Appraising Homes on Tribal Land

by Administrator on Aug 2, 2016

My experiences with appraising a single-family residential (SFR) home on an Indian reservation I am sure are not unique, but there were important differences between a typical appraisal and the tribal one.  Most important is the fact that the property owner held a leasehold estate and not a fee estate in the real property.  The lease indicated that 65 years remained on the leasehold and a provision in the lease indicated that it could be renewed at the end of its term.  The SFR building that I appraised was noted to be over 10 years old and with an age-life expectancy of 55 years the building will likely be fully depreciated when it's lease term ends.

Also important and considered were HOA fees, no property taxes and a number of minor differences that were all discussed in the appraisal report.  Not being able to find a single scrap of information on the property when I started the assignment was disconcerting but I found builder information on the subject property from the builder that included floorplan sketches, measurements, features and original asking prices which was a good start.

My discussions with local agents brought out the fact that the marketing time for the SFR properties located on reservation land generally took longer to close than typical properties.  Residences on tribal land with leasehold estates took 6 months or more to close while those traditional sales in the local market closed in 60 to 90 days.  Agents advised me that there are fewer mortgage companies that are willing to make a loan on leasehold properties and there are fewer buyers who are comfortable with a leasehold estate.  It's imprtant to disclose to appraisal clients that these factors exist and affect the marketability of the properties.

Bolstering my good feelings about the appraisal was the fact that I found data on a number of sales and some of the sales were model matched homes with the exact same floorplan, gross building area (GBA) and gross living area (GLA).  The data wasn't available through my local multiple listing service (MLS), I had to ask for the data from another MLS that had more activity on the reservation.  My MLS had one or two sales, which looked to be a problem, but the MLS outside of my area had almost 20 sales over the last 12 months.

While the Tribal property had its own Assessor I found it nearly impossible to get information from them.  In the end I did receive some of the data that I needed but I didn''t find them to be cooperative.  I don't understand why the Tribal Assessor wouldn't provide the information I needed promptly, but I guess that it didn't make that much of a difference.

As part of the appraisal process I reviewed a number of sources and articles on appraising real property interests located within an Indian Reservation and there are, especially with regard to vacant land, a number of additional issues that are at times not as easily resolved.  My particular assignment was clearly did not include some of the more complex issues that can exist on a reservation controlled property.  Thus appraisers should approach assignments of this type with a great deal of caution.  The impact of the marketability of a leasehold estate may be difficult to quantify, you need to know if the parcel has been surveyed and you need to know how difficult it would be to secure financing on the property.

Appraising a SFR home in a tract home development on a reservation with many sales available to you is one thing, but appraising a property that is somewhat unique on a reservation is more challenging.  It's my opinion that it's better to take some time before you accept an assignment to decide about its complexity than to accept it and then figure out that you shouldn't have taken it at all.  That's why I rarely quote a price to a client without having them send me the information and taking the time to do some preliminary research.

For more appraisal information contact Glenn J. Rigdon MA, MRICS, ASA is a Las Vegas / Henderson Nevada based appraiser who can be contacted via email or via his business website known as Appraiser Las Vegas  (http://www.appraiserlasvegas.com), or you can also click on “Contact Us” on the home page of this website or visit my public profile at LinkedIn at http://www.linkedin.com/pub/glenn-rigdon-ma-mrics-asa/1a/30b/879/

 

 

Article source: http://www.valuationarticles.com/Residential-Appraisal/3-Appraising-Homes-on-Tribal-Land.html

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