Stimson LEX COL64-KAN17 - APPRAISAL SPECIFICATIONS.pdf

1 | P a g e

Appraisal Specifications for Real Property [Stimson Land Exchange – [COL64/KAN17] | 3/1/2022

APPRAISAL SPECIFICATIONS

FOR

Stimson Land Exchange – [COL64/KAN17]

General Specifications & Scope

The project consists of a land exchange proposal involving 157 parcels totaling 30,334.79 acres of Federal land owned by the USDA Forest Service (Forest Service) and 160 parcels totaling 60,097.21 acres of non-Federal land owned by Stimson Lumber Company, an Oregon

Corporation, and Stimson Washington, Inc., a Washington Corporation and wholly owned subsidiary of Stimson Lumber Company (Stimson Lumber).

The purpose of the appraisals is to provide opinions of market value. The intended use of the appraisals is to provide the basis for market values for the proposed Stimson Land

Exchange between the USDA Forest Service and Stimson Lumber Company. The client is the

USDA Forest Service. The intended users of the appraisal reports are the USDA Forest

Service and Stimson Lumber Company.

The contract appraiser shall furnish all materials, supplies, tools, equipment, personnel, travel, and shall complete all requirements of this contract including performance of the professional appraisal services listed herein.

The project will have two phases. Phase One consists of two (2) Appraisal Reports. One

Appraisal Report for the Federal (Forest Service) property and one Appraisal Report for the non-Federal (Stimson Lumber) property. Phase Two consists of, if directed by the Forest

Service, one or two Supplemental Appraisal Reports. One Supplemental Appraisal Report for the Federal (Forest Service) property and/or one Supplemental Appraisal Report for the non-Federal (Stimson Lumber) property.

“Phase One” – Appraisal Reports

Phase One consists of two (2) Appraisal Reports. One Appraisal Report for the Federal

(Forest Service) property and one Appraisal Report for the non-Federal (Stimson Lumber) property.

For the purposes of these specifications, any appraisal report will be considered as meeting the “Uniform Standards of Professional Appraisal Practice” (USPAP) requirements for an

“Appraisal Report” if it has been prepared in accordance with the “Uniform Appraisal

Standards for Federal Land Acquisitions” (UASFLA) (2016; Sections 1 and 2). The reports will provide an opinion of market value for each estate appraised and will conform to the most recent editions of USPAP as of the date of the report, published by The Appraisal

Foundation, as well as UASFLA 2016 edition. In case of conflict between the two sets of standards, the latter shall take precedence.

2 | P a g e

The Appraisal Specifications follow this section. The Appraisal Specifications for both the

Federal and Non-Federal Appraisals is located within this section.

Provide a separate single bid for “Phase One” - the completion of two (2) Appraisal

Reports as described above.

“Phase Two” – Supplemental Appraisal Reports

Phase Two consists of, if directed by the Forest Service, one or two Supplemental Appraisal

Reports. One Supplemental Appraisal Report for the Federal (Forest Service) property and/or one Supplemental Appraisal Report for the non-Federal (Stimson Lumber) property.

The Federal Land Policy and Management Act of October 21, 1976 (FLPMA), Section 206(b) amends the value requirements of prior exchange authorities by requiring that properties be equal in value or, if the values are not equal, either party may make them equal by payment of cash not to exceed 25 percent of the Federal value.

Parcels will not be subdivided to equalize value. Once the two Appraisal Reports from Phase

One have been completed and reviewed and approved for Forest Service use, the Forest

Service and Stimson Lumber will convene to identify and agree upon a configuration of the exchange which will provide for equalization of values. Federal or non-Federal parcels may be dropped from the exchange to achieve equal values, but no new parcels will be added. If needed, and as directed by the Forest Service, the contract appraiser will then complete

Supplement Appraisal Report(s) for the Federal (Forest Service) property and/or the non-

Federal (Stimson Lumber) property. The Supplemental Appraisal Report(s) will then be reviewed and approved for Forest Service use. The effective date of the appraisal for the

Supplemental Appraisal Report(s) will be the same as for the Appraisal Reports from

Phase One. Subject property inspections will not be required for Phase Two.

