Appendix 1 APPRAISAL SPECIFICATIONS.pdf

APPRAISAL SPECIFICATIONS

Girdwood Office (Girdwood) Purchase

Case #1004P-10141004P-1014 – Chugach National Forest Appraisal Tracking #FS22-1001-0503

UASFLA and USPAP Conflicts: Conflicts between UASFLA and USPAP are minimal.

When there is conflict, UASFLA takes precedence. It may be necessary to invoke the Jurisdictional Exception Rule to USPAP to meet certain standards of the UASFLA. 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 UASFLA shall be discussed with the assigned COR and/or Contracting Officer.

Comprehensive Review: Federal law requires review of all appraisals by a qualified review appraiser to assure they meet applicable appraisal requirements, including those in UASFLA, Forest Service policy, and these specifications. Compliance with USPAP will also be reviewed. Findings of deficiency shall be discussed and corrections requested once the appraisal report has been delivered. A value estimate is acceptable for agency use only after the assigned staff review appraiser has approved the appraisal report (FSM 5411).

Freedom of Information Act: Freedom of Information Act provisions may result in the release of all or part of the appraisal report to the public. Prepare the report so that:

a. Analytical methods and techniques are explained (in so far as possible) in a manner understandable to the public, as well as the reviewer.

b. If providers of information request confidentiality, this information is not included in the report. Confidential information shall be made available to the COR and/or Contracting Officer upon request, but shall not be incorporated in a Forest Service system of records.

Client and Client Confidentiality: The appraiser has an obligation of confidentiality to the client. Appraisers are to receive and discuss appraisal instructions from the Contracting Officer and COR ONLY. The appraiser is not to provide appraisal information, analyses, or opinions of value to any party (owner, nongovernmental organization (NGO) representatives, or National Forest staff) before the appraisal has been reviewed and approved for Forest Service use by the COR/review appraiser. Inappropriate discussions with third party facilitators, property owners, or the release of appraisal information to unauthorized parties jeopardizes the appraisal process and will be considered a violation of the contract for appraisal services.

C-2.2(a) - Format. The report shall be electronic PDF on bond paper, sized at 8 1/2 by 11 inches, with all parts of the report legible. The face of the report shall be labeled to identify the appraised property and show the contract number, the appraisal tracking number, the appraiser's name and address, and the date of the appraisal. All pages of the report, including the exhibits, shall be numbered.

Appraisal Specifications FS22-1001-0503, Girdwood Office, Chugach National Forest Page 2 of 12

C-2.2(b) - Contents. The suggested format outlined in items C-2.2(b)(1) through C-2.2(b)(4) is based on UASFLA. Although it is not required that the contract appraiser strictly adhere to it, all items must be addressed. It should be noted that in most instances, these specifications reference UASFLA without reprinting them here. Important items are noted below, but are not all-inclusive. It is incumbent upon the contract appraiser to read, understand, and comply with UASFLA and these specifications.

C-2.2(b)(1) - Part I - Introduction. Follow the UASFLA format.

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. The contract appraiser must inspect the appraised property.)

"In my opinion, the market value (or other value as required) is $ as of (date).

By (Appraiser’s signature)

Printed Name and Professional Accreditation

State General Certification No. __________, expires _________ (date)

5. Summary of Salient Facts and Conclusions.

6. Photographs of Subject. 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. A map may be used to show some of this information.

b. The name of the photographer.

c. The date the photograph was taken.

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7. Statement of Assumptions and Limiting Conditions. All appraisal reports submitted to the Forest Service 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.

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.

In this section of the specifications, or in separate written instructions, the contract appraiser shall be instructed as to necessary hypothetical conditions or extraordinary assumptions. For conveyances of Federal land, include a hypothetical condition stating that the Federal land is appraised as if it is in non-Federal ownership and zoned consistent with similar non-Federal property. Do not add additional hypothetical conditions or extraordinary assumptions without the approval of the COR and/or Contracting Officer.

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

8. Scope of the Work. A full understanding of the critical assignment elements is essential to a proper scope of work that will enable appraisers to solve the appraisal problem.

UASFLA requires the seven (7) critical elements, identified in Section 1.2, to be addressed and report in the description of the Scope of Work section of the report (Section 2.3.1.8).

1. Client (1.2.1) (Provided in the Statement of Work (SOW))

2. Intended users (1.2.2) (Provided in SOW)

3. Intended use (1.2.3) (Provided in SOW)

4. Type and definition of value (1.2.4) (Provided in SOW)

5. Effective date (1.2.5)

a. Typically is the last date of inspection

6. Relevant characteristics about the subject property (1.2.6) also referred to as property characteristics (2.3.1.8)

a. Property Interest(s) to be appraised (1.2.6.1) (Provided in SOW)

b. Legal description (1.2.6.2) (Provided in SOW)

i. Appraiser should still verify the legal description

1. On the ground during a physical inspection of the property

2. With the owner of the property (if possible)

3. Comparing it with aerial or other available maps

4. Comparing it with public records

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ii. There is no reporting requirement of the actual legal description in this section of the report as it is required to be reported under the factual data section. However, it would be helpful to report the legal description was provided and verified to be accurate.

