appraising special ownerships and interests chapter 17
TRANSCRIPT
Airspace condominium
Attached housing
Compensable damage
Condemnation
Condemnee
Condemnor
Conditions, Covenants, and
Restrictions (CC&Rs)
Condominium
Cooperative
Fixtures
Homeowners’ association
Just compensation
Larger parcel
Leased fee
Leasehold
Manufactured home
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CHAPTER TERMS AND CONCEPTS
Master mortgage
Mobile home
Modular homes
Partial interests
Partial taking
Party wall
Patio home
Prefabricated homes
Remainder parcel
Row house
Severance damage
Take parcel
Time-share ownership
Zero-lot-line home
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CHAPTER TERMS AND CONCEPTS
LEARNING OUTCOMES
1. List at least four less-common types of homes, define each, and explain what special problems each presents to the appraiser.
2. Define several commonly marketed types of partial interests.
3. Explain three ways in which the appraisal process is different for eminent domain appraisals.
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TYPES OF OWNERSHIP
CondominiumsOwnership:Airspace + Interest in common areaRestrictions: oCC & Rs
Appraisals:oEmphasize sales comparison approachoCompare amenities with competing projects
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TYPES OF OWNERSHIP
Planned Unit Developments (PUDs) Zoning concept allows subdivision design
flexibility Ownership is the fee interest + shared interest in
the common areas Townhouse styling is common
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TYPES OF OWNERSHIP
CooperativesOwnershipoPercentage of cooperative associationoRight to occupy specific unitoRight to use of common areasoAmenities similar to condominiums
AppraisalsoConsider available financingoConsider what transfers in a saleoConsider Market acceptance
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OTHER HOUSING DESIGN
Row Houses Located on individual lots Lack side yards Usually owned in fee Problems involve lack of privacy, fire
protection
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OTHER HOUSING DESIGN
Townhouses Similar to the row house in lack of side
yards Townhouse name applies to the building
style Ownership is the fee interest plus shared
interest in any common areas Homeowner’s associations are usually
involved Legally similar to the planned unit
development
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OTHER HOUSING DESIGN
Zero Lot Line (Patio) Homes Small lots; house lacks conventional side
yards Patio often abuts wall of the house next
door Lack of privacy may pose problems
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VARYING THE TYPE OF CONSTRUCTION
Manufactured Homes HUD classification of mobile homes built
after 1976
Built to meet Federal Manufactured Construction and Safety Standards
Structure and property must meet strict standards to qualify for FHA loans
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VARYING THE TYPE OF CONSTRUCTION
Modular and Prefabricated Homes Both are forms of factory built housing
Modular homes resemble mobile homes but without running gear
Prefabricated components are now commonplace in conventional construction
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PARTIAL INTERESTS
Other Partial Interests Life Estates
Undivided Interests
Mortgaged Properties
Timeshares
Easements
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PARTIAL INTERESTS
Defining Leased Interests Leased Fee = The owner’s interest in the
property
Leasehold = The tenant’s interest in the property
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TYPES OF LEASES
Types of Leases Flat/Straight lease Step-Up lease Percentage leaseResponsibility for Expenses Gross Lease = The landlord pays all
expenses Net Lease = the tenant pays all expenses Variations = Responsibility is often divided
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VALUING THE LEASEHOLD
Valuing the LeaseholdEstimate the Tenant’s favorable rentoDefined as market rent less contract rentoConsider the terms of the lease
Apply annuity or yield CapitalizationoUse a financial calculatoroCapitalize for the term of the leaseoArrive at a market value opinion
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VALUING THE LEASED FEE
Valuing the Leased Fee (Method #1)
Estimate the annual net operating income
Apply annuity or yield capitalization
Use a financial calculator
Capitalize for the term of the lease
Add the discounted reversion (Value at the end of the lease ) using a calculator
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VALUING THE LEASED FEE
Valuing the Leased Fee (Method #2)
Appraise the Undivided Fee conventionally
Subtract the value of the leasehold estate
The result is the value of the leased feeoNot always a valid method
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EMINENT DOMAIN TERMINOLOGY
Eminent Domain The government’s right to take private property with “just
compensation”
Condemnation The court action under eminent domain
Condemnor The agency acquiring the property
Condemnee The property owner
Partial Taking The part taken out of a larger parcel
Remainder Parcel The part the owner will get to keep
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EMINENT DOMAIN TERMINOLOGY
The Larger Parcel The economic unit from which the “Take” parcel is a part
Severance Damage The loss in value to the remainder parcel due to the take
Compensable Damage Legally compensable value loss
Benefits General – those shared by the community at large Special - those affecting only the remainder parcel
Just Compensation Generally 1) the market value of the “Take” parcel plus, 2) the
market value damage to the remainder parcel
SUMMARY
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Appraisers are faced with a growing variety of appraisal assignments. Many of these assignments now involve unusual concepts in ownership, design, and construction. A common appraisal situation involves estimating the market value of the lessor’s and/or lessee’s interests in a given property. One of the most specialized areas of appraisal practice involves valuing property for eminent domain. eminent domain often involves acquisition of only a portion of the property, called a partial take. Here, the appraiser must consider the concepts of the larger parcel, the remainder parcel, severance damages, and general and special benefits, in order to reach a final value conclusion.