WRPappraisalSpecs.pdf

APPRAISAL SPECIFICATIONS FOR APPRAISALS OF REAL PROPERTY

FOR THE WETLANDS RESERVE PROGRAM (WRP)

A. BACKGROUND INFORMATION

The United States of America, acting through the United States Department of Agriculture, Natural Resources Conservation Service (NRCS) is considering purchasing a conservation easement to assist the landowner in protecting, restoring and enhancing the original hydrology, native vegetation, and natural topography of eligible land, restore and protect the functions and values of wetlands in the agricultural landscape, help achieve the national goal of no net loss of wetlands and improve the general environment. These lands may be placed under a conservation easement through WRP.

All appraisals completed for this program shall comply with Uniform Standards of Professional Appraisal Practice (USPAP), Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA aka Yellow Book) and Supplemental Standards as issued by

NRCS.

Yellow Book and USPAP Conflicts: Conflicts between Yellow Book and USPAP are minimal. When there is conflict, Yellow Book takes precedence. It may be necessary to invoke the Jurisdictional Exception Rule to USPAP to meet certain standards of the Yellow Book. Invocation of the Jurisdictional Exception Rule should never be invoked lightly and must include citation of the over-riding Federal policy, rule, or regulation that requires it. Any jurisdictional exceptions not specifically cited in the Yellow Book shall be discussed with the assigned review appraiser.

B. APPRAISER QUALIFICATIONS

Appraisers shall be a State Certified General Real Property Appraiser or obtain a temporary practice permit in the state(s) 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 conservation easements of the requested type. Documentation of appraisal education courses attended, such as eminent domain or conservation easements, and Yellow Book course shall be provided to the NRCS authorized official prior to issuing any work order.

C. PURPOSE OF THE APPRAISAL REPORTS

The purpose of the appraisals is to provide an opinion of market value, as defined below, of the entire subject property (larger parcel) before acquisition of an easement (before value) and an opinion of market value of the entire subject property remaining after the proposed easement has been placed (after value) as of a current date of value. The appraiser shall recognize that in a before and after appraisal, the partial interest being acquired is not actually being appraised. What is appraised is the larger parcel before and after the conveyance of the partial interest.

The purpose of two opinions of value is to establish the effect on value resulting from imposition of a conservation easement. The price of the easement is the before value of the entire property (larger parcel) minus the value of the entire property as encumbered by the WRP Warranty Easement Deed, after value, provided there are not adjustments such as excess irrigation water rights explained below, which would equal the price of the easement. A key concept in this appraisal process is defining the larger parcel is required to begin the appraisal process. The appraisals must be completed in compliance with Uniform Standards of Professional Appraisal Practice, Uniform Appraisal Standards for Federal Land Acquisitions and Supplemental Standards issued by NRCS.

For the purpose of these appraisals, the Federal Rules for acquisition will be used.

The market value definition that will be stated and used in developing and reporting this assignment is the definition as stated in the Yellow Book;

“Market value is the amount in cash, or in 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 makes no linkage between the estimated market value and exposure time.

A specific exposure time shall not be cited in an appraisal report prepared under Yellow Book standards. Invoke the Jurisdictional Exception Rule to avoid a violation of USPAP standards, which require a specific exposure time.

No other definition of market value is acceptable.

D. BACKGROUND FOR THE APPRAISAL REPORT

1. Prepare two opinions of value of the entire subject property (larger parcel) in the before and after conditions considering the effects of the easement. The after 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. Irrigation water rights that are owned and used on the entire subject property will be valued in the before appraisal. The appraiser will document if any portion these irrigation water rights can be removed from the subject property or not. 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 after appraisals.

Irrigated units may have excess irrigation water rights in the after condition due to land use change. 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 before and after values. This is necessary to determine compensation for rights obtained by the government and rights retained by the property owner.

3. Client is USDA/NRCS and any other specific organization or entity that may be involved in the specific transaction, unless otherwise directed by the Client.

4. Intended User should be identified as USDA/NRCS unless otherwise directed by the Client.

5. Intended Use will be for USDA/NRCS consideration in determining the effect on value of the conservation easement of lands entering into the Wetland Reserve Program.

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

7. Property rights to be appraised will be surface rights, improvements such as hay sheds and fencing, timber, 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 standing timber will be considered by a timber cruise and included in any valuations. Other permanent plantings that are located on the subject property will be appraised and included in any valuations.

8. The after value will not include consideration of the planned restoration activities as being installed. Selection of comparable sales will be based upon similar encumbered properties that have similar circumstances for restoration potential.