iii. Property Inspections (1.2.6.3)

1. The appraiser (the lead/contracted appraiser) must personally inspect the subject property

iv. Contacting landowners (1.2.6.4)

1. During the course of inspecting the subject property, the appraiser is expected to meet with property owner or representative, if possible (Contact information provided in SOW)

2. The owner or owner’s designated representative must be given an opportunity to accompany the appraiser on the property inspection

7. Assignment conditions (1.2.7)

a. Instructions, hypothetical conditions, extraordinary assumptions (1.2.7.1)

i. Includes any special instructions which are typically in writing and provided in the SOW

ii. Only hypothetical conditions and extraordinary assumptions provided in the SOW is to be included

1. The appraiser has the burden of clearly identifying and explaining the implications of any hypothetical condition or extraordinary assumption adopted. The required explanation and discussion of the implications of such hypothetical conditions or extraordinary assumptions must be included in this portion of the appraisal report. Each hypothetical condition and extraordinary assumption must be labeled as such and any legal instructions must be included in the addenda of the report. (2.3.1.8)

iii. Jurisdictional Exceptions (1.2.7.1.2) (Provided in SOW )

iv. See 1.2.7.3 through 1.2.7.6 for additional items considered part of the assignment conditions

8. Additional reporting requirements under scope of work:

a. Should describe:

i. The investigation and analysis in developing the appraisal

ii. The geographical area and time span searched for market data

iii. Include a description of the type of market data researched and the extent of market data confirmation

iv. State references and data sources relied upon in developing the appraisal

b. Shall discuss:

i. The applicability of all approaches

ii. The exclusion of any approach to value

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C-2.2(b)(2) - Part II - Factual Data.

1. Area, City, and Neighborhood Data. The use of boilerplate demographic and economic data is unnecessary and undesirable. Report only data that directly impacts the market analysis. Include the distance to the closest town/city that provides services.

a. Area Map. Include a small-scale map showing the general location of the appraised property. It can be placed here or in the addenda.

b. Neighborhood Map. Show the appraised property and its immediate neighborhood. The map may be placed here or in the addenda.

2. Property Data. Include the following:

a. Site Description: Dimensions, size, shape, vegetative cover, soil types, topography, elevations, wetlands, flood plains, view, timber, water rights, effect of encumbrances, livestock forage, access, road frontage, utilities, location, or other characteristics that may affect value.

• A statement must be made concerning the existence or absence of mineral deposits having a commercial value. Evidence, if any, of hazardous substances shall be described by the contract appraiser.

b. Location: Location descriptions shall be sufficient to enable a reviewer to locate the property with a road map during a field inspection. The location description shall be with reference to roads

(ex. South side of Route XYZ, approximately 2 miles east of County Road 321, in Boondoggle County, Wisconsin. A clear location description is required for all parcels including those with remote locations.)

c. Access: Separate discussions for legal access and physical access to the property.

• Legal access shall be clearly identified. Legal access is typically via direct frontage on a public road or recorded easement for ingress/egress. Other types of legal access should be clearly described. The appraisal should include a clear statement as to whether the property has legal access or whether it does not have legal access. If legal access is via a recorded easement, recording

FS22-1001-0503, Girdwood Office, Chugach National Forest Page 6 of 12 information shall be provided. If a property does not have legal access, this shall be clearly stated.

• Physical access shall be clearly described. (ex. “Paved public two lane road”, or “one lane dirt logging road accessible by 4X4 but not cleared during the winter”.)

d. Improvements. A listing of significant improvements will be provided by the Forest Service. The impact of these features should be considered in the analysis. If during the course of property inspections, other significant improvements are observed by the appraiser, these shall be brought to the attention of the assigned review appraiser.

e. Fixtures.

f. Use History. A 10-year history is required.

g. 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.

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

i. Assessed Value and Annual Tax Load.

j. Zoning and Other Land-use Restrictions. Federal lands must be appraised under the hypothetical condition that they are already in non-Federal ownership and zoned consistent with similar non-Federal properties in the market area. 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.

• Zoning/Land Use/Regulations should include factual information regarding zoning and regulations which impact the legal uses of the subject property, and should include an analysis of these requirements as applied to the subject. The uses permitted by zoning must often be evaluated with reference to land development regulations for access, septic percolation requirements, etc. The appraisal should include a conclusion as to

FS22-1001-0503, Girdwood Office, Chugach National Forest Page 7 of 12 the legally permitted uses, type of units, and legally permitted number of units (or density/intensity) which could conceivably be developed on the property.

k. 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.

C-2.2(b)(3) - Part III - Data Analysis And Conclusions.

1. Analysis 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.”

Highest and Best Use requires a conclusion as if vacant and as improved. The highest and best use as if vacant and as improved are different analyses, and both should include a complete discussion of the legally permissible uses, physically possible uses, financially feasible uses and that use (or those uses) which produce the greatest return to the land. An opinion of highest and best use of development requires support from the market.

