Post on 04-Jul-2018
THE WAIVER OF APPRAISAL
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Succinct Explanation of the RW Process
When rights of way are needed for a highway project, the owner of the
property needed for the project is offered compensation (FMVE).
Then there are negotiations,
Once agreement on price is obtained:
■ the owner is paid compensation …
■ the owner signs the instrument and …
■ the acquiring agency obtains control of the property needed for
the project.
If agreement cannot be reached, the agency exercises its right of eminent domain by
filing appropriation action and depositing the Fair Market Value Estimate (FMVE) with the
court.
The Waiver of Appraisal
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Succinct Explanation of Compensation
Compensation is based on an appraisal process
■ At ODOT this process is known as the "FMVE Delivery Process”
- Parcel Impact Notes are created
Describes the valuation problem caused by the taking
Recommends the valuation format
- Appraiser is engaged/creates a written report
- That report is reviewed by a review appraiser
- The reviewer recommends the written report
- The agency establishes FMVE
- An offer of compensation can now be made to the owner
The Waiver of Appraisal
RW Appraisal Report (Narrative)
The Value Finding (VF)
Report
The Value
Analysis (VA)
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ODOT Uses 3 Valuation Formats
■ The Right of Way Appraisal Report
It’s a before and after narrative appraisal report proving or disproving the existence of
damages to the residue property
It’s Uniform Standards of Professional Appraisal Practice (USPAP) compliant – Offer of
owner accompaniment is mandated
It’s expensive and time consuming
■ The Value Finding Appraisal Report (VF)
It’s an appraisal of the whole that allocates to the part taken
Damages are not considered - so before and after are not necessary
It’s USPAP compliant – Offer of owner accompaniment is mandated
■ The Value Analysis (VA)
It is a waiver of the appraisal
It’s quick, simplistic and should be not expensive to the agency
The Waiver of Appraisal
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The Waiver of Appraisal
At ODOT:
Parcels acquired using “waiver of appraisal” 65%
Parcels acquired using “Value Finding” appraisals +15%
Subtotal 80%
Parcels acquired with narrative before and
after appraisals + 20%
Total 100%
The Waiver of Appraisal
ODOT embraces and uses waiver of appraisals for
most of its acquisition parcels.
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Why the Waiver of Appraisal was Developed
Before waivers were allowed, agencies could only create narrative appraisal
reports.
Narrative appraisals require a valuation of the property before the taking, and
then another valuation of the residue after the taking to determine damages +
an allocation to the part taken.
- This requires a skilled appraiser who is a known expert in eminent domain
valuation
- The narrative appraisal report is large (50 – 200 pages)
- Its time consuming to create (4 - 8 weeks)
- They’re expensive ($5,000 - $15,000)
The Waiver of Appraisal
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Why the Waiver of Appraisal was Developed
As they are appraisals, a review of the narrative appraisal is required, which is
expensive and time consuming
- Cost of a review ($2,500 - $7,500)
- Time for a review (4 to 6 weeks)
- Propensity to find problems creating more time delays
The negotiator (who is not an appraiser) is required to explain the report to
the owner
Owners have a difficulties understanding the lengthy before and after
narrative appraisal reports
The Waiver of Appraisal
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Why the Waiver of Appraisal was Developed
Narrative appraisals are certainly needed for complex
valuation assignments
- But narrative-style appraisals are overkill for simplistic,
non-complicated valuation problems caused by small
strip takes that represent the majority of acquisitions for
road projects.
The Waiver of Appraisal
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Why the Waiver of Appraisal was Developed
Budgets are tight and it is a waste of tax payer money to pay for expensive
narrative appraisal reports by credentialed appraisal experts to estimate
compensation …
when a trained, non-credentialed staff person can estimate compensation that
is not significantly different
- Using simplified forms
- Following explicit procedures
- At a much reduced cost/fee ($500-$750)
- And producing a compensation estimate in a matter of days/weeks
The Waiver of Appraisal
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Why the Waiver of Appraisal was Developed
That is why FHWA allows the use of waiver of appraisals.