E. INFORMATION PROVIDED BY USDA/NRCS TO THE APPRAISER:

1. Aerial photograph of the entire 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 entire subject property owned.

3. Preliminary legal description of the proposed easement area (survey to be completed later);

Example: On attached aerial photograph, approximately 10.5 (outlined in dark ink) acres located in the NW 1/4. NW 1/4 of Section 10 T55N R20W of 5th PM.

4. Township plat map with entire owned subject property identified.

5. County map showing the location of the entire owned property and all applicant owned tracts in the county.

6. Aerial photograph indicating the location and acreage of any conservation agreement, contract, or easement of any type that is associated with any part of the farm.

7. Copy of the completed FSA Form CCC-505 and executed by the Landowner for crop base 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. Note: any crop base or allotment acquired by NRCS must be retired from Federal Government programs.

8, Documentation provided by NRCS will identify the volume of irrigation water rights to be retained for the subject property in the after condition as necessary to ensure the function of the wetland operation and other wetland conservation values.

9. Copy of WRP Manual section 514.28, Attachment 1, Determining Easement Price

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

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

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

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

14. Completed Preliminary Certificate of Inspection and Possession (Exhibit 514.67) and the Hazardous Substance Examination Checklist (Exhibit 514.68) and any available information pertaining to the probability of existence of hazardous substances that might be found on the property to be appraised.

15. Documentation of water rights owned, including wells on the property to be appraised.

16. Copy of WRP Conservation Easement Deed Exhibit 514.63.

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

F. THE APPRAISAL REPORT

1. Description of Work Product

The appraisal(s) will meet the requirements of the Uniform Standards of Professional Appraisal Practice, Uniform Appraisal Standards for Federal Land Acquisitions regulations and Supplemental Standards issued by NRCS as a complete appraisal self contained report.

The Appraisal Report can consist of a Form Report or a Narrative Report, or a combination may be used. The Appraisal Report must be in compliance with Uniform Standards of Professional Appraisal Practice, Uniform Appraisal Standards for Federal Land Acquisitions 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 shall talk personally to the property owner or the owner’s agent or representative and the property owner or the owner’s agent or representative shall be given an opportunity to accompany the appraiser during his or her inspection of the subject property.

The Uniform Residential Appraisal Report (URAR) shall not be acceptable.

Reports must contain a Table of Contents and sequentially numbered pages including addenda. Reports may contain handwritten page numbers

Reports shall 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 E 14 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, Letters of Engagement (Call Orders) or other issues. 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 appraisal(s) shall be in typewritten or legible ink print form and/or automated or computerized forms.

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

The Appraisal Report shall be bound in a durable report cover with appropriate identification.

The appraiser shall provide one (1) original and two (2) copies of the appraisal(s) to NRCS. Reference the above instructions, including exhibits, for details on appraisal reports, appraisal forms required, and required methodology and supporting documentation.

2. Required Elements for WRP Appraisals

Part 1 Introduction

1. Title Page

2. Letter of transmittal

3. Table of contents

4. Appraiser’s certification

Follow the UASFLA and USPAP guidelines, but include the following:

"I have made a personal inspection of the appraised property which is the subject of this report and all comparable sales used in developing the opinion of value. The date(s) 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 larger parcel before conveyance of the partial interest is $____________, and the market value of the remainder 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.

If the appraisal has been made subject to any encumbrances against the property, such as easements, that shall be stated.

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. Refer to E 12 above.

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 shall have a sound foundation, be in writing, and included in the appraisal report.

8. Scope of the appraisal

This section shall 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 part being conveyed and the principal differences in the property in the before and after condition.

Describe the before and after methodology to be used.

9. Purpose of the appraisal will be as stated in C above.

10. Summary of the appraisal problem

Part 2. Factual Data

11. Legal description

12. Area, city and neighborhood data

13. Property data

a. Site

b. Improvements

c. Fixtures, livestock and forage production structures and facilities

d. Use history

e. Sales history

Include a 10-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 10-years, the appraiser shall 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

The contract appraiser shall 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.

Refer to E 12 above.

i. 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

14. Analyses of highest and best use For acquisition appraisals, UASFLA defines highest and best use 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.”

The UASFLA requires the contract appraiser to make a larger parcel determination in all appraisals. Apply the tests provided in UASFLA Part III to determine the larger parcel(s).

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 for which the Federal Government will put the property after it has been acquired is, as a general rule, an improper highest and best use. A non-economic 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.

