THE WAIVER OF APPRAISAL | Why the Waiver of Appraisal was Developed Before waivers were allowed, agencies could only create narrative appraisal reports. Narrative appraisals require

THE WAIVER OF APPRAISAL

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Succinct Explanation of the RW Process

When rights of way are needed for a highway project, the owner of the

property needed for the project is offered compensation (FMVE).

Then there are negotiations,

Once agreement on price is obtained:

■ the owner is paid compensation …

■ the owner signs the instrument and …

■ the acquiring agency obtains control of the property needed for

the project.

If agreement cannot be reached, the agency exercises its right of eminent domain by

filing appropriation action and depositing the Fair Market Value Estimate (FMVE) with the

court.

The Waiver of Appraisal

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Succinct Explanation of Compensation

Compensation is based on an appraisal process

■ At ODOT this process is known as the "FMVE Delivery Process”

- Parcel Impact Notes are created

Describes the valuation problem caused by the taking

Recommends the valuation format

- Appraiser is engaged/creates a written report

- That report is reviewed by a review appraiser

- The reviewer recommends the written report

- The agency establishes FMVE

- An offer of compensation can now be made to the owner


RW Appraisal Report (Narrative)

The Value Finding (VF)

Report

The Value

Analysis (VA)

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ODOT Uses 3 Valuation Formats

■ The Right of Way Appraisal Report

It’s a before and after narrative appraisal report proving or disproving the existence of

damages to the residue property

It’s Uniform Standards of Professional Appraisal Practice (USPAP) compliant – Offer of

owner accompaniment is mandated

It’s expensive and time consuming

■ The Value Finding Appraisal Report (VF)

It’s an appraisal of the whole that allocates to the part taken

Damages are not considered - so before and after are not necessary

It’s USPAP compliant – Offer of owner accompaniment is mandated

■ The Value Analysis (VA)

It is a waiver of the appraisal

It’s quick, simplistic and should be not expensive to the agency


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At ODOT:

Parcels acquired using “waiver of appraisal” 65%

Parcels acquired using “Value Finding” appraisals +15%

Subtotal 80%

Parcels acquired with narrative before and

after appraisals + 20%

Total 100%


ODOT embraces and uses waiver of appraisals for

most of its acquisition parcels.

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Why the Waiver of Appraisal was Developed

Before waivers were allowed, agencies could only create narrative appraisal

reports.

Narrative appraisals require a valuation of the property before the taking, and

then another valuation of the residue after the taking to determine damages +

an allocation to the part taken.

- This requires a skilled appraiser who is a known expert in eminent domain

valuation

- The narrative appraisal report is large (50 – 200 pages)

- Its time consuming to create (4 - 8 weeks)

- They’re expensive ($5,000 - $15,000)


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As they are appraisals, a review of the narrative appraisal is required, which is

expensive and time consuming

- Cost of a review ($2,500 - $7,500)

- Time for a review (4 to 6 weeks)

- Propensity to find problems creating more time delays

The negotiator (who is not an appraiser) is required to explain the report to

the owner

Owners have a difficulties understanding the lengthy before and after

narrative appraisal reports


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Narrative appraisals are certainly needed for complex

valuation assignments

- But narrative-style appraisals are overkill for simplistic,

non-complicated valuation problems caused by small

strip takes that represent the majority of acquisitions for

road projects.


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Budgets are tight and it is a waste of tax payer money to pay for expensive

narrative appraisal reports by credentialed appraisal experts to estimate

compensation …

when a trained, non-credentialed staff person can estimate compensation that

is not significantly different

- Using simplified forms

- Following explicit procedures

- At a much reduced cost/fee ($500-$750)

- And producing a compensation estimate in a matter of days/weeks


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That is why FHWA allows the use of waiver of appraisals.

- Waivers allow agencies to move faster at less cost

- Estimate compensation that is not significantly

different than full before and after narrative appraisal

reports.


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What is a waiver of appraisal?

It is permitted by laws and regulations


- 49 CFR 24.102(c)

- OAC 5501:2-5-06(B)(3)

- ORC 163.59(C)

- ORC 163.04(C)

Before negotiations, real property to be acquired

shall be appraised, except as provided in

24.102(c)(2)

An appraisal is not required if:

● The agency determines an appraisal

unnecessary because:

● The valuation problem is uncomplicated

and

● The anticipated value of the proposed

acquisition is estimated at $10,000 or less,

based on a review of available data

● When an appraisal is determined

unnecessary, the agency shall prepare a

waiver valuation.

● The person performing the waiver

valuation must have sufficient

understanding of the local real estate

market to be qualified to make the waiver

valuation.

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Based in regulation, the conditions for an agency to

waive the appraisal are:

■ The agency must determine:

■ The valuation problem is uncomplicated, and

■ The FMVE is estimated at $10,000 or less.