- Waivers allow agencies to move faster at less cost
- Estimate compensation that is not significantly
different than full before and after narrative appraisal
reports.
The Waiver of Appraisal
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What is a waiver of appraisal?
It is permitted by laws and regulations
The Waiver of Appraisal
- 49 CFR 24.102(c)
- OAC 5501:2-5-06(B)(3)
- ORC 163.59(C)
- ORC 163.04(C)
Before negotiations, real property to be acquired
shall be appraised, except as provided in
24.102(c)(2)
An appraisal is not required if:
● The agency determines an appraisal
unnecessary because:
● The valuation problem is uncomplicated
and
● The anticipated value of the proposed
acquisition is estimated at $10,000 or less,
based on a review of available data
● When an appraisal is determined
unnecessary, the agency shall prepare a
waiver valuation.
● The person performing the waiver
valuation must have sufficient
understanding of the local real estate
market to be qualified to make the waiver
valuation.
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What is a waiver of appraisal?
Based in regulation, the conditions for an agency to
waive the appraisal are:
■ The agency must determine:
■ The valuation problem is uncomplicated, and
■ The FMVE is estimated at $10,000 or less.
■ The preparer of the waiver must be qualified
The Waiver of Appraisal
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What is a waiver of appraisal?
ODOT has implemented this regulation:
■ The waiver is on a standardized form called the Value Analysis (VA)
■ The VA is signed, dated and retained in acquisition files and provided to
the property owner at the time of the offer.
■ ODOT’s process requires an agency determines that an appraisal is
unnecessary, that the valuation problem is uncomplicated and
compensation is less than $10,000 on a form called Parcel Impact
Notes.
■ ODOT requires a review of the VA by a review appraiser with a
recommendation by the reviewer that the VA should be the basis of
FMVE.
■ ODOT requires an official from the agency to establish FMVE.
The Waiver of Appraisal
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Condition 1: The Valuation Problem is Uncomplicated
Defining Uncomplicated
1. It has to be obvious the affect of the taking causes no
damages to the residue property.
- Because there are no damages to the residue…
There is no need to value the residue so…
No before and after valuation is required.
The Waiver of Appraisal
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Condition 1: The Valuation Problem is Uncomplicated
Defining Uncomplicated
2. Its obvious the taking does not adversely affect the
residue.
- This means the highest and best use (HBU) does not
change
- Whatever potential the property had before the taking,
it has after the taking.
- Therefore the taking/acquisition creates a simplistic,
uncomplicated valuation problem.
The Waiver of Appraisal
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Condition 1: The Valuation Problem is Uncomplicated
Defining Uncomplicated
3. The highest and best use of the whole property is obvious.
- No analysis is required for a reasonable person to arrive
at the same conclusion of HBU.
- It is obvious the HBU is the same as stated in the zoning
code
The Waiver of Appraisal
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Condition 1: The Valuation Problem is Uncomplicated
Defining Uncomplicated
4. Its obvious that the estimated compensation from a full
before and after narrative appraisal would not result in
compensation being significantly different from that
produced in a waiver of appraisal.
- It would be a waste of taxpayer money to do a full
before and after analysis of the property to disprove
the existence of damages or to determine the
property’s HBU.
The Waiver of Appraisal
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Condition 1: The Valuation Problem is Uncomplicated
Defining Uncomplicated
5. The waiver of appraisal process is only used for partial
take acquisitions.
6. There can be no buildings in the take area.
- Minor site improvements or old structures having no
contributory value can be within the take area.
The Waiver of Appraisal
10 acres
1,320 ft.
