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Valuing Fractional Interests Article – Part 3

Goldilocks and the Critical Importance of Time

The most important thing about valuing a fractional interest in real estate is time, specifically, how long will the interest-holder be stuck in its position? Interest holders care less about the current net asset value, and more about its future value. The valuer can use this to solve many issues and conclude the likely period, which is a critical element in such valuations. 

The restriction period typically ends when the assets are sold and profits are distributed. This period has profound effects and it is important for the valuer to consider the circumstances that could affect the period. 

Two possible dilemmas may occur when matching the model period and the period which discount rates are taken from. One dilemma is when a period seems to be “forever”: partners who intend to hold their assets forever. “Forever” would rely on future generations, which is very difficult to predict. Webb suggests that exceeding 10-15 years creates an invalid model because it is practically impossible to find discount rates that can support longer periods. 

The other dilemma is the short term: when a partnership ends and partners do not want to extend. With good facts, a 2-3 year restriction period can be concluded, but short holds are not baked into yield rates.

Ryan Whitelaw, MAI will be attending the 2022 Appraisal Institute Annual Conference in Las Vegas.

This conference is the premier annual event for real estate valuation professionals to gather for education seminars, dynamic speakers, knowledge sharing, networking, and product and service shopping. In addition to Keynote Speaker, Ryan Leak, a speaker, coach and consultant with expertise in empowering leaders to reclaim a new self-awareness, classes and speakers at this event will explore Fannie Mae policies and initiative updates, how to keep pace with demand, interpret real market data, litigation and arbitration and many more tools that are effective in educating and advancing professionals in the appraisal field. 

To learn more click the link below:

Pacific Appraisers Ryan Whitelaw MAI moderates breakout session at the 2022 MBAS

Ryan Whitelaw MAI recently attended the 2022 Monterey Bay Appraisal Seminar (MBAS). Ryan moderated the breakout session on “Best Practices using Marshal and Swift”. The 2022 Monterey Bay Appraisal Seminar was sponsored by the Society of Real Estate Appraisers (SREA), The American Society of Appraisers (ASA) and The American Right of way Association (ARWA).  The seminar covered topics regarding policy clarifications, appraisal compliance reviews, SB 9, and cost approach, with an opening keynote from Dr. Gerd Welke, and many presentations from experts at different appraisal companies around the country.

To learn more click the link:

Right of Way Certification

We are very happy to announce that Ben Rumsey, MAI has received his Right of Way certification from IRWA. This will help Pacific Appraisers to continue its expansion into non lender appraisal markets.