The general appraisal specifications for the Supplemental Appraisal Reports are as described above for the Appraisal Reports from “Phase One”. A separate Supplemental Appraisal

Specification will be provided to the contract appraiser if Supplemental Appraisal Reports are deemed necessary.

3 | P a g e

Provide separate bids for each Phase as follows:

1. “Phase 1”-One bid for the completion of two (2) Appraisal Reports (1-Federal and 1-Non-Federal) as described above. Each report will include at a minimum both the Sales Comparison Approach and the Income Approach.

2. “Phase 2”-One bid for the completion of one Supplemental Appraisal Report for the Federal (Forest Service) property as described above. Each report will include at a minimum both the Sales Comparison Approach and the Income

Approach.

3. “Phase 2”- One bid for the completion of one Supplemental Appraisal Report for the non-Federal (Stimson Lumber) property as described above. Each report will include at a minimum both the Sales Comparison Approach and the Income

Approach.

If clarification of these specifications is needed, and/or to arrange for the site inspection and prework meeting, the contract appraiser will contact:

James Witt, MAI, AI-GRS

Regional Appraiser (Region 6)

USDA Forest Service

Pacific Northwest Region james.witt@usda.gov

817.673.8957 (cell)

4 | P a g e

Instructions for Property to be Appraised

Property Identification

The two properties are part of a land exchange proposal involving 157 parcels totaling

30,334.79 acres of Federal land owned by the USDA Forest Service (Forest Service) and 160 parcels totaling 60,097.21 acres of non-Federal land owned by Stimson Lumber Company, an Oregon Corporation, and Stimson Washington, Inc., a Washington Corporation and wholly owned subsidiary of Stimson Lumber Company (Stimson Lumber).

The properties lie in Pend Oreille and Stevens Counties in the northeastern portion of the

State of Washington. The Pend Oreille River runs north-south through this area with

Stimson Lumber properties on the east side of the river and a mix of Stimson Lumber and

Forest Service properties on the west side of the river. Both properties lie in hilly and mountainous areas that have historically been managed for timber production and range management.

The Stimson Lumber property consists of numerous small parcels and two larger areas of checkerboard pattern ownership. The span of the Stimson Lumber property is roughly 50 miles north to south and 34 miles east to west. The Stimson Lumber property lies within the

Colville and Idaho Panhandle National Forests and the Little Pend Oreille National Wildlife

Refuge.

The Forest Service property is more geographically concentrated, but still includes some checkerboard pattern ownership. The span of the Forest Service property is roughly 32 miles north to south and 10 miles east to west. The Forest Service property lies within the

Colville National Forest.

A map located in the “Addendum” shows the Forest Service and Stimson Lumber properties.

The Forest Service property is shown as dark pink parcels. The Stimson Lumber property is shown as dark green parcels. An attached Quad Map Index shows the ownership patterns of the Forest Service and Stimson Lumber properties.

A full legal description of the Forest Service property is provided in the Federal Land

Description Verification (LDV) document dated November 8, 2021, located in the “Federal

Addendum”. A full legal description of the Stimson Lumber property is provided in the Non-

Federal Land Description Verification (LDV) document dated November 4, 2021, located in the “Non-Federal Addendum”. The LDV documents also contain detailed information pertaining to outstanding rights, mineral rights, improvements, encumbrances, access rights, water rights, and zoning for both properties.

5 | P a g e

Date of Value

The contract appraiser may be provided a pre-determined date of value for the entire project; otherwise, the date of the value opinion shall be the last date the contract appraiser inspected the appraised property.

Appraisal Report

The contract appraiser will make a detailed field inspection and identification of the subject property as identified herein and conduct as many investigations and studies as necessary to derive sound conclusions and to prepare the appraisal report.

Pre-Work Conference

At the request of the USDA Forest Service, the contract appraiser will be required to attend a pre-work conference for discussion and understanding of these instructions. The pre-work conference may be held in conjunction with the property examination.