■ The preparer of the waiver must be qualified


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ODOT has implemented this regulation:

■ The waiver is on a standardized form called the Value Analysis (VA)

■ The VA is signed, dated and retained in acquisition files and provided to

the property owner at the time of the offer.

■ ODOT’s process requires an agency determines that an appraisal is

unnecessary, that the valuation problem is uncomplicated and

compensation is less than $10,000 on a form called Parcel Impact

Notes.

■ ODOT requires a review of the VA by a review appraiser with a

recommendation by the reviewer that the VA should be the basis of

FMVE.

■ ODOT requires an official from the agency to establish FMVE.


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Condition 1: The Valuation Problem is Uncomplicated

Defining Uncomplicated

1. It has to be obvious the affect of the taking causes no

damages to the residue property.

- Because there are no damages to the residue…

There is no need to value the residue so…

No before and after valuation is required.


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2. Its obvious the taking does not adversely affect the

residue.

- This means the highest and best use (HBU) does not

change

- Whatever potential the property had before the taking,

it has after the taking.

- Therefore the taking/acquisition creates a simplistic,

uncomplicated valuation problem.


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3. The highest and best use of the whole property is obvious.

- No analysis is required for a reasonable person to arrive

at the same conclusion of HBU.

- It is obvious the HBU is the same as stated in the zoning

code


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4. Its obvious that the estimated compensation from a full

before and after narrative appraisal would not result in

compensation being significantly different from that

produced in a waiver of appraisal.

- It would be a waste of taxpayer money to do a full

before and after analysis of the property to disprove

the existence of damages or to determine the

property’s HBU.


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5. The waiver of appraisal process is only used for partial

take acquisitions.

6. There can be no buildings in the take area.

- Minor site improvements or old structures having no

contributory value can be within the take area.


10 acres

1,320 ft.

330 ft

Road 5 foot SH taking House situated on rural residential home site

1,650 SF highway easement/ 0.038 acres

● 10 acres reduced to 9.962 acres

● Use of property still functionsas single family residential

● No apparent damages

● Land value in the area is$8,000 per acre

● A rough preliminary estimateof compensation is: $8,000/A x 0.038 acres = $304

● Compensation ≤ $10,000

Conclusion is the valuation problem is simplistic / no apparent damagesThe estimated compensation is less than $10,000

The scope of work for this simplistic valuation problem is The Value Analysis - Can implement the waiver of appraisal provisions in regulations

From a project management perspective:● Turn around time for preparing and

reviewing the VA should be short● Cost should not be too expensive● Good chance of settling the parcel

without appropriation

120

140

25 FT WD take

Road

Commercial retail buildingZoning is GB / General BusinessMinimum site size is 14,000 SF

WD Take is 25 x 140 = 3,500 SF

Impact to residue:● Site reduced from 16,800 SF to 13,300 SF; no

longer conforms to zoning● Parking reduced from 22 spaces to 11 spaces

There is apparent loss in value to the residue: - Insufficient parking may affect occupancy, type of tenant- Nonconforming site size may affect ability to expand, rebuild

Conclusion is the valuation problem is complex / damages are apparent

The scope of work for this complex valuation problem is “The Right of Way Appraisal Report”- Narrative appraisal that values the property before the taking and after the

taking

From a project management perspective:● Turn around time for preparing the

appraisal and reviewing will be severalmonths

● It will be expensive● Increased chance of appropriation● Possible relocation of occupant(s)

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Condition 2: Value of Proposed Acquisition ≤ $10,000

Compensation in the State of Ohio is can be for 3 things:

The Part Taken

+ Damages to the Part Not Taken

+ Temporary Easements for Construction

Compensation


An uncomplicated valuation

problem cannot have damages to

the residue

Therefore the $10,000 threshold is limited to

the Part Taken and Temporary Easements

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Condition 2: Value of Proposed Acquisition ≤ $10,000

Valuation Assumptions and Process

1. Determine the whole property

2. Determine the highest and best use of the whole

3. Value the whole property as a vacant site using the Sales

Comparison Approach

- Ignore any improvements outside the take area

- Determine the unit price of the whole

4. Allocate the unit price to the area taken

5. Add to this the value of any minor site improvements in the

take area

6. Add to this the estimated rental amount for any Temporary

Easements


Price/Acre or

Price/SF

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Condition 3: Agency determines an appraisal is unnecessary


Discuss the valuation problem caused by the

taking

Conclude if the valuation problem is

Simplistic/Uncomplicated or Complex

Have the parties representing agency sign off on this form

agreeing that this appears to be the problem and that the

VA is the correct valuation template to use.

