A Little Strange...

Fractional Interests

• Are co-ownership interests in real estate, often tenancy-in-   common interests.
• Come with default rights and restrictions that the co-owners   often modify by agreement.
• Typically suffer a substantially reduced marketability— compared to corporate shares, partnership and limited partnership interests, and 100% interests in real property.

Holders of fractional interests may have little or no control over the future identity and number of their co-owners. Still, fractional interests do not require complex preparation to establish, and may be useful in estate and gift planning.

Valuation Features
Due to their impaired marketability and control features, the market value of these interests is typically far less than their pro rata share of the market value of the underlying property. Your real estate appraiser may not have the ability to properly analyze this diminished value because fractional interests usually have a total lack of market comparables and may be subject to restrictive agreements – so that the analysis needed is more akin to that of a business valuation. Since these interests are subject to substantial value discounts, courts and tax agencies are increasing their scrutiny on the valuation methodologies that support the reduced values.

Appraisal First
We conduct our fractional interest valuation after the completion of a professional appraisal on your real property. Depending on property location, we may be able to refer you to a professional, qualified real estate appraiser. We welcome referrals from attorneys, accountants, real estate appraisers, other professionals, financial institutions, and trust departments.