Examination Notice

The contract appraiser will provide Stimson Lumber and the Forest Service advanced notice of the examination date and shall give the Stimson Lumber representative(s) and the Forest

Service representative(s) an opportunity to accompany the contract appraiser during the inspection of the property. These notices shall be documented in the contract appraiser’s transmittal letter of the appraisal report. The contract appraiser shall certify that they have personally visited the appraised property and all of the comparable transactions used in the comparative analyses.

Definition of Terms

Unless specifically defined herein or in UASFLA or USPAP, definitions of all terms are the same as those found in The Dictionary of Real Estate Appraisal (Appraisal Institute), 6th

Edition. UASFLA shall take precedence followed by USPAP in any differences among definitions.

6 | P a g e

Technical Specifications

Application of these Specifications

These technical specifications reflect the standards for the appraisal of property to be acquired or conveyed by the Forest Service. Unless defined for the contract appraiser in the assignment, the specifications require the contract appraiser to analyze and determine the larger parcel. If it is determined that the estate to be appraised contains multiple larger parcels, the contract appraiser shall consult with the assigned staff review appraiser for possible additional direction.

Should it be determined that multiple “larger Parcels” exist, a contributory value conclusion (as part of the whole) for each of the larger parcels identified will be reported.

Definition of Market Value

“Market value is the most probable price in cash, or terms equivalent to cash, which lands or interest in lands should bring in a competitive and open market under all conditions requisite to a fair sale, where the buyer and seller each acts prudently and knowledgeably, and the price is not affected by undue influence” (Federal Land Exchange Facilitation Act dated March 8, 1994).

Also include verbatim: “The reader should note that this definition of market value, required by the Federal Land Exchange Facilitation Act, is not “linked” to a specific “exposure time” estimate as required by the Uniform Standards of Professional Appraisal Practice (USPAP, SR

1-2). “Appraisers should not link opinions of market value for federal acquisitions to a specific exposure time” (Section 4.2.1.2, UASFLA, 2016). This appraisal therefore invokes the Jurisdictional Exception Rule and does not include an opinion of reasonable exposure time.”

Pre-Authorized Extraordinary Assumptions and Hypothetical Conditions.

Extraordinary Assumption(s)

• Extraordinary Assumption that the subject property is unaffected by hazardous material and, if found to be so affected, the property shall be cleaned up or the effect of the hazardous substances or petroleum products shall be remediated prior to conveyance.

Hypothetical Condition(s)

• For the Federal (Forest Service) property (only), include a Hypothetical Condition as follows: “In accordance with 36 CFR 254.9, the subject property is to be appraised

“as if in private ownership and available for sale in the open market.” Additionally, 7 | P a g e

Forest Service Appraisal Handbook 5409.12 Chapter 60 Section C-2.2(b)(2) – Part II

– Factual Data, Item (5)(h) of the Basic Specifications for Real Property Appraisals states “Federal land 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.” Therefore, it will be necessary to include the aforementioned hypothetical condition(s) in completing the assignment.

Federal Law Controls

Federal law may differ from the laws of some states and supersedes State law when they conflict. Accordingly, it is incumbent upon the contract appraiser to understand the applicable Federal law as it affects the appraisal process in the estimation of market value.

Federal law is reflected in UASFLA. The specifications in this appraisal follow UASFLA format, with emphasis on issues of special concern to the Forest Service. It should not be construed that the contract appraiser is to consider only the emphasized items. Appraisal reports shall be prepared in compliance with UASFLA standards and Forest Service appraisal instructions provided by the assigned staff review appraiser.

Unit Rule

One aspect of the UASFLA that the contract appraiser should be aware of is the “unit rule.” A principle developed by the federal courts that dictates what is to be value for just compensation. Under the unit rule, the property being appraised must be valued as a unitary whole in single ownership. The value of the whole cannot be derived by adding together the separate values of various interests or components. As a result, summation or cumulative appraisals are improper under federal law. The unit rule relates to ownership interests

(estates) in real estate and to various physical components of real estate (such as timber, mineral deposits, farmland, and buildings). See UASFLA 2016 for more details.

