Term for a property is encumbered by sales contract by value is as-is

[Michael P Jacobs MAI]

I'm looking for a term for this situation: the property to be appraised is raw land and the appraisal condition is AS-IS. However, the land is pending plat map approval and plan review, with three buyers waiting to close on three prospective sites. I am not appraising the prospective values, only the as-is value of the whole before map/plan approval and closing of the contracts.

So, the property is essentially 100% encumbered by three purchase contracts pending plan review.

When fee simple property is encumbered by a sales contract, WHAT is that called? I saw it somewhere...

 

[Mike Kennedy]

https://www.cpp.edu/~hturner/ce313/real_estate_law.pdf

 

[Mike Kennedy]

FLORIDA
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[George Hatch]

Maybe I've got it all wrong, but I would think those sales contracts are contingent upon (subject to) the recording of a map which may or may not occur in the future. If so and if the map isn't recorded then those contracts would presumably be voided.

 

[Michael P Jacobs MAI]

Maybe I've got it all wrong, but I would think those sales contracts are contingent upon (subject to) the recording of a map which may or may not occur in the future. If so and if the map isn't recorded then those contracts would presumably be voided.

That is true. In that way they could be said to be hypothetical if "subject to" but the assignment is specifically to estimate as-is land value. But you're giving me another idea - would it be a hypothetical to ignore those encumbrances? Now, I'm thinking it would be, and that's why my brain hasn't been able to get past this issue.

 

[Tim The Enchanter]

Would not the value be likely to increase over today when the map is recorded?

 

[Michael P Jacobs MAI]

Would not the value be likely to increase over today when the map is recorded?

Absolutely yes in January but by now who knows with COVID. I've included this in the extraordinary assumption.

 

[George Hatch]

That is true. In that way they could be said to be hypothetical if "subject to" but the assignment is specifically to estimate as-is land value. But you're giving me another idea - would it be a hypothetical to ignore those encumbrances? Now, I'm thinking it would be, and that's why my brain hasn't been able to get past this issue.

A "Hypothetical Condition" is one that the appraiser knows does not exist. I suppose you could hypothesize that the value of the property rights appraised would be $x if these legal encumbrances didn't exist.

I guess what I'm driving at is whether or not these sales contracts for a property interest which has yet to be created actually amounts to an encumbrance on the property rights you're appraising in its as is condition.


Let's say I was building a condo project and had already presold - with contracts - all of the units prior to recording the map and building the improvements. But before I can follow through I get hit by a bus or the buildable portion of the site gets washed out to sea by the 1000ft high tsunami. The project doesn't get built, but gets sold to a drug baron who plans to build a custom home with a cliff diving platform and a petting zoo for his tigers. And a moat with man-eating alligators. And a merry-go-round with built-in cotton candy dispensers.

Are the sales contracts for the proposed condos still binding on that property? Is its owner compelled to follow through on the map and the construction?

I suppose the contracts can be written that way, but it seems unlikely to me that most such contracts would be written that way.

 

[Michael P Jacobs MAI]

SNIP...
Let's say I was building a condo project and had already presold - with contracts - all of the units prior to recording the map and building the improvements. But before I can follow through I get hit by a bus or the buildable portion of the site gets washed out to sea by the 1000ft high tsunami. The project doesn't get built, but gets sold to a drug baron who plans to build a custom home with a cliff diving platform and a petting zoo for his tigers. And a moat with man-eating alligators. And a merry-go-round with built-in cotton candy dispensers.

lol it must be five o'clock there...

 

[George Hatch]

I don't drink. Or toke. I do hang out on this forum though; and it's affected my head.