GRP_Appraisal Specificationd.pdf

Attachment D

APPRAISAL SPECIFICATIONS FOR APPRAISALS OF REAL PROPERTY FOR THE

GRASSLAND RESERVE PROGRAM (GRP)

A. BACKGROUND INFORMATION

The United States of America, acting through the U.S. Department of Agriculture, Natural Resources Conservation Service (NRCS) is considering purchasing a conservation easement to protect, restore, and conserve grassland, rangeland, pastureland, and shrub land through the GRP.

The goals for GRP are to support grazing operations, maintain and improve plant and animal biodiversity, and protect grasslands that are under threat of conversion to nongrassland uses, such as cropland and residential development. Eligible landowners may enroll their lands into GRP under a permanent easement or the maximum allowed under State law.

All appraisals completed for this program must comply with Uniform Standards of Professional Appraisal Practice (USPAP) and appraisal instructions as issued by NRCS. When an appraisal is completed, it will consist of two appraisals as self-contained appraisal reports: an appraisal of the proposed easement area for the unencumbered land and an appraisal for the proposed encumbered land. The difference between these two values is the effect of the easement on the subject property.

B. APPRAISER QUALIFICATIONS

All real property appraisers performing appraisals must be State-certified general real property appraisers or obtain a temporary practice permit in conformance with title XI of the Financial Institution’s Reform, Recovery and Enforcement Act of 1989 in the State or States where the subject property is located, and be in good standing with the licensing authority where the credential was issued. Appraiser must have demonstrated competency in compliance with USPAP in conducting appraisals of agricultural properties with and without easements of the requested type. A copy of the appraiser’s State license or practice permit must be provided to the contracting officer (CO) at the time of bid submission. Work will not be granted until such time as the CO has reviewed and approved the licensing credentials and the experience requirements of the contractor and any subcontractors.

If the appraiser elects to subcontract the appraisal work, the subcontractor must also be a State-certified general real property appraiser or obtain a temporary practice permit in the State or States where the subject property is located and be in good standing with the licensing authority where the credential was issued. Proof of the subcontractor’s qualifications and experience requirements must be supplied within 10 days of contract award. Appraiser and any subcontractor must have demonstrated competency in compliance with USPAP in conducting appraisals of agricultural properties with and without conservation easements. In the event the contractor wishes to change personnel or subcontractors, the contractor must submit the same proof of qualifications and licensing. Approval must be obtained from the contracting officer prior to the assignment of appraisal work to such individuals. Failure to obtain such approval may invalidate the award and cause termination of the contract in accordance with Federal Acquisition Regulation 52.249-8.

C. PURPOSE OF THE APPRAISAL REPORTS

The purpose of the appraisals is to provide an opinion of market value of the proposed easement acres subject property before acquisition of an easement (unencumbered value) and an opinion of market value of the proposed easement acres subject property after acquisition of an easement has been placed (encumbered value) as of a current date of value.

The purpose of two opinions of value is to establish the effect on value resulting from imposition of a conservation easement. The compensation for the easement is the unencumbered value of the proposed easement area minus the value of the encumbered easement area by the conservation easement plan, provided there are no adjustments, such as excess irrigation water, that would equal the compensation for the easement.

The market value definition that will be stated and used in developing and reporting this assignment is the definition as stated below:

“Market value means the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby—

1. Buyer and seller are typically motivated;

2. Both parties are well informed or well advised and acting in what they consider their own best interests;

3. A reasonable time is allowed for exposure to the open market;

4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

5. The price represents the normal considerations for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

No other definition of market value is acceptable.

D. BACKGROUND FOR THE APPRAISAL REPORT

1. Prepare two opinions of value of the subject property: proposed easement acres in the unencumbered state and the proposed easement acres in the encumbered state considering the effects of the easement as self contained appraisal reports. The encumbered condition will be based upon a hypothetical condition that the conservation easement is in place and the effects on value that may be created.