UASFLA and USPAP Conflicts

Conflicts between UASFLA and USPAP are minimal. When there is conflict, UASFLA takes precedence. It may be necessary to use the Jurisdictional Exception Rule to USPAP to meet certain standards of the UASFLA. Invocation of the Jurisdictional Exception Rule should never be used 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 staff review appraiser.

Comprehensive Review

Federal law requires review of all appraisals by a qualified review appraiser to assure they meet applicable appraisal requirements, including UASFLA, USPAP, Forest Service Policy, and these specifications. Any findings of deficiency shall be discussed, and corrections requested by the review appraiser. A value opinion is acceptable for use only after the assigned review appraiser has approved the appraisal report (FSM 5411).

8 | P a g e

Freedom of Information Act

Freedom of Information Act provisions may result in 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 intended users.

b) If providers of information request confidentiality, this information is not included in the report. Confidential information shall be made available to the review appraiser upon request but shall not be incorporated in the Forest Service system of record.

Format

The report shall be typewritten, or computer generated on bond paper sized 8 1/2 by 11 inches with all parts of the report legible and shall be bound with a durable cover. The face of the report shall be labeled using the case name, Stimson Land Exchange – COL64/KAN17, to identify the appraised property and to show the contract number, the contract appraiser's name and address, and the date of the appraisal. All pages of the report, including the exhibits, shall be numbered.

Contents

The following is a recommended appraisal report format that generally follows the UASFLA format in Appendix B. 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.

Timber Valuation Specifications

The value of the subject property to be appraised will likely be affected by the value of the timber resources present. Therefore, the contractor is required to conduct a timber valuation for this assignment. The contractor may use qualified staff timber valuation professional or may subcontract the timber valuation to a qualified forestry consulting firm.

Staff qualifications or subcontractor qualifications will be reviewed by the Forest Service

Review Appraiser.

Timber Inventory / Timber Cruise

A timber inventory of both the Federal and Non-federal parcels has been conducted. The timber data was collected using the Mason-Bruce-Girard program. The data has been

9 | P a g e collected and presented at the stand level using “Microsoft Access” software. The contractor will be given the timber inventory data post award. The contractor will need to make sure that they have access to a program that is compatible with “Microsoft Access” software.

Timber Valuation Considerations

Only the timber allowed to be harvested under the existing State Forest Practice Rules may be appraised at current values. Volume adjustments must be made for timber required to be retained for riparian, wildlife, or other purposes. These volume adjustments can be designed into the cruise (such as for riparian areas), made based on the stand table (such as wildlife tree retention requirements), or in some cases an acreage adjustment may be appropriate. Volume adjustments shall be documented. Timber that must remain under the existing rules but may be harvested at a later time (such as to meet green-up requirements) will need a growth projection to the time of harvest, then discounted to present value. The costs associated with meeting reforestation requirements where necessary (including site preparation and planting) must be addressed in the valuation.

Timber Valuation Review

The timber valuation will also be comprehensively reviewed. Any findings of deficiency shall be discussed, and corrections requested by the review appraiser. A timber value opinion is acceptable for use only after the assigned review appraiser has approved the appraisal report (FSM 5411).

10 | P a g e

PART 1 - INTRODUCTION

1. Title Page.

2. Letter of Transmittal.

3. Table of Contents. List the topic headings in numerical order with corresponding page numbers.

4. Appraiser's Certification. The appraisal report shall include an appraiser’s signed certification statement that is consistent with the certification requirements of USPAP

Standard 2. In addition, the following statements related to these Standards must be included, and are found at UASFLA 2.3.1.4:

“The appraisal was developed and the appraisal report prepared in conformity with the

Uniform Appraisal Standards for Federal Land Acquisitions; and”

“The appraisal was developed and the appraisal report prepared in conformance with the

Appraisal Standards Board’s Uniform Standards of Professional Appraisal Practice and complies with USPAP’s Jurisdictional Exception Rule when invoked by Section 1.2.7.2 of the

Uniform Appraisal Standards for Federal Land Acquisitions; and”

"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 ___________________; and” (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 appraiser must inspect the appraised property.)

