Table of Contents
A. Data Documentation and Appraisal Reporting Standards
Part I Introduction
A-1. Title Page. This should include (a) the name, street address and agency assigned tract, or parcel, number (if any), of the property appraised, (b) the name and address of the individual( s) making the report, and (c) the effective date of the appraisal.
A-2. Letter of Transmittal. This should include the date of the letter; identification of the property and property rights appraised; a reference that the letter is accompanied by a self-contained (or summary) appraisal report; a statement of the effective date of the appraisal; identification of any hypothetical conditions, extraordinary assumptions, limiting conditions, or legal instructions; the value estimate, or estimates, in the case of a partial acquisition, of the value of the whole property before the acquisition and the remainder property after the acquisition; and the appraiser's signature.
A-3. Table of Contents. The major parts of the appraisal report and their subheadings should be listed. Items in the addenda of any report shall be listed individually in the table of contents.
A-4. Appraiser's Certification. The appraisal report shall include an appraiser's signed statement certifying that:
° the statements of fact contained in the report are true and correct;
° the reported analyses, opinions, and conclusions are limited only by the reported assumptions, limiting conditions, and legal instructions, and are the personal, unbiased professional analysis, opinions, and conclusions of the appraiser;
° the appraiser has no present or prospective interest in the property appraised and no personal interest or bias with respect to the parties involved;
° the compensation received by the appraiser for the appraisal is not contingent on the analyses, opinions, or conclusions reached or reported;
° the appraisal was made and the appraisal report prepared in conformity with the Uniform Appraisal Standards for Federal Land Acquisitions;
° the appraisal was made and the appraisal report prepared in conformity with the Appraisal Foundation's Uniform Standards for Professional Appraisal Practice, except to the extent that the Uniform Appraisal Standards for Federal Land Acquisitions required invocation of USPAP's Jurisdictional Exception Rule, as described in Section D-1 14 of the Uniform Appraisal Standards for Federal Land Acquisitions;
° the appraiser has made a personal inspection of the property appraised and that the
property owner, or his/ her designated representative, was given the opportunity to
accompany the appraiser on the property inspection;
° no one provided significant professional assistance to the appraiser. (If professional
assistance was provided the appraiser, the name of the individual( s) providing such
assistance must be stated and their professional qualifications should be included in the
addenda of the appraisal report. This requirement includes both professional appraisal
assistance and providers of subsidiary assistance, e. g., planning and permitting consultants,
engineers, cost estimators, marketing consultants.)
The appraiser's certification shall also include the appraiser's opinion of the market value of the property appraised as of the effective date of the appraisal. If the government's acquisition comprises only a portion of the whole property, or property rights, appraised, the certification shall include both the appraiser's opinion of the market value of the whole property as of the effective date of the appraisal and the appraiser's opinion of the remainder property's market value after the government's acquisition, as of the effective date of the appraisal.
Appraisers may also add to their certifications certain items that may be required by law, the USPAP, and the appraiser's professional organization( s). However, appraisers should avoid adding certifications that are not pertinent to the specific appraisal (e. g., that report was prepared in accordance with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)) or that are beyond the scope of the appraisers' assignment (e. g., certifying an opinion of just compensation). The appraiser's certification may alternately follow the appraiser's final estimate of value in the appraisal report.
A-5. Summary of Salient Facts and Conclusions. The appraiser shall report the major facts and conclusions that led to the final estimate( s) of value. This summary should include an identification of the property appraised; the highest and best use of the property (both before and after the acquisition if a partial acquisition); brief description of improvements (both before and after the acquisition if a partial acquisition); the indicated value of the property by each approach to value employed (both before and after the acquisition if a partial acquisition); the final estimate of value (both before and after the acquisition if a partial acquisition); and any hypothetical conditions, extraordinary assumptions, limiting conditions or instruction; and the effective date of the appraisal.
A-6. Photographs of Subject Property. Pictures shall show the front elevation of the major improvements, any unusual features, views of the abutting properties on either side and that property directly opposite, and interior photographs of any unique features. When a large number of buildings are involved, including duplicates, one picture may be used for each type. Except for an overall view, photographs may be bound as pages facing the discussion or description of the photographs' content, or may be placed in the addenda of the report.
Each photograph should be numbered, and show the identification of the property, the date taken, and the name of the person taking the photograph. The location from which each photograph was taken and the direction the camera lens was facing should be shown on the plot plan of the property in the report's addenda.
In selecting photographs for inclusion in their reports, appraisers should bear in mind that some government appraisal reviewers and other readers of the report may never have an opportunity to personally view the property. Therefore, they must rely on the photographs and the narrative description of the property provided by the appraiser to gain an adequate understanding of the physical characteristics of the property to judge the accuracy and reasonableness of the appraiser's analyses and value estimate( s). Thus, the appraiser may need to include aerial photographs in the report to insure that readers can accurately visualize the property.