2. Subject property will only be the proposed easement area as provided by NRCS.

3. Irrigation water rights that are owned and used on the subject property will be valued in the unencumbered appraisal. The appraiser will document whether or not any portion of these irrigation water rights can be removed from the subject property. If the irrigation water rights can be removed from the property, the appraiser will provide a value opinion of the value of each irrigation water right. The appraiser will consider only the irrigation water rights required to be retained on the subject property as identified by NRCS in the grassland conservation plan in the encumbered appraisals.

Irrigated units may have excess irrigation water rights in the encumbered condition due to change in use of the land. Existence of excess irrigation water rights, if any, will be determined by NRCS based on irrigation needs to sustain the viability of the grassland functions. If the excess irrigation can be sold or leased, the appraiser will provide a value opinion of the excess irrigation water rights and it will be deducted from the difference between the unencumbered and encumbered values. This is necessary to determine compensation for rights obtained by the Government and rights retained by the property owner.

4. Client is NRCS, Farm Service Agency (FSA), or both and any other specific entity or organization that may be involved in the specific transaction, unless otherwise directed by the client.

5. Intended User should be identified as NRCS, FSA, or both and any other specific entity or organization that may be involved in the specific transaction, unless otherwise directed by the client.

6. Intended Use will be for USDA’s consideration in determining the effect on value of the conservation easement of lands entering into the GRP.

7. Exclusions of approaches to value, as stated in USPAP, must be strongly supported with solid reasoning.

8. Property rights to be appraised will be surface rights, improvements (such as barns, houses, hay sheds and fencing, timber, and orchards or other permanent plantings), and any irrigation water rights. The irrigation water rights include wells, ditches, reservoirs, ponds, and lakes that provide irrigation on the subject property. The value of any marketable standing timber that could be economically harvested will be considered by a timber cruise and included in any valuations. The appraiser is responsible for obtaining the timber cruise. Other permanent plantings that are located on the subject property will be appraised and included in any valuations. Special attention should be given to the restrictions and requirements of the grazing plan.

E. INFORMATION PROVIDED BY U.S. DEPARTMENT OF AGRICULTURE (USDA)

OFFICIALS, FROM EITHER NRCS OR FSA, TO THE APPRAISER:

1. Aerial photograph of the subject property with the location of the proposed easement area identified, access to the easement area identified, easement boundary identified, and an estimate of the acres in the proposed easement identified

2. Legal description of subject property

3. Preliminary legal description of the proposed easement area or survey

4. Copy of Form NRCS-CPA-255, “GRP Conservation Easement Deed”

5. Aerial photograph indicating the location and acreage of any conservation agreement, contract, or easement of any type that is associated with the property;

6. Specific details of any existing easements, reservations, or other restriction currently encumbering the subject property as provided by the landowner

7. Copy of the completed Form CCC-505, “FSA Voluntary Permanent Direct and Counter

Cyclical Program Base Acres Reduction,” executed by the landowner for crop base/ allotments located on the proposed easement area. This form will not be processed by FSA until the easement is closed. The appraiser will verify the amount of crop base to be retired or moved on the proposed easement area and if any remaining crop base exists on the easement area. Documentation of production data will be provided to NRCS by landowner;

8. If irrigation rights are included in the easement area, documentation provided by NRCS will identify the volume of irrigation water rights to be retained for the subject property as necessary. This volume will also be documented in the “Grazing Management Plan and Easement Baseline Inventory Report” exhibit attached to the conservation deed.

9. Documentation of water rights owned, including name of irrigation company, number of shares or amount of ownership, and documentation concerning irrigation wells on the property to be appraised as provided by the landowner

10. Recorded landowner’s name, address, and telephone number

11. Current information as to the status of title of ownership such as copies of deeds

12. If available, completed “Preliminary Certificate of Inspection and Possession” and the

“Hazardous Substance Examination Checklist” and any available information pertaining to the probability of existence of hazardous substances that might be found on the property to be appraised

13. Copy of preliminary title commitment covering the proposed easement area

14. Copy of the completed grazing management plan of the proposed easement area and a copy of the restoration plan, if applicable

15. A copy of the recorded written access to the easement area, if available

16. Written permission from the landowner or an authorized representative authorizing the assigned appraiser to enter the property for appraisal purpose

F. THE APPRAISAL REPORT

1. Description of Work Product

The appraisals will meet the requirements of the USPAP and appraisal instructions issued by NRCS as a self-contained appraisal report. Each appraisal report must comply with the following requirements.