"That the property owner; or (his)(her) designated representative, was given the opportunity to accompany the appraiser on the property inspection; and”

"In my opinion, the market value is $ __________________, in terms of cash, as of (date).

By (Appraiser’s signature)

Printed

State General Certification No.

5. Executive Summary. The contract appraiser shall report the major facts and conclusions that led to the final opinions(s) of value. This summary should include an identification of the property appraised; the highest and best use of the property; brief description of improvements; the indicated value of the property by each approach to value employed; the

11 | P a g e final opinion of value; any hypothetical conditions, extraordinary assumptions, limiting conditions, or instructions; and the effective date of the appraisal.

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.

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

Forest Service for review become property of the United States and may be used for any legal and proper purpose. Therefore, a condition that limits the distribution of the report is not permitted.

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. Agency instructions and/or legal instructions must have a sound foundation, be in writing, and included in the appraisal report.

8. Description of Scope of Work. The contract appraiser shall use this section of the report to identify the seven critical elements that defined the appraisal problem to be solved:

• Client

• Intended Users

• Intended Use

• Definition of Market Value

• Effective date

• Property characteristics

• Assignment conditions

12 | P a g e

This section shall include an explanation of the property rights appraised. The contract appraiser should describe the investigation and analysis that was undertaken in developing the appraisal. The geographical area and time span searched for market data should be included, as should a description of the type of market data researched and extent of market data confirmation. The contract appraiser should state the references and data sources relied upon in developing the appraisal.

The applicability of all approaches to value shall be discussed and the exclusion of any approach to value shall be explained.

For land exchange appraisals, use the following definition of market value: “Market value is the most probable price in cash, or terms equivalent to cash, which lands or interest in lands should bring in a competitive and open market under all conditions requisite to a fair sale, where the buyer and seller each acts prudently and knowledgeably, and the price is not affected by undue influence” (Federal Land Exchange Facilitation Act dated March 8, 1994).

Also include verbatim: “The reader should note that this definition of market value, required by the Federal Land Exchange Facilitation Act, is not “linked” to a specific “exposure time” estimate as required by the Uniform Standards of Professional Appraisal Practice (USPAP, SR

1-2). “Appraisers should not link opinions of market value for federal acquisitions to a specific exposure time” (Section 4.2.1.2, UASFLA, 2016). This appraisal therefore invokes the Jurisdictional Exception Rule and does not include an opinion of reasonable exposure time.”

9. The Purpose of the Appraisal.

The purpose of the appraisal is to provide an opinion of the market value.

The intended users of the appraisal are the USDA Forest Service and Stimson Lumber

Company.

The intended use of the appraisal is to provide the basis for market value for the proposed

Stimson Land Exchange between the USDA Forest Service and Stimson Lumber Company.

PART II – FACTUAL DATA

1. Legal Description. The legal description is provided to the contract appraiser in the appraisal assignment. If a lengthy description would disrupt the narrative flow, it may be placed in the addenda and referenced in the text.

13 | P a g e

2. 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.

(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.

3. Property Rights.

The property right to be appraised (Estate to be Appraised) is provided to the contract appraiser in the Performance Work Statement.

4. Identify the property rights to be appraised as instructed. List all reservations, outstanding rights, and other encumbrances. For multiple parcel properties, list by appraised parcel. If investigation reveals differences from property rights cited in the assignment, confer with the review appraiser. Discuss the effect on value of identified reservations, outstanding rights, and other encumbrances.

5. Property Data. Include the following:

a) Site Description. As relevant, describe the present use, accessibility and road frontage, topography and elevation, soils, vegetation (including timber), views, land area size, land shape, utilities, mineral deposits, water rights associated with the property, relevant easements, wetlands, floodplains, and other characteristics that may affect value. Also discuss the beneficial and detrimental factors inherent in the location of the property. The presence of hazardous substances should be addressed.