In taking photographs, appraisers should also be guided by the knowledge that the government may be unable to acquire the property voluntarily and may take possession of the property well before the question of value is settled; thus, the land may be substantially altered and improvements demolished prior to a final decision in a condemnation trial.
A-7. Statement of Assumptions and Limiting Conditions. Any assumptions and limiting conditions that are necessary to the background of the appraisal shall be stated. Any client agency or special legal instructions provided the appraiser shall be referenced and a copy of such instructions shall be included in the addenda of the appraisal report. 15
If the appraisal has been made subject to any encumbrances against the property, such as easements these shall be stated. In this regard, it is unacceptable to state that the property has been appraised as if free and clear of all encumbrances, except as stated in the body of the report; the Encumbrances must be identified in this section of the report.
The appraiser must avoid including "boiler-plate" type of assumptions and limiting conditions. For instance, an assumption that improvements are free from termite infestations is inappropriate in the appraisal of vacant land. Also, assumptions and limiting conditions cannot be used by an appraiser to alter an appraisal contract, assignment letter, or the appraiser's scope of work. Unauthorized hypothetical conditions, assumptions, or limiting conditions may result in disapproval of the appraisal report.
The appraiser must also avoid assumptions and limiting conditions that are clearly the appraiser's own conclusions. While it may be appropriate for an appraiser to conclude and report that a probability exists that the property under appraisal could be rezoned, it is not appropriate for an appraiser to make an appraisal under the "assumption" that the property could be rezoned.
The adoption of an uninstructed assumption, or hypothetical condition, that results in a evaluation of other than the as is market value of the property appraised as of the effective date of the appraisal will, as a general rule, invalidate the appraisal for government acquisi-tion purposes. For instance, the inclusion of the assumption that a property is free of contami-nation from hazardous substances when it is suspected that the property may, in fact, be contaminated is an unacceptable practice. 16
In the case of a partial acquisition, the appraiser should identify those hypothetical conditions, assumptions and limiting conditions that apply to both the before and after acquisition appraisals, those which apply only to the appraisal of the whole property before the acquisition, and those which apply only to the appraisal of the remainder. Appraiser assumptions and limiting conditions, as well as client and legal instructions, are discussed in greater detail in Section D-3 of these Standards.
A-8. Scope of the Appraisal. The appraiser shall describe the scope of investigation and analysis that was undertaken in making the appraisal. The appraisal's scope should conform with its purpose and intended use. In many cases the intended use and purpose of the appraisal places specific demands on the scope of the investigation and analysis presented in the appraisal report. In all cases, the appraisal report should clearly link the appraisal's scope with its purpose and intended use.
The geographical area and time span searched for market data should be included, as should a description of the type of market data researched and the extent of market data confirmation. The appraiser should state the references and data sources relied upon in making the appraisal; if preferred, this information may be shown within the applicable approaches to value.
The applicability of all standard approaches to value shall be discussed and the exclusionof any approach to value shall be explained. Appraisers should recognize that the exclusion of an approach to value because it is not applicable to the specific appraisal problem (e. g., the exclusion of the cost approach in valuing vacant land, or when the improvements do not contribute to the highest and best use of the property under appraisal) does not result in a limited appraisal under USAP. 17 Therefore, the appraiser should not identify an appraisal as a limited appraisal when an inapplicable approach to value has not been utilized.
Likewise, the adoption of a hypothetical condition 18 or an extraordinary assumption 19 by an appraiser does not result in a limited appraisal. 20 Rather, the appraisal is merely a complete appraisal, made under a specific, and adequately identified, hypothetical condition, or extraordinary assumption. However, the appraiser has the burden of clearly explaining the implications of any hypothetical condition or extraordinary assumption adopted. The required explanation and discussion of the implications of such hypothetical condition or extraordinary assumption must be included in this section oft he appraisal report.
A-9. Purpose of the Appraisal. This section shall include an explanation of the reason for the appraisal, and the definition of all value estimates required, and a description of the property rights appraised, which should be provided to the appraiser by the client agency. In most instances the purpose of the appraisal will be to estimate market value as of a specific date. 21 In an appraisal assignment involving a partial acquisition, the purpose of the appraisal will be to estimate the market value of the whole property before the acquisition and to estimate the market value of the remaining property after the acquisition.
This section should specifically identify the intended use and the intended user of the appraisal report. Generally, the intended user of the appraisal report will be the client agency, and the intended use of the appraisal report will be to assist the client agency in its determination of the amount paid for the property rights acquired or conveyed. Care should be taken to prepare the appraisal report in a manner that clearly meets the intended use of the report by the intended user.
