always thought we appraised with the ordinary assumption that title was marketable. Correct me if I'm wrong here, but doesn't a life estate put restrictions on the ability of the "owner" to sell? Sounds like a lending decision, not an appraisal problem.

You're wrong.

Life estates are severed interests. You can't assume Fee Simple, without an HC, as Fee Simple doesn't exist and that has nothing to do with either interest being marketable or not.

 

[Terrel L. Shields]

consider a discount based on potential life expectancy

Exactly. Lenders do lend on these. They want the value of the fee simple. They also require the life estate to sign the mortgage normally. Some people will when a relative is involved, some won't. The only assumption is that when asked to value the property if they want the value of the FEE SIMPLE or whether they want the value of the life estate or remainder estate. Normally, they want the fee simple and so ask your client what they want.

 

[Peter LeQuire]

You're wrong.

Life estates are severed interests. You can't assume Fee Simple, without an HC, as Fee Simple doesn't exist and that has nothing to do with either interest being marketable or not.

No, but you can appraise the fee simple interest and communicate that the fee estate is encumbered by the life estate.

 

[Deleted member 130081]

I found this excerpt in Wikipedia under Life Estates:

"The ownership of a life estate is of limited duration because it ends at the death of a person. Its owner is the life tenant (typically also the 'measuring life') and it carries with it right to enjoy certain benefits of ownership of the property, chiefly income derived from rent or other uses of the property and the right of occupation, during his or her possession. Because a life estate ceases to exist at the death of the measuring person's life, the life tenant, a temporary owner, may short-term let but cannot sell, give or bequeath the property indefinitely (including assuming it could pass to heirs (intestate) or creating a purported document leaving it to devisees (testate))."

 

[Howard Klahr]

but cannot sell, give or bequeath the property indefinitely

Correct, but it does not prohibit the sale of the interest owned whether the interest is as the life estate or the remainerman, both interests may be sold and/or transferred

 

[Mike Kennedy]

http://trusts-estates.lawyers.com/estate-planning/life-estates.html