An affirmative statement is required if the property is located within a flood hazard area. A statement must be made concerning the existence or absence of mineral deposits having a commercial value.

b) Improvements.

c) Fixtures.

d) Use History. State brief history of the use of the property as improved. If improved, state the purpose for which the improvements were designed and the dates of original construction and major renovations, additions, and/or conversions.

Include a 10-year history of the use and occupancy of the property. If any of the forgoing information is indeterminable, the contract appraiser must report that fact.

14 | P a g e

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 the subject property. 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.

g) Assessed Value and Annual Tax Load. Include analysis of tax rates (stable, increasing, decreasing.)

h) Zoning and Other Land-Use Restrictions. 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.

PART III - ANALYSIS & CONCLUSIONS

1. Highest and Best Use. For land exchange appraisals, highest and best use is defined as “an appraiser’s supported opinion of the most probable and legal use of a property, based on market evidence, as of the date of valuation” (36 CFR 254.2). The appraiser’s determination of highest and best use is one of the most important elements of the entire appraisal process. Appraisers must clearly support the highest and best use conclusion in the appraisal report. The highest and best use of the land, as if vacant, is addressed first. If the land is improved, the highest and best use of the property, as improved, is then addressed.

a. Four Tests – The four tests of highest and best use are physically possible, legally permissible, financially feasible, and must result in the highest value.

Each of these four criteria must be addressed in the appraisal report. The level of supporting data and analysis presented in the report for each criterion will depend in part on the complexity of the appraisal problem. A property’s highest and best use will ordinarily be existing use, as an owner will normally put property to its maximum (highest value) use. A determination that the property has a different highest and best use than its existing use requires evidence that the property is physically and legally adaptable for that use and there is a market demand for that use in the reasonably near future.

The contract appraiser should discuss the use of the property as if vacant, which results in the highest value, and the analysis that supports that conclusion. The contract appraiser should identify the timing of the use and the likely purchaser and user.

15 | P a g e

If the property contains improvements, the contract appraiser must address the highest and best use as improved. The same process described above be followed. This analysis is focused on the contribution of the improvements to the property overall, taking into account the highest and best use of the property as if vacant. After addressing each of the four tests and making a determination of the highest and best use as improved, the appraiser should identify the timing of the use and the likely purchaser and user.

b. Larger Parcel - The UASFLA requires the appraiser to make a larger parcel determination in all appraisals. The contract appraiser must describe the factual basis and analysis underlying the conclusion of the larger parcel analysis. The three tests developed under larger parcel analysis (unity of highest and best use, unity of title, and contiguity) must be reported in sufficient detail for the client and intended users to fully understand the factual and analytical basis for the conclusion. See UASFLA Section 1.12 for guidance pertaining to the determination of the larger parcel for a non-assembled land exchange.

If it is determined that the estate to be appraised contains multiple larger parcels, the contract appraiser shall consult with the assigned staff review appraiser for possible additional direction.

Should it be determined that multiple “larger Parcels” exist, a contributory value (as part of the whole) for each of the larger parcels identified will be reported.

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.

Appraisals in federal acquisitions cannot be based on noneconomic or nonmarket uses. To be an economic use, the use must contribute to the property’s actual market value, and there must be competitive supply and demand for that use in the private market.

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.

A highest and best use must be reasonably probable. Elements affecting value that depend upon events or combination of occurrences which while within the realm of possibility, are not fairly shown to be reasonably probable, should be excluded from consideration.

The 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

16 | P a g e 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.

