Easement Issues

An appraisal for easement purposes involves an easement adversely affecting fee simple title to an insured’s property. The easement was not disclosed to the purchaser (insured) and was discovered by the insured after the purchase. The title insurance policy provides coverage for such an adverse easement, but the title insurance policy did not reveal the easement when issued in connection with the property acquisition. The appraisal date of inspection usually occurs after the date of discovery of the easement so the appraisal is performed on a retrospective basis.

The title insurance company hires an appraiser to estimate the diminution in market value using a before-and-after valuation methodology as of the date of discovery. First, the property is appraised based upon a hypothetical condition as if the easement did not exist, and second, the property is appraised on an As Is basis impacted by the easement. The difference between the first and second market value opinions is the market-value loss or diminution adversely affecting the subject property.

The intended users are the attorney representing the title insurance company and the attorney representing the insured property owner. Expert witness testimony might be required in the event that the parties disagree on the market value diminution. Such testimony is typically provided before an arbitration panel. In this case, Vestor Realty Consultants recommends a summary or possibly a self-contained appraisal report following consultation with the attorney working on behalf of the client.

Marital Dissolutions

An attorney representing a spouse in a divorce proceeding requests an appraisal for a marital dissolution as of current date or the date the lawsuit was filed. The property interest appraised is the 100% fee simple interest even through the spouses might hold the title in joint tenancy.

The intended user is the attorney representing the spouse, because the appraisal/consulting work is completed to preserve confidentiality within the attorney work product privilege. Expert witness testimony might be required if the opposing counsel representing the other spouse contests the valuation. Vestor Realty Consultants would recommend a summary appraisal report.  However, the attorney requests that a work file be prepared for record-keeping purposes before any oral or written communication for such purposes. The content of the work file might be provided as a restricted appraisal report with backup documentation retained in raw form.

Qualifications

George M. Baker has been involved in the community and in professional organizations, having served as a member of the Board of Directors of the Wilmette Chamber of Commerce (2008-2009); as Chair, Candidate Guidance, for the Illinois Chapter of the Appraisal Institute (1988-1989); and as a member of the Board of Directors of the Chicago Chapter of the Appraisal Institute (1992-1993).

Mr. Baker has attended various real estate appraisal and brokerage seminars to comply with continuing education requirements. Specifically, he has completed the following courses offered by the Appraisal Institute and the Realtors National Marketing Institute:

The Appraisal Institute

Course 1A: Basic Principles, Methods & Techniques
Course 1B: Capitalization Theory and Techniques
Course II: Urban Properties
Course IV: Litigation Valuation
Course VI: Real Estate Investment Analysis
Course SPP: Standards of Professional Practice
Course 705: Litigation Appraising: Specialized Topics and Applications

The Realtors National Marketing Institute

CCIM Course 101: Fundamentals of Real Estate Investment and Taxation
CCIM Course 102: Fundamentals of Creating a Real Estate Investment

Appraisal for Market Rent

An appraisal for a market rental opinion is required under the terms of a lease that includes a renewal option. This lease provision calls for the landlord and tenant to agree on the market rental rate (as opposed to the original rental rate). If the parties cannot agree, the renewal option calls for an MAI appraisal to be completed and paid for by both parties.

The intended users are the parties or their attorneys. The parties might be so focused on cost that they initially request a restricted-use appraisal. However, this report type does not include presentation and analysis of rental comparables, and the lack of this information might not satisfy one or both parties. The more costly but ultimately effective solution is to prepare a summary appraisal report.

Appraisal for Gift-tax Purposes

An appraisal for gift tax purposes involves a charitable donation to a non-profit organization or a non-charitable gift to a family member of a fractional interest or 100% interest in a property as of a specific date.

The intended users are the attorney or CPA representing the property owner in filing a federal tax return. The IRS later reviews the appraisal and might contest the valuation. Expert witness testimony might be required. In this case, Vestor Realty Consultants would recommend a summary appraisal report following consultation with the attorney or CPA working on behalf of the client.