Undivided Interest in Real Property
Our group has valued over 300 undivided interests in real property for estate and gift tax purposes as well as determination of market value when converting a traditional IRA to a Roth IRA. Over the past 20 years our professionals have acquired in-depth knowledge of undivided interests, also referred to as tenant-in-common and co-tenancy interests, in order to empirically and logically support their value conclusions and discounts.
A comprehensive valuation of an undivided interest should include a detailed analysis in order to identify factors that influence the control and marketability discounts applied to the co-tenancy interest. Below are some of the factors considered by our staff when valuing a tenant-in-common interest in real property.
- Appraisal of the property
- Mortgage, tax, mechanic, judgment and other types of liens
- Loan documents to ascertain if each co-tenant is jointly and severally liable for the debt
- Calculation of the co-tenants’ equity in the property
- Co-tenants' anticipated cash flow from the property
- Property’s potential for appreciation
- Property’s earnings potential
- Co-tenants' out of pocket costs if the property is not producing a positive cash flow
- Tenants-in-commons’ ability to satisfy the obligations associated with ownership and operation of the property
- Interview of co-tenants to ascertain their desire to develop, improve or sell the property in the future
- Interview of co-tenants to ascertain the manner in which they make decisions related to the ownership and operations of the property if they have not entered into a co-tenancy agreement
- Rights of the co-tenants should their actions be subject to a co-tenancy agreement
- Statutory rights of the tenants-in-common regarding the partition of the property
- Statutory rights of the cotenants should a creditor attempt to perfect a lien
- Hundreds of comparable sales of undivided interests in unimproved and improved properties across the United States which evidence discount to equity ratios
- Sanity check to ensure that the opinion of value is not only technically plausible, but also reasonable as seen from the perspective of a potential buyer and a potential seller of the interest.
Our Real Estate Appraisal & Consulting Group appraises all types of improved and unimproved properties zoned for commercial use as well as single family residence in which undivided interests are owned by co-tenants. We also appraise residences when an estate holds a one half 50% community property interest in a home or when a settler makes a gift to a qualified personal residence trust (QPRT).