The appraisal report may consist of a form report or a narrative report, or a combination may be used. The appraisal report must comply with USPAP and must use the following guidelines as stated in these standards.

Restricted-use reports are not acceptable.

The contract appraiser must personally inspect the subject property and comparable sales.

The appraiser must talk personally to the property owner or the owner’s agent or representative, and the property owner or the owner’s agent or representative must be given an opportunity to accompany the appraiser during his or her inspection of the subject property, which will documented in the appraisal report.

The Uniform Residential Appraisal Report (URAR) is not acceptable.

Reports must contain a table of contents and sequentially numbered pages, including addenda.

Reports may contain handwritten page numbers.

Reports must reference all environmental documents utilized by the appraiser in completing the appraisal. An environmental document will be required in the appraisal report, as provided by NRCS (refer to paragraph E 12 above). The appraiser is a key individual in identifying potential environmental problems that may affect the value of the subject property.

The appraiser will contact NRCS or its designated client to resolve problems, clarify questions, and letters of engagement (call orders). Issues relating to the appraisal process will be discussed with the technical review appraiser, who will keep NRCS or its designated client advised of such discussions.

The effective date of the appraisal report is the date the property was personally inspected by the appraiser.

The appraiser will prominently state any crop base and allotment history located in the easement that has been included in the value.

The appraisals must be in typewritten or legible ink print form, automated or computerized forms, or both.

Only reports completed and submitted on 8½- by 11-inch paper will be accepted.

The appraisal reports must be bound in a durable report cover with appropriate identification.

The appraiser must provide three originals of the appraisals. Reference the above instructions, including exhibits, for details on appraisal reports, appraisal forms required, and required methodology and supporting documentation.

2. Required Elements for GRP Appraisals

Part 1 Introduction

1. Title page

2. Letter of transmittal

3. Table of contents

4. Appraiser’s certification in accordance with USPAP and include the following:

"I have made a personal inspection of the appraised property that is the subject of this report and all comparable sales used in developing the opinion of value. The date of inspection was __________, and the method of inspection was ___________________.”

(If more than one person signs the report, this certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property and sales. The contract appraiser must inspect the appraised property.)

In my opinion, as of ___[date]______, the market value of the easement parcel before conveyance of the partial interest is $____________, and the market value of the easement parcel after conveyance of the partial interest is $___________.

By: [signature]

Print Name

Printed Name and Professional Accreditation

State Certification #

5. Summary of salient facts

6. Photographs of subject property. Provide original color photographs or high-quality color copies of photographs of the appraised property. Photographs may be a separate exhibit in the addenda or included with the narrative description of the appraised property and comparable sales. Show the following information with each photograph:

a. Identify the photographed scene. Indicate direction of view, vantage point, and other pertinent information. An aerial photo should be used to show the location of the photos.

b. The name of the photographer.

c. The date the photograph was taken.

7. Statement of assumptions and limiting conditions.

All appraisal reports submitted to the NRCS for review become the property of the United States and may be used for any legal and proper purpose. Therefore, a condition that limits distribution of the report is not permitted.

State if the appraisal has been made subject to any encumbrances against the property. 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 use of an uninstructed assumption or hypothetical condition that results in other than “as-is” market value will invalidate the appraisal. Include only factors relating to the appraisal problem.

Assumptions and limiting conditions that are speculative in nature are inappropriate. Do not include limiting conditions that significantly restrict the application of the appraisal.

A contract appraiser cannot make an assumption or accept an instruction that is unreasonable or misleading. Client instructions must have a sound foundation, be in writing, and included in the appraisal report.

8. Scope of work

This section must fully describe the extent of investigation and analysis. The scope of work should be consistent with the intended use of the appraisal.

Identify the appraisal as a partial acquisition case appraisal. Describe the principal differences in the property in the unencumbered and encumbered condition. Describe the before and after methodology to be used.