- The Review Appraiser

- The Agency Official

- The Appraiser

Recommend the valuation format to use based

on the valuation problems previously

discussed

This form is completed before the person does

the appraisal or the Value Analysis

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5 x 1,000 = 5,000 SF

5,000 SF ÷ 43,560 SF = 0.115 acres

WD Take is: 0.115 acres

1WD 0.115 A $7,500/A None None $863 0.115 a X $7,500/a = $862.50

Rounded to: $863

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Estimating the value of the 120 acre

whole property - $7,500/acre

Allocating that value to the part taken

$7,500/A x 0.115 acres = $863

Sale History of Whole Property

ID the Whole Property

Zoning of Whole Property

HBU of Whole Property

Utility Availability of Whole Property

Sales Comparable to the Whole Property

- No adjustments are required

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Requirements for the Value Analysis

● Pages 1 and 2 of the VA form

● Photographs of the subject

● Attachments:

Sale Data Sheets

Sales Location Map

Parcel Impact Notes

Sketch of the property

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Requirements for the Value Analysis

■The preparer must physically inspect the subject property/the

take area

■ The preparer does not have to offer the owner the right of

accompaniment

■ The preparer must be qualified

- Consultants and LPA staff must be listed as approved to do

VAs on the website for Consultant Services

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Condition 4: Becoming Prequalified to do Waiver of Appraisals


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Federal Funded Early Acquisition

● Basic appraisal knowledge

● Knowledge of VA procedures

● Ability to read plans

● Must be a certified or licensed appraiser

● If not certified, then must satisfactory complete the

following ODOT classes:

- Highway Plan Reading

- Appraisal 101 - Laws

- Appraisal 102 - Valuation of Simplistic

Acquisitions

- Appraisal 105 - Appraisal Review

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Federal Funded Early Acquisition

● Provide a resume detailing:

- Work history

- Appraisal experience

- Experience with the Value Analysis

- ODOT RW courses successfully completed

- Samples of VA demonstrating competency

● Your resume along with any pertinent attachments

- Such as course certificates

- Work samples

Are submitted to the Office of Consultant Services.

● They refer the information to the Office of Real Estate

who review the information submitted.

● The Office of Real Estate makes a recommendation

to Consultant Services.

●CS makes the determination if someone is added to

the list.

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Certified Appraisers vs. USPAP vs.Waiver of Appraisals

Certified appraisers are certified because they have appraisal

licenses/certifications issued to them by the Ohio Department of

Commerce.

Certified appraisers must comply with USPAP (ORC 4763.13)

- USPAP governs the standards for appraisal in the United States

- USPAP defines appraisal as:

The act or process of developing an opinion of value; an opinion

of value – USPAP 2018-2109.

The end product of a waiver valuation is an opinion of

compensation

- This meets the definition of appraisal under USPAP


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Certified Appraisers : USPAP: Waiver of Appraisals

As the waiver is declared not an appraisal in 49 CFR Part 24

and OAC, it does not comply with USPAP standards.

There is an obvious conflict in law, regulation and

USPAP.

- The result is a certified appraiser who prepares a

waiver valuation is subject to disciplinary action by

the Ohio Department of Commerce for not complying

with USPAP (a violation of ORC 4763.13) when they do

a waiver valuation.


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Certified Appraisers : USPAP: Waiver of Appraisals

If the appraiser adds whatever is necessary to the VA to turn it

into appraisal in an attempt to comply with USPAP, the agency

must now comply with all the requirements for an appraisal

defeating the purpose of the waiver of appraisal.

To avoid the conundrum…


The Ohio Administrative Code 5501:2-5-06 (B)(3)(b)(ii)(a)

■ The language added into the OAC complies with the Jurisdictional Exception Rule in USPAP.

■ This addition to the OAC precludes the person preparing or reviewing the VA from compliance to USPAP

■ Therefore a certified appraiser only needs to properly invoke the Jurisdictional Exception Rule in USPAP when preparing

the Value Analysis and the appraiser will not be in violation of USPAP.

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FAQsWhy does ODOT require the Value Analysis to be reviewed?

■ The requirement of review does not add significant time or

cost.

■ The review helps to assure that:

- Procedures have been followed,

- Compensation is reasonable, and

- Assists the agency legal counsel to argue in an

appropriation that the agency has completed a proper

valuation of the property.


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FAQsCan 1 person estimate compensation and also negotiate?

■ Yes, so long as FMVE is $10,000 or less

■ Further, its possible on a group of parcels having simplistic

ownerships and valuations that the same person can do:

- An Abbreviated Title Report

- Prepare the Value Analysis

- Negotiate with the Owner

- Do the Closing


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END OF PRESENTATION


THE WAIVER OF APPRAISAL | Why the Waiver of Appraisal was Developed Before waivers were allowed, agencies could only create narrative appraisal reports. Narrative appraisals require

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