330 ft
Road 5 foot SH taking House situated on rural residential home site
1,650 SF highway easement/ 0.038 acres
● 10 acres reduced to 9.962 acres
● Use of property still functionsas single family residential
● No apparent damages
● Land value in the area is$8,000 per acre
● A rough preliminary estimateof compensation is: $8,000/A x 0.038 acres = $304
● Compensation ≤ $10,000
Conclusion is the valuation problem is simplistic / no apparent damagesThe estimated compensation is less than $10,000
The scope of work for this simplistic valuation problem is The Value Analysis - Can implement the waiver of appraisal provisions in regulations
From a project management perspective:● Turn around time for preparing and
reviewing the VA should be short● Cost should not be too expensive● Good chance of settling the parcel
without appropriation
120
140
25 FT WD take
Road
Commercial retail buildingZoning is GB / General BusinessMinimum site size is 14,000 SF
WD Take is 25 x 140 = 3,500 SF
Impact to residue:● Site reduced from 16,800 SF to 13,300 SF; no
longer conforms to zoning● Parking reduced from 22 spaces to 11 spaces
There is apparent loss in value to the residue: - Insufficient parking may affect occupancy, type of tenant- Nonconforming site size may affect ability to expand, rebuild
Conclusion is the valuation problem is complex / damages are apparent
The scope of work for this complex valuation problem is “The Right of Way Appraisal Report”- Narrative appraisal that values the property before the taking and after the
taking
From a project management perspective:● Turn around time for preparing the
appraisal and reviewing will be severalmonths
● It will be expensive● Increased chance of appropriation● Possible relocation of occupant(s)
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Condition 2: Value of Proposed Acquisition ≤ $10,000
Compensation in the State of Ohio is can be for 3 things:
The Part Taken
+ Damages to the Part Not Taken
+ Temporary Easements for Construction
Compensation
The Waiver of Appraisal
An uncomplicated valuation
problem cannot have damages to
the residue
Therefore the $10,000 threshold is limited to
the Part Taken and Temporary Easements
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Condition 2: Value of Proposed Acquisition ≤ $10,000
Valuation Assumptions and Process
1. Determine the whole property
2. Determine the highest and best use of the whole
3. Value the whole property as a vacant site using the Sales
Comparison Approach
- Ignore any improvements outside the take area
- Determine the unit price of the whole
4. Allocate the unit price to the area taken
5. Add to this the value of any minor site improvements in the
take area
6. Add to this the estimated rental amount for any Temporary
Easements
The Waiver of Appraisal
Price/Acre or
Price/SF
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Condition 3: Agency determines an appraisal is unnecessary
The Waiver of Appraisal
Discuss the valuation problem caused by the
taking
Conclude if the valuation problem is
Simplistic/Uncomplicated or Complex
Have the parties representing agency sign off on this form
agreeing that this appears to be the problem and that the
VA is the correct valuation template to use.
- The Review Appraiser
- The Agency Official
- The Appraiser
Recommend the valuation format to use based
on the valuation problems previously
discussed
This form is completed before the person does
the appraisal or the Value Analysis
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5 x 1,000 = 5,000 SF
5,000 SF ÷ 43,560 SF = 0.115 acres
WD Take is: 0.115 acres
1WD 0.115 A $7,500/A None None $863 0.115 a X $7,500/a = $862.50
Rounded to: $863
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Estimating the value of the 120 acre
whole property - $7,500/acre
Allocating that value to the part taken
$7,500/A x 0.115 acres = $863
Sale History of Whole Property
ID the Whole Property
Zoning of Whole Property
HBU of Whole Property
Utility Availability of Whole Property
Sales Comparable to the Whole Property
- No adjustments are required
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The Waiver of Appraisal
The Waiver of Appraisal
Requirements for the Value Analysis
● Pages 1 and 2 of the VA form
● Photographs of the subject
● Attachments:
Sale Data Sheets
Sales Location Map
Parcel Impact Notes
Sketch of the property
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The Waiver of Appraisal
Requirements for the Value Analysis
■The preparer must physically inspect the subject property/the
take area
■ The preparer does not have to offer the owner the right of
accompaniment
■ The preparer must be qualified
- Consultants and LPA staff must be listed as approved to do
VAs on the website for Consultant Services
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Condition 4: Becoming Prequalified to do Waiver of Appraisals
The Waiver of Appraisal
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Condition 4: Becoming Prequalified to do Waiver of Appraisals
Federal Funded Early Acquisition
● Basic appraisal knowledge
● Knowledge of VA procedures
● Ability to read plans
● Must be a certified or licensed appraiser
● If not certified, then must satisfactory complete the
following ODOT classes:
- Highway Plan Reading
- Appraisal 101 - Laws
- Appraisal 102 - Valuation of Simplistic
Acquisitions
- Appraisal 105 - Appraisal Review
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Condition 4: Becoming Prequalified to do Waiver of Appraisals
Federal Funded Early Acquisition
● Provide a resume detailing:
- Work history
- Appraisal experience
- Experience with the Value Analysis
- ODOT RW courses successfully completed
- Samples of VA demonstrating competency
● Your resume along with any pertinent attachments
- Such as course certificates
- Work samples
Are submitted to the Office of Consultant Services.