9. Purpose of the appraisal

10. Summary of the appraisal problem

Part 2 Factual Data

1. Legal description

2. Area, city, and neighborhood data

3. Factual data

a. Site

b. Improvements

c. Fixtures, livestock, and forage production structures and facilities

d. Use history

e. Sales history

Include a 3-year record of all sales of the appraised property and, if the information is available, offers to buy or sell. If no sale has occurred in the past 3 years, the appraiser must report the last sale of the property, irrespective of date.

f. Rental history

A 3-year rental history is required. An unsupported statement that the rent does not represent market or economic rent is unacceptable.

g. Assessed value and annual tax load

h. Zoning and other land use regulations

i. The contract appraiser must identify, in addition to zoning, all other land-use and environmental regulations, outstanding rights, and reservations that have an impact on the highest and best use and value of the property.

j. Appraised property map or plat Show the dimensions and topography of the appraised property in detail on a large-scale topographic map, at least 2 inches to the mile. The map may be placed here or in the addenda.

Part 3 Data Analysis and Conclusions Before Acquisition

1. Analyses of highest and best use

2. For these appraisals, highest and best use is defined as “The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future.” The contract appraiser may also refer to definitions as found in “The Dictionary of Real Estate Appraisal.”

a. The highest and best use conclusion must be clearly supported by market evidence. Sale or exchange to the United States or other public entity is not an acceptable highest and best use. The use to which the property will be put after it has been acquired is, as a general rule, an improper highest and best use. A noneconomic highest and best use, such as “conservation,” “natural lands,” “preservation,” or any use that requires the property to be withheld from economic production in perpetuity, is not a valid use upon which to base an estimate of market value.

b. If the highest and best use is for assemblage, describe and explain the relationship of the appraised property to the property to which it would be joined.

c. If speculation or investment is the highest and best use of the property, describe and explain its interim and most probable ultimate use.

d. When there is a claim that the highest and best use of a property is something other than the property’s existing use, the burden of proof is on the contract appraiser.

3. Market value cannot be predicated upon potential uses that are speculative and conjectural.

4. The contract appraiser's opinion of a reasonable probability of a zoning change must have a factual foundation. The appraisal report must include a description of the investigation undertaken to determine the probability of rezoning. The investigation must include thorough research of the uses and zoning of properties situated similarly to the subject property within the area covered by the zoning authority. The stated rezoning conclusion must be supported by facts surfaced in the research. A property cannot be valued as if it were already rezoned for a different use. The property must be valued only in light of the probability of obtaining a zoning change.

5. Land valuation

6. Value estimate by the cost approach

Estimate the value of the land as though vacant and available for its highest and best use. The preferred method is to estimate land value by the use of confirmed sales of comparable or nearly comparable lands having similar optimum uses.

7. Value estimate by the sales comparison approach

Nearby arm’s length transactions, comparable to the land under appraisement and reasonably current, are the best evidence of market value. The Federal courts recognize the sales comparison approach as being normally the best evidence of market value.

8. Analyze the last sale of the subject property if relevant. If not used, explain why. An unsupported claim that a sale of the subject property was a forced sale, or is not indicative of its current value, is unacceptable.

9. When supportable by market evidence, the use of quantified adjustments is preferred.

Percentage and dollar adjustments may, and often should, be combined. Resort to qualitative adjustments only when there is inadequate market data to support quantitative adjustments.

Factors that cannot be quantified are dealt with in qualitative analysis. When quantitative and qualitative adjustments are both used in the adjustment process, all quantitative adjustments should be made first.

10. Include a sales adjustment chart summarizing the adjustments and showing the final adjusted sale prices and how the sales compare with the subject property. The documentation of each comparable sale must include:

a. Parties to the transaction

b. Date of transaction

c. Confirmation of the transaction

d. Confirm the transaction with the buyer, seller, broker, or other person having knowledge of the price, terms, and conditions of sale

e. Buyer motivation

f. Location

g. Size

h. Legal description

i. Property rights conveyed

j. Consideration

k. Financing terms

l. Sale conditions

m. Verify if the sale was an arm’s length or distressed sale

n. Improvements

o. Physical description

p. Describe topography, vegetative cover, water influence, improvements, irrigation water, soils, and other characteristics

q. Nonrealty items

r. Economic characteristics

s. Zoning

t. Current use and highest and best use

u. Topographic map

v. Photographs

11. In order to make meaningful comparisons between the sales and the appraised property, NRCS requires inspection of all sales directly compared with the appraised property.