2. Land Valuation. The contract appraiser shall report the opinion of value of the land for its highest and best use as if vacant and available for such use. See UASFLA Sections 1.5.1 and 4.4.2 for a detailed discussion concerning the approaches to value and legal foundation for these standards. In all assignments, the sales comparison approach is the preferred valuation approach for forming an opinion of market value of the land as if vacant. However, in some assignments the subdivision development method may be appropriate.

a. Sales Comparison Approach. In reporting the results of the sales comparison approach for land valuation, the contract appraiser shall provide sufficient detailed description of confirmed sales of lands that have the same or similar highest and best use as the subject property. Differences between the comparable sales and the subject property shall be considered and adjustments made to the sales to address these differences. Items of comparison shall include property rights conveyed, financing terms, conditions of sale, market conditions, location, physical characteristics, economic characteristics, legal characteristics and non-realty components of value. The adjustments must be summarized in an adjustment grid and each adjustment (whether qualitative or quantitative) should be supported with market data.

b. Subdivision Development Method. In those circumstances where the property has a highest and best use for subdivision purposes and the contract appraiser has developed the subdivision method, the report must address all of the factors and assumptions used in sufficient detail for the client and intended users to understand the outcome of this method. The market support for each factor (lot sale price, absorption rate, development costs, expenses, time lag, and discount rate) used in this analysis must be clearly presented in the report.

The discount cash flow analysis prepared as part of this analysis must be included in the report

3. Cost Approach. This portion of the report should be in the form of computational data, arranged in sequence, beginning with reproduction or replacement cost. The report should state the source of all figures used. If the contract appraiser retained the services of a contractor or professional cost estimator to assist in the developing the reproduction or replacement cost estimate, this data should be referenced and the estimator’s report included in the addenda of the appraisal report. See UASFLA Section 1.5.3 for a discussion concerning the preferred methods of estimating depreciation.

17 | P a g e

4. 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. Each appraisal report must contain a sufficient description of the comparable sales used so that it is possible for the reader to understand the conclusion drawn by the contract appraiser from the comparable sales data.

Prior sales of the same property, if unforced, arm’s-length, for cash or its equivalent and reasonably recent to the date of valuation, are extremely probative evidence of market value. Accordingly, the appraiser must determine what the owner paid for the property being appraised. Prior sales of the same property are not categorically entitled to more weight than sales of other comparable properties. Relative importance of each must be analyzed under particular facts of the appraisal assignment. An unsupported claim that a sale of the subject property did not represent market value or was not an arm’s-length transaction is not sufficient.

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 in the addenda on a comparable sales form, which shall include:

a) Parties to the transaction.

b) Date of transaction.

c) Legal Description.

d) Type of sale instrument.

e) Document recording information.

f) Price.

g) Terms of the sale.

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

i) Buyer motivation.

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

18 | P a g e

k) Location. Include enough information to locate the sold property in the field.

l) Zoning.

m) Present Use.

n) Highest and best use.

o) Briefly describe the physical characteristics of the property including size, topography, vegetative cover, improvements, water influence, and other relevant characteristics.

p) Plot plan, sketch or topo map of the property.

q) Date of inspection and by who.

r) Photographs showing the date taken and name of the person taking the photograph.

s) Non-realty items.

t) Economic characteristics.

A sale map showing the relative location of the comparable sale to the subject property shall be included in the addenda of the report. Inclusion of a copy of the transfer document (e.g., deed, contract) in the report is neither required nor desirable, unless there is something in the document that is unusual or particularly revealing.

In order to make meaningful comparisons between the sales and the appraised property the USDA 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 review appraiser prior to completion of the appraisal report. Waiver of the comparable sales inspection requirement must be made in writing by the assigned review appraiser in the form of a supplemental appraiser 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 sale date, grantor and grantee, size, 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.

In developing a final opinion of value by the sales comparison approach, the contract appraiser shall explain the comparative weight given to each comparable sale, no

19 | P a g e matter whether quantitative or qualitative adjustments or a combination thereof are used. A comparative adjustment chart or graph is required.

5. The Income Capitalization Approach. All data shall be market supported. The appraisal shall include adequate factual data to support each figure and factor used and should be arranged in detailed form.

These methods are based upon the economic principal that the amount a buyer would be willing to pay presently is based upon anticipated future benefits, discounted for risk and other variables, of owning a property.