● They refer the information to the Office of Real Estate
who review the information submitted.
● The Office of Real Estate makes a recommendation
to Consultant Services.
●CS makes the determination if someone is added to
the list.
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Certified Appraisers vs. USPAP vs.Waiver of Appraisals
Certified appraisers are certified because they have appraisal
licenses/certifications issued to them by the Ohio Department of
Commerce.
Certified appraisers must comply with USPAP (ORC 4763.13)
- USPAP governs the standards for appraisal in the United States
- USPAP defines appraisal as:
The act or process of developing an opinion of value; an opinion
of value – USPAP 2018-2109.
The end product of a waiver valuation is an opinion of
compensation
- This meets the definition of appraisal under USPAP
The Waiver of Appraisal
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Certified Appraisers : USPAP: Waiver of Appraisals
As the waiver is declared not an appraisal in 49 CFR Part 24
and OAC, it does not comply with USPAP standards.
There is an obvious conflict in law, regulation and
USPAP.
- The result is a certified appraiser who prepares a
waiver valuation is subject to disciplinary action by
the Ohio Department of Commerce for not complying
with USPAP (a violation of ORC 4763.13) when they do
a waiver valuation.
The Waiver of Appraisal
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Certified Appraisers : USPAP: Waiver of Appraisals
If the appraiser adds whatever is necessary to the VA to turn it
into appraisal in an attempt to comply with USPAP, the agency
must now comply with all the requirements for an appraisal
defeating the purpose of the waiver of appraisal.
To avoid the conundrum…
The Waiver of Appraisal
The Ohio Administrative Code 5501:2-5-06 (B)(3)(b)(ii)(a)
■ The language added into the OAC complies with the Jurisdictional Exception Rule in USPAP.
■ This addition to the OAC precludes the person preparing or reviewing the VA from compliance to USPAP
■ Therefore a certified appraiser only needs to properly invoke the Jurisdictional Exception Rule in USPAP when preparing
the Value Analysis and the appraiser will not be in violation of USPAP.
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FAQsWhy does ODOT require the Value Analysis to be reviewed?
■ The requirement of review does not add significant time or
cost.
■ The review helps to assure that:
- Procedures have been followed,
- Compensation is reasonable, and
- Assists the agency legal counsel to argue in an
appropriation that the agency has completed a proper
valuation of the property.
The Waiver of Appraisal
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FAQsCan 1 person estimate compensation and also negotiate?
■ Yes, so long as FMVE is $10,000 or less
■ Further, its possible on a group of parcels having simplistic
ownerships and valuations that the same person can do:
- An Abbreviated Title Report
- Prepare the Value Analysis
- Negotiate with the Owner
- Do the Closing
The Waiver of Appraisal
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END OF PRESENTATION
The Waiver of Appraisal