Waiver of the comparable sale inspection requirement must be made in writing by an authorized official in the form of a supplemental appraisal instruction. The requirement for inspection of the appraised property may not be waived.

12. Include a list of the sales considered but not actually used in the addenda. Cite pertinent facts such as date, size, buyer and seller, price, terms, and location. Explain why each sale was not used.

13. Value estimate by the income approach

All data must be market supported.

14. Correlation and final estimate

a. The contract appraiser must avoid making a summation appraisal.

b. Appraisers are responsible for the final opinion of value even if it relies upon estimates developed by others (such as timber cruisers or cost estimators). Value estimates developed by others will be the appraiser’s responsibility if needed.

Part 4 Data Analysis and Conclusions After Acquisition

a. Legal description

b. If only a portion of the bundle of rights pertaining to a specific parcel of real estate is being acquired, this will be the same as in the “before” condition.

c. If the partial interest being acquired is only a portion of the property rights associated with the parcel, the rights being acquired are outstanding rights for the “after” appraisal.

d. Neighborhood factors

e. Property data

f. Site

g. Improvements

h. Fixtures

i. History

j. Assessed value and annual tax load

k. Zoning and other land-use regulations

Part 5. Data Analysis and Conclusions After Acquisition

a. Analysis of highest and best use

b. Land valuation

c. Value estimate by cost approach

d. Value estimate by sales comparison approach

e. Value estimate by income capitalization approach

f. Correlation and final value estimate

Part 6. Acquisition Analysis

Recapitulation Show the difference between the value of the entire property and the value of the remainder by deducting the property’s after value from its before value.

Part7 Exhibits and Addenda

1. Location map

These maps must clearly identify the property and be of sufficient quality to enable the review appraiser to locate the property on the ground. Maps must be dated, include a legend, scale, and north arrow. The original copy of the report must contain original maps or vivid color copies.

a. Area map This is a small-scale map showing the general location of the subject market area.

b. Neighborhood map This map shows the appraised property and its immediate neighborhood.

c. Tract map or plat

This map is a large-scale (2 inches per mile) U.S. Geological Survey (USGS) or similar quality map that shows the appraised property and pertinent physical features, such as roads, streams, and improvements. If portions of the appraised property are assigned separate contributory values to the whole, these areas must be delineated on this map or a separate map.

2. Comparable data maps

This map must show the location of the appraised property and the sales. Delineate the boundaries of the appraised properties and comparable sales when the map is of sufficient scale to be meaningful. If all pertinent comparable sales cannot be shown on the same map as the appraised property, a smaller-scale map (such as a State road map) may be included in addition to the larger-scale map.

3. Detail of comparative data

Include a completed form showing all information for each comparable transaction used in the appraisal. Include a plat (if available), a USGS topographic map (if appropriate), and color photos of each sale. The transaction number must match the number of the transaction listed in the report.

4. Plot plan

5. Floor plan

6. Title evidence report

Include a copy of the preliminary title report for the non-Federal land if available.

7. Other pertinent exhibits

Present additional data such as documents and charts pertinent to the valuation and referred to in the body of the appraisal. Exhibits will include—

a. A copy of the conservation easement deed.

b. A copy of technical reports from specialists. This may include a timber cruise summary signed by a timber cruiser or a road plan signed by an engineer.

c. Copy of the grazing management or conservation plan that includes grazing practices.

d. Property owner permission to appraise.

8. Qualifications of appraiser

Include the qualifications of all contract appraisers or technicians who made significant contributions to the completion of the appraisal assignment. The contract appraisers must provide evidence of compliance with the certification requirements of the State or States where the properties are located.

