Home Appraisal FAQs - Appraisals What are the types of interest held in real estate?
What are the types of interest held in real estate?
Fee Simple, Leased Fee & Leasehold

Implicit in the analysis of the subject property is a determination of the interest in the property being appraised. For most common situations, such as mortgage finance, the fee simple interest is explicitly assumed since it is the most complete bundle of rights afforded a property owner. While there are many different possible interests in real estate, the three most common are:

  • Fee Simple Value - The most complete ownership in real estate, subject to the powers reserved to the government (taxation, escheat, eminent domain, and police power).
  • Leased Fee Value - This is simply the fee simple interest encumbered by a lease. If the lease is at market rent, then the leased fee value and the fee simple value are equal. However, if the tenant pays more or less than market, the residual owned by the leased fee holder, plus the market value of the tenancy, may be more or less than the fee simple value.
  • Leasehold Value - The interest held by a tenant. If the tenant pays market rent, then the leasehold has no market value. However, if the tenant pays less than market, the difference between the present value of what is paid and the present value of market rents would be a positive leasehold value. A leasehold value would only exist if the below market lease was transferable to another party.

Still have a questions? Nexus Analytix™ can provide answers for your real estate appraisal questions. Please contact our offices at, Phone: (856) 985-0008 or by e-mail.

 

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