It is imperative that the appraiser utilize the correct definition of market value. For appraisals prepared under these Standards, appraisers shall use the following definition of market value:
Market value is the amount in cash, or on terms reasonably equivalent to cash, for which in all probability the property would have sold on the effective date of the appraisal, after a reasonable exposure time on the open competitive market, from a willing and reasonably knowledgeable seller to a willing and reasonably knowledgeable buyer, with neither acting under any compulsion to buy or sell, giving due consideration to all available economic uses of the property at the time of the appraisal.
This definition must be placed in this section of the appraisal report. No other definition of market value for purposes of appraisals made under these Standards is acceptable, 22 unless otherwise required by a specific and cited federal law or regulation. Contrary to USPAP Standards Rule 1-2( c), this definition of market value does not call for the estimate of value to be linked to a specific exposure time estimate, but merely that the property be exposed on the open market for a reasonable length of time, given the character of the property and its market. Therefore, the appraiser's estimate of market value shall not be linked to a specific exposure time when conducting appraisals for federal land acquisition purposes under these Standards. 23
It is recognized that some appraisers' client groups (e. g., relocation companies, mortgage (lenders) may require appraisers to estimate a marketing time 24 for the property under appraisal. However, such estimates are inappropriate for, and must not be included in, appraisal reports prepared for federal land acquisitions under these Standards. "The request to provide a reasonable marketing time opinion exceeds the normal information required for the conduct of the appraisal process" 25 and is, therefore, beyond the scope of the appraisal assignment under these Standards.
A-10. Summary of Appraisal Problems. This section gives the appraiser the opportunity to acquaint the reader of the appraisal report with the specific appraisal problems, if any, which have been encountered by the appraiser and that will be discussed in detail in the body of the appraisal report. Appraisers are encouraged to take advantage of it. If the property under appraisal is a single-family residence, the whole of which is being acquired, in an area of plentiful market data, the appraiser will usually only report that no special appraisal problems were encountered. However, federal land acquisitions are seldom that simple.
In considering subjects to be discussed in this section of the report, appraisers should review the subjects discussed in Section B of these Standards, which cover many of the specialized, sometimes complex, appraisal problems often encountered in preparing appraisal reports for federal land acquisition purposes. The appraiser should briefly describe the principal problems presented in estimating the market value of the property under appraisal and describe the estate to be taken. In the case of a partial acquisition, the appraiser should describe the principal differences in the property between the before and after situations, including a brief description of the government's project and any changes in the highest and best use of the subject property.
If the parcel under appraisal includes water rights, minerals, or suspected mineral values, fixture values, growing crops, or timber values, the treatment of their contributory value should be discussed, including the methodology employed to avoid the forbidden summation or cumulative appraisal. 26 If the valuation of the property required the use of any consulting reports, the appraiser should describe such reports, the method of utilization thereof, and the weight or reliance placed thereon.
14. Appraisers should recognize that USPAP changes frequently and that future changes may require additional jurisdictional exceptions which are not noted in Section D-1 of these Standards. In such an instance, appraisers will have to identify and report such additional jurisdictional exceptions.
15. Appraisers must bear in mind that if a client or legal instruction has not been provided to them in writing, it is not considered a binding instruction. Therefore, if the appraiser accepts a verbal instruction of the client or legal counsel, the appraiser becomes wholly responsible for it. Reference to a client or legal instruction a copy of which is not in the addenda of the appraisal report, will not be acceptable justification for acceptance or adoption of the instruction, and may result in disapproval of the appraisal report.
16. See Sections D-3 and D-4 regarding this practice.
17. USPAP, Departure Rule.
18. "Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis." USPAP, Definitions.
19. "Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property or about conditions external to the property, such as market conditions or trends, or the integrity of data used in an analysis." USPAP, Definitions.
20. Note that hypothetical conditions and extraordinary assumptions fall within USPAP's Standard Rule 1-2, which contains binding requirements from which departure is not permitted.
21. For a discussion of the legal requirements regarding the effective date of value, see footnote 125 in Section B-2 of these Standards.
22. For a discussion of the legal basis for this definition of market value and this specific requirement, see Section B-2 of these Standards.
23. For a discussion of the legal basis for this standard, which results in a jurisdictional exception under USPAP, see Section B-2 of these Standards.
24. Marketing time refers to the period of time it would take to sell the appraised property, after the effective date of the appraisal, at its appraised value.
25. USPAP, Advisory Opinion 7.
26. See Section B-13, "The Unit Rule," in these Standards.
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