Life Estate

[Couch Potato]

I don't think the radon problem is a similar situation at all. The full set of rights exists and can be appraised at all times, whether it is spread out among individuals or not.

 

[Joyce Potts]

I don't think the radon problem is a similar situation at all. The full set of rights exists and can be appraised at all times, whether it is spread out among individuals or not.

I don't disagree with that. But given a life estate in place, I wouldn't make the appraisal of the fee simple ownership AS IS. I would make it subject to removal of the life estate.

 

[The Warrior Monk]

The person granted the life estate is still alive, and will be signing away her rights prior to closing.

Will be is not the same as has already occurred as of the date of value.

If something does not exist as of the date of value, it must be handled appropriately. Fee simple does not exist as of the date of value, otherwise there is no reason for the original post.

 

[Couch Potato]

Will be is not the same as has already occurred as of the date of value.

If something does not exist as of the date of value, it must be handled appropriately. Fee simple does not exist as of the date of value, otherwise there is no reason for the original post.

Fee simple always exists, it's just is not always held. The rights are divided, not nonexistent. The job is to appraise the fee simple interest in the property, not the rights held by any particular individual.

 

[Joyce Potts]

Fee simple always exists, it just is not always held. The rights are divided, not nonexistent. The job is to appraise the fee simple interest in the property, not the rights held by any particular individual.

Greg,

How would you appraise the radon affected property? The perfect condition of the house exists, it's just divided or impacted by the environmental problems? So would you appraise the property AS IS if the radon problem was disclosed to you?

I'm having a difficult time distinquishing how the two are any different.

 

[Couch Potato]

The perfect condition of the house does not exist in the radon situation. Although it may be structurally sound, it must be physically altered to treat the radon problem; just as it must in any repair situation.

 

[Joyce Potts]

I guess I see the analogy and you don't.

I still say if the fee simple interest is impacted by a life estate, the fee simple interest does not exist for an AS IS value.

Certainly, you can appraise the fee simple interest as a hypothetical condition which is what I'm advocating.

 

[Doug Wegener]

Exactly right

I guess I see the analogy and you don't.

I still say if the fee simple interest is impacted by a life estate, the fee simple interest does not exist for an AS IS value.

Certainly, you can appraise the fee simple interest as a hypothetical condition which is what I'm advocating.

Exactly right.

 

[The Warrior Monk]

Now I'm busting out some literature.

In "The Appraisal of Real Estate, 12th Ed.," page 68, fee simple interest is defined as

absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by governmental powers of taxation, eminent domain, police power, and escheat.

Since absolute ownership does not exist as of the date of value, how does the fee exist? It also didn't pass me that one our resident experts included "as if" as a qualifier for the fee interest. That wouldn't be necessary if the fee always exists.

Now turn ahead to page 80, where it states

Often the valuation of a fee simple interest is hypothetical and is performed as the first step in the valution of a partial interest.

How could a fee simple interest ever be hypothetical if it always exists???

 

[Couch Potato]

the fee simple interest does not exist for an AS IS value.

This is the point where we disagree. All the rights always exist. A Life Estate can be created from the rights, and can be destroyed. A Leasehold or Leased Fee interest can be created from the rights , and can be destroyed. So those type of interests can be hypothetical. That type of interest can exist or not exist. But, when all the rights, however they are divided among different parties, still exist. The value of ownership of all the rights never needs a hypothetical condition, because there is nothing that is part of fee simple ownership that does not exist. It just requires multiple parties to transfer the fee simple ownership when multiple parties own some of the rights.