Interests in real property are often held directly by multiple owners. The market values of these fractional interests are generally discounted from their pro rata share of the whole, due to their reduced control over the property, and their impaired liquidity. Methods for such "discount" valuations are not settled, unfortunately, and value opinions can be contentious. The required valuation process is inextricably tied to both real property and business valuation, but is directly confronted by neither, creating a "gray zone" of uncertainty between the two disciplines.

This paper is a road map to understanding valuation of direct fractional interest ownership in real property, and a plea for true cross-disciplinary training and cooperation between valuers in each specialty. It begins with Why—the uses of fractional interest valuations. It then describes How—the various methods for valuing discounts and their applications. This section provides an overview of ownership forms and the concept of "levels of value." Approaches to value are reviewed, and their application to multiple levels of value clarified. Real property rights and circumstances are examined in some detail. This is followed by a discussion of how specific valuation methods interpret the value influences of these rights and circumstances; an example shows how an income method can be applied to develop the discount. An outline of the valuation process shows practitioners in all related disciplines how their specific roles work together.

The paper closes with a discussion of the qualifications of Who—since the valuer needs to understand both the attributes of the real property and the ownership structure that affect value. It recommends education and training in interdisciplinary practice to overcome the "gray zone" between disciplines, and continue our mission to promote and preserve public trust in the valuation profession.

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