G. Appraisal Reviews

All appraisal reports are subject to a technical appraisal review conducted for compliance with NRCS appraisal instructions and USPAP prior to acceptance and as determined by NRCS. As a minimum, all appraisal reports will have an administrative appraisal review conducted on each appraisal report. Any deficiencies in the appraisal report will be returned to the appraiser for revisions, additional support or explanation, corrections to the original appraisal report in a supplemental report format as stated below, or some combination of these. All revisions will be subject to an appraisal review for compliance with the original instructions and acceptance as stated above.

1. Any appraisal report revisions required either by the technical or the administrative reviewer must be completed and returned to the Government no later than the 14th calendar day after receipt as verified by the appraiser. Revised appraisal reports may be submitted by NRCS to the technical reviewer no more than three times. If, after the third submission, the report is still found to be unacceptable, the report will be rejected, disapproved, or both. The review appraiser will clearly show why the appraisal report is inadequate.

2. Rejection.—When an appraisal report is in violation of appraisal principles and standards, agency or departmental regulations or directives, is inconsistent with facts, or asserts unsupported conclusions, the report will be rejected. The technical review appraiser finds the appraisal report to be illogical, unreasonable, not supported by data cited, or is inconsistent with other data. Rejection indicates particular problems of integrity. Minor technical nonconformance with the USPAP should not be the cause of rejection of an appraisal report unless the deficiencies affect the reliability of the value estimate. Fees will be withheld if the report clearly and flagrantly does not comply with the contract specifications.

3. Disapproval.—If in the technical appraisal reviewer’s opinion, the value estimate is unsupported or not supported strongly enough, the report will be disapproved. NRCS reserves the right to order a second appraisal to confirm, support, or replace the original appraisal report. In the event the second report supports a significantly different value estimate—and the second report is ultimately approved—this determination effectively rejects the original appraisal report and payment will be withheld by NRCS.

4. Approved.—If in the technical appraisal reviewer’s opinion, the value estimate is strongly supported and complies with all contract specifications, the report will be approved. Any corrections or revisions by the appraiser are deemed insignificant in the technical appraisal reviewer’s opinion and will not affect the values identified in the appraisal report. Fees will be paid upon receipt of accurate invoices.

H. Format for Supplemental Appraisal Reports

Supplements or amendments to appraisal reports, such as for updating value estimates, changes in acreage, additional documentation, or changes needed from the original appraisal must be referenced for incorporation with the original report in accordance with USPAP. The following format is recommended. All items must be addressed.

1. Title Page

Include the same information as on the original appraisal report. Label the report as a "supplemental appraisal report.”

2. Summary of Facts

Include all of the following:

(a) Owner's name or other identification of the property

(b) Size

(c) Highest and best use

(d) New estimate of value

(e) New valuation date

3. Summary of Original Appraisal

Cite the date and value opinion from the original appraisal. If previous updates have been made since the original appraisal, cite value opinions and value dates from all updates as well as the original appraisal.

4. Changes

Explain the reason for the appraisal supplement, such as to update an opinion of value due to acreage change, amend a previous appraisal report, add additional support or explanation, or other.

5. Revised Opinion of Value

Revised opinions of value will be made as of the effective date of the original appraisal only.

Discuss the method used to revise the opinion of value and cite the evidence, analysis of trends, or both that support the revised value opinion. Conclude with a statement of the revised opinion of value and the valuation date, followed by the contract appraiser's signature.

6. Certification

Follow the USPAP guidelines required for certification and include the following:

"I have made a personal inspection of the appraised property that is the subject of this report and all comparable sales used in developing the opinion of value. The date of inspection was __________, and the method of inspection was ___________________.”

(If more than one person signs the report, this certification must clearly specify which individuals did and which individuals did not make a personal inspection of the appraised property and sales. The contract appraiser must inspect the appraised property.)

In my opinion, as of ___[date]______, the market value of the easement parcel before conveyance of the partial interest is $____________, and the market value of the easement parcel after conveyance of the partial interest is $___________.

By: [signature]

Print Name

Printed Name and Professional Accreditation

State Certification #

7. Addenda

Include sales data detail for new sales cited, summaries of data and trend analyses, maps of sales analyzed, and any other information relied upon but not included in the text.

8. Binding

If the supplemental appraisal report is more than four pages long, it must be bound in a durable report cover with appropriate identification.

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