Property Valuation
What is 'fee simple value versus leasehold value' comparison in Hawaii and why is leasehold typically discounted?
AA. Leasehold and fee simple properties are valued identically; only location matters
BB. Leasehold properties are typically discounted relative to fee simple because buyers assume ground lease risks: rent renegotiation, lease expiration, potential loss of improvements, and limited mortgage options✓ Correct
CC. Leasehold properties command a premium because ground lease tenants don't pay property taxes on the land
DD. The value difference depends entirely on the lease term remaining; if more than 50 years, they are equal
Explanation
Hawaii leasehold condominiums and homes are generally valued below comparable fee simple properties due to: uncertainty at lease expiration (typically 55-65 years), rent escalations at renegotiation periods, lender reluctance to finance with less than 30 years remaining, and buyer perception of reduced permanence. The discount varies based on remaining lease term and rent reset provisions.
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