Fractional Interest Appraisals

 

Fractional interest are usually undivided interests held by multiple parties in real property.  Often owners acquire undivided fractional interests expressed as a percentage like 49.0% or interests expressed as fraction of a fee estate interest like 1/3rd, 1/4th, 1/5th, etc. in a property.

 

Appraisers are often charged with appraising the fractional interest holding of an owner as part of the appraisal problem.  Fractional interests are created by individuals (partnerships), wills, probate courts and other circumstances.  

 

As would be expected, the demand for a fractional ownership interest in a real property is significantly lower than the demand for a fee interest in the same property.  Having to share a property with others, including; its use, its expenses, decision making regarding improvements and sales price decision is daunting and not generally desired.  Thus, most appraisers discount fractional interests due to a perceived lower demand for them.   

 

Minority fractional interests in real property are interest of less than 50%, and these interests lack control of the real property.  A minority fractional interest is even more difficult to market and sell than a majority fractional interest since the minority interest owner is "along for the ride."

 

Majority fractional interest owners can usually request that the property be "partitioned" into smaller parcels, while minority interest owners generally cannot.

 

It is important for an appraiser to keep up with IRS guidelines and discounts made to real properties for fractional interest holdings in our reports and consider what has been approved by government agencies in the past.        

 

Contact us with your questions or concerns regarding fractional interests, fractional interest appraisals or regarding your specific appraisal assignment in Nevada at 1-702-568-6699.  We can also be e-mailed at grigdon@cox.net.  

 

 

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Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.