1. APPRAISING SPECIAL OWNERSHIPS AND INTERESTS Chapter 17

2. 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 2 CHAPTER TERMS AND CONCEPTS

3. 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 3 CHAPTER TERMS AND CONCEPTS

4. 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. 4

5. TYPES OF OWNERSHIP Condominiums Ownership:  Airspace + Interest in common area  Restrictions: o CC & Rs  Appraisals: o Emphasize sales comparison approach o Compare amenities with competing projects 5

6. 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 6

7. TYPES OF OWNERSHIP Cooperatives  Ownership o Percentage of cooperative association o Right to occupy specific unit o Right to use of common areas o Amenities similar to condominiums  Appraisals o Consider available financing o Consider what transfers in a sale o Consider Market acceptance 7

8. OTHER HOUSING DESIGN Row Houses  Located on individual lots  Lack side yards  Usually owned in fee  Problems involve lack of privacy, fire protection 8

9. 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 9

10. 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 10

11. 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 11

12. 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 12

13. PARTIAL INTERESTS Interests Created by Leases  Leased Fee  Leasehold  Sub-leasehold 13

14. PARTIAL INTERESTS Other Partial Interests  Life Estates  Undivided Interests  Mortgaged Properties  Timeshares  Easements 14

15. PARTIAL INTERESTS Defining Leased Interests  Leased Fee = The owner’s interest in the property  Leasehold = The tenant’s interest in the property 15

16. TYPES OF LEASES Types of Leases  Flat/Straight lease  Step-Up lease  Percentage lease Responsibility for Expenses  Gross Lease = The landlord pays all expenses  Net Lease = the tenant pays all expenses  Variations = Responsibility is often divided 16

17. VALUING THE LEASEHOLD Valuing the Leasehold  Estimate the Tenant’s favorable rent o Defined as market rent less contract rent o Consider the terms of the lease  Apply annuity or yield Capitalization o Use a financial calculator o Capitalize for the term of the lease o Arrive at a market value opinion 17

18. 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 18

19. 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 fee o Not always a valid method 19

20. 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 20

21. 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 21

22. SUMMARY 22 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.