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.

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

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.

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

The contract appraiser's opinion of a reasonable probability of a zoning change must have a factual foundation. The appraisal report shall include a description of the investigation undertaken to determine the probability of rezoning. The investigation shall include thorough research of the use(s) and zoning of properties situated similarly to the subject property within the area covered by the zoning authority. The stated rezoning conclusion shall 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.

15. Land valuation

16. Value estimate by the cost approach

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

17. 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.

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.

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.

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 shall include:

a. Parties to the transaction

b. Date of transaction

c. Confirmation of the transaction

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

d. Buyer motivation

e. Location

f. Size

g. Legal description

h. Property rights conveyed

i. Consideration

j. Financing terms

k. Sale conditions

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

l. Improvements

m. Physical description

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

n. Non-realty items

o. Economic characteristics

p. Zoning

q. Current use

r. Topographic map

s. Photographs

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. There shall be no waiver of the requirement for inspection of the appraised property.

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, location, and explain why each sale was not used.

The contract appraiser shall adhere to UASFLA direction pertaining to comparable sales requiring extraordinary verification and weighting considerations. These include sales to governmental agencies, sales to environmental organizations, sales to parties desiring to exchange the land to the government, distressed sales, and other atypical or non-arm’s length sales.

18. Value estimate by the income approach

All data shall be market supported.

19. Correlation and final estimate

The contract appraiser must avoid making a summation appraisal.

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 Factual Data after Acquisition

20. Legal description 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. If all of the rights held by the grantor for only a portion of the larger parcel are being acquired, this section will describe only the real estate being retained in the after condition.

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

21. Neighborhood factors

22. Property data

a. Site

b. Improvements

c. Fixtures

d. History

e. Assessed value and annual tax load

f. Zoning and other land use regulations

Part 5 Data Analysis and Conclusions after Acquisition

23. Analysis of highest and best use

24. Land valuation

25. Value estimate by cost approach

26. Value estimate by sales comparison approach

27. Value estimate by income capitalization approach

28. Correlation and final value estimate

Part 6 Acquisition Analysis

29. 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 it’s before value.

30. Allocation and explanation of damages Briefly explain any damages to the remainder property.

31. Explanation of special benefits Identify any special benefits accruing to the remainder.

Part 7. Exhibits and addenda

32. Location map

Maps shall clearly identify the property and be of sufficient quality to enable the review appraiser to locate the property on the ground. Maps shall be dated, include a legend, scale, and north arrow. The original copy of the report shall 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-inch/mile) United States 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 shall be delineated on this map, or a separate map.

33. Comparable data maps

This map shall 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.

34. 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 photo(s) of each sale. The transaction number must match the number of the transaction listed in the report.

35. Plot plan

36. Floor plan

37. Title evidence report

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

38. 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 may 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. Property owner permission to appraise.

39. 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 appraiser(s) must provide evidence of compliance with the certification requirements of the state(s) where the properties are located.

G. Appraisal Reviews

1. All appraisal reports are subject to a technical appraisal review conducted for compliance with appraisal instructions UASFLA and USPAP prior to acceptance by NRCS 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, and or corrections to the original appraisal report. All revisions will be subject to am appraisal review for compliance with the original instructions and acceptance as stated above.

H. Format for Supplemental Appraisal Reports.

Supplements or amendments to appraisal reports, such as for updating value estimates, changes in acreage, change in actual land location or title conditions shall 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 (a) owner's name or other identification of the property, (b) size, (c) highest and best use, (d) new estimate of value, and (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, amend a previous appraisal report, add additional support or explanation, or other.

5. New Opinion of Value.

Discuss the changes and market activity that have occurred since the original appraisal (or previous update). Discuss the method used to update the opinion of value and cite the evidence and/or analysis of trends that support the updated value opinion. Conclude with a statement of the new opinion of value and the valuation date, followed by the contract appraiser's signature.

6. Certification.

The appraiser shall recognize that in a before and after appraisal, the partial interest being acquired is not actually being appraised. What is appraised is the larger parcel before and after the conveyance of the partial interest. Follow the UASFLA and USPAP guidelines required for certification as follows.

"I have made a personal inspection of the appraised property which is the subject of this report and all comparable sales used in developing the opinion of value. The date(s) 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 and sales.)

In my opinion, as of ___(date)______, the market value of the larger parcel before conveyance of the partial interest is $____________, and the market value of the remainder 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 comprises more than four pages, it shall be bound in a durable report cover with appropriate identification.

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