The Conversion Return method is a type of income approach specifically applied to property with the highest and best use for commercial timber production. When the appraiser has developed a conversion return analysis, the report must address all the factors and assumptions used in sufficient detail for the client and intended users to understand the outcome of this method.

The Conversion Return method includes three general components; the net cashflows resulting from property management, the terminal value of the timber when it is ultimately sold, and the discount rate applied to these cashflows to bring them back to present value. Each of these components must be addressed in detail and clearly presented in the report. See UASFLA Sections 4.4.4. for a detailed explanation on the Income Capitalization Approach.

6. Reconciliation and Final Opinion of Market Value. The contract appraiser must explain the reasoning applied to arrive at the final opinion of value and how the results of each approach to value were weighted in that opinion, and the reliability of each approach to value for solving the particular appraisal problem. The contract appraiser must avoid making a summation appraisal.

The contract appraiser is solely responsible for the final opinion of value. In using supporting experts' opinions and reports, the contract appraiser cannot merely accept such consultant reports as accurate, but rather must analyze such reports and adopt them only if reasonable and adequately documented and supported. The reasonableness of subsidiary estimates must be conformed in accordance with

UASFLA Section 1.13.

The results of secondary valuation reports (minerals, fixtures, or timber valuations) cannot simply be added to the value of the land to arrive at a value of the property as a whole without proper analysis by the contract appraiser. To do so would violate the unit rule and professional standards. The contract appraiser must consider these components of the property in light of how they contribute to the market value of the property as a whole.

20 | P a g e

PART IV - EXHIBITS & ADDENDA

Appraisal Assignment Package: The Program of Work and Appraisal Specifications for Real

Property Appraisal must be included by attachment in the addenda of the appraisal report.

All other supplied exhibits and/or appendices by the Forest Service may be included as the contract appraiser feels necessary to produce a creditable report that is not misleading.

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 review appraiser to locate the properties 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 - 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 separated 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 color photo(s) of each sale. 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.

21 | P a g e

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 photographs:

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.

6. Other Pertinent Exhibits. Present any 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 easement or other deed.

b) 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, a mineral report signed by a geologist, and a hazardous materials report.

c) Property owner permission to appraise.

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.

Updating of Report

Supplements or amendments to the appraisal reports, such as for updating the value opinion to a new, change in acreage, additional support or explanation, or to correct a previous appraisal report, shall be referenced for incorporation with the original report.

22 | P a g e

The updated report shall be submitted in original and one copy and shall include sale data or other evidence to substantiate the updated conclusions of value. The following format is recommended. All items must be addressed.

1. Title Page. Include the same information as in the original appraisal report. Label the report as a “Supplemental” or “Updated” 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 opinion 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 valuation date, followed by the appraiser’s signature.

6. 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.

23 | P a g e

Furnished Property, Data, & Services

USDA Forest Service will furnish one (1) electronic/digital document package.

Special Instructions to the Appraiser:

1. CLIENT, INTENDED USE, INTENDED USERS:

• Client(s): USDA Forest Service.

• Intended User(s): USDA Forest Service

• Intended Use: The intended use of the appraisal is to provide the basis for market value for the proposed Stimson Land Exchange between the USDA Forest Service and Stimson Lumber Company.

2. EFFECTIVE DATE: The effective date of value shall be the last date the contract appraiser inspected the subject property.

3. Appraisal reports must be reviewed and approved by the assigned review appraiser prior to the intended use by the USDA Forest Service. Prior to review, appraisal reports shall not be distributed to non-governmental parties. Unauthorized release of an appraisal report prior to completion of the review may invalidate its use in supporting an action by the USDA Forest Service.

4. Include an Extraordinary Assumption that the subject property is unaffected by hazardous material and, if found to be so affected, the property shall be cleaned up or the effect of the hazardous substances or petroleum products shall be remediated prior to conveyance.

5. For the Federal (Forest Service) property, include a Hypothetical Condition as follows: In accordance…