The UASFLA requires the contract appraiser to make a larger parcel determination in all appraisals. Apply the tests provided in UASFLA 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 to which the 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

FS22-1001-0503, Girdwood Office, Chugach National Forest Page 8 of 12 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.

2. 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.

If the contract appraiser will place considerable weight on the cost approach to value in reaching a final value estimate, consideration should be given to retaining the services of a contractor or professional cost estimator to assist in developing the reproduction or replacement cost estimate.

Estimating depreciation by the use of published tables or age-life computation shall be avoided.

The contract appraiser must substantiate that it is not possible to abstract depreciation rates from the market if tables or age-life methodologies are used to compute depreciation. If this is the only method used, the weakness resulting from the lack of market support is to be addressed and considered in the reconciliation.

3. 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.

Quantitative adjustments must have quantitative support and may be in the form of sale/resale, paired sales, statistical analysis relevant to the local market and property type. Percentage and dollar adjustments may, and often should, be combined. Resort to qualitative adjustments 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. An analysis which incorporates both quantitative adjustments and qualitative analysis or only qualitative analysis when there is a lack of market support for quantitative adjustments is permitted.

Include a sales adjustment chart summarizing all of 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. Recording Information and Instrument

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b. Parties to the transaction.

c. Date of transaction.

d. 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.

Provide name of person verifying transaction and relationship to transaction, date of verification, and name of appraiser who confirmed transaction.

e. Buyer motivation.

f. Location: Provide location with reference to street/road and closes cross street similar to that provided for the subject property.

g. Access: Describe legal and physical access similar to that provided for the subject property.

h. Size.

i. Legal description.

j. Property rights conveyed. State the exceptions of title for the sale. Do not just state typical outstanding rights.

k. Consideration.

l. Financing terms.

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

n. Improvements.

o. Physical description. Describe topography, vegetative cover, water influence, and other characteristics. Describe legal and physical access.

p. Non-realty items.

q. Economic characteristics.

r. Zoning and/or land use regulations.

s. Current use.

t. Highest and best use.

u. Topographic map.

v. Aerial map.

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w. Photographs. Include pictures of the road frontage/access, typical attributes and a picture of any improvements if possible (as applicable). Include a brief description, the date taken and by whom. Two to four pictures of the comparable sales should be included.

x. Date of inspection

y. Exhibits (Plat, aerial map, topo map, etc. please note there is no deed to include the deed)

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

Unusual circumstances that preclude on-the-ground inspection or make inspection unreasonably difficult shall be discussed with the assigned COR and/or Contracting Officer prior to completion of the appraisal report. Waiver of the comparable sale inspection requirement must be made in writing by the assigned COR and/or Contracting Officer 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.

4. The Income Capitalization Approach. All data shall be market supported. Discount rates/cap rates require support. Surveys, built up method, etc. are permitted as support for selected rates. Primary support for selected rates should be from an analysis of market data.

5. The Development Approach. The development approach should not be relied upon as the primary indicator of value when comparable sales are available with which to accurately estimate the property’s market value. The contract appraiser shall adhere to UASFLA direction pertaining to this highly sensitive and complex method of valuation.

6. Correlation and Final Conclusion of Market Value. 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, mineral appraisers, or cost estimators).

C-2.2(b)(4) - Part IV - Exhibits and Addenda.

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Include the following items as applicable to the appraisal problem if not included in the body of the report:

1. Maps. Maps shall clearly identify the properties and be of sufficient quality to enable the staff review appraiser to locate the properties on the ground. Maps shall be dated, include a legend, scale, and north arrow. 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 (1:24000) 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 values, such as in an assembled exchange, these areas shall be delineated on this map, or a separate map.

d. Comparable Sales Location Map. 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.

2. Sale Transaction Forms. 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 multiple, color photo(s) of each sale. Photos should include typical attributes of the property including access and any water attributes. The transaction number must match the number of the transaction listed in the report.

3. Legal Description. Include a full legal description of the property appraised if not shown in the narrative section of the report.

4. Title Information. Include a copy of the preliminary title report for the non-Federal land and a statement of interest (status report) for the Federal land, as applicable.

5. Photographs. Provide quality color photographs of the appraised property and all comparables in the original and all copies of the final report. 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. A map may be used to show some of this information.

b. The name of the photographer.

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c. The date the photograph was taken.

6. Other Pertinent Exhibits. Present additional data such as documents and charts pertinent to the valuation and referred to in the body of the appraisal. It may include:

a. A copy of the title commitment

b. A copy of the current deed and all easement or other deeds.

c. A copy of technical reports from specialists. This may include a timber cruise summary signed by a timber cruiser, a road plan signed by an engineer, or a mineral report signed by a geologist.

d. Appraisal assignment letter (statement of work).

7. References. List sources of data, including documents and individuals.

8. Qualifications of the 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.