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Section 2: Appraisal Guidelines for LPAs

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Informational Notice to Owners Required

As required by federal regulations, an Informational Notice letter (form ROW-N-INTO) must be given to every property owner. This letter can be personally delivered to the property owner at the pre-appraisal contact or sent by Certified Mail, Return Receipt Requested.

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Pre-appraisal Contact/Interview

The pre-appraisal contact/interview (see Appendix A for guidelines) should be a personal meeting. During this meeting, give the property owner information on the overall timing of right of way acquisition, the general type of facility to be constructed, and the appraisal procedure that will follow. However, do not make a commitment to value or make an offer before receiving approved values. Use this contact to determine, initially, existence of the following items:

During pre-appraisal contact, resolve any possible controversy with the property owner by distinguishing between realty being acquired and personalty not being acquired.

LPA’s may use TxDOT’s form ROW-A-PAC, Pre-Appraisal Contact with Property Owners, during the pre-appraisal contact. LPAs should also refer to Appendix A of this manual.

R/W-PD should monitor all pre-appraisal procedures by an LPA on 90-10 projects to ensure that TxDOT’s guidelines are followed.

NOTE: LPAs should make every effort to identify potential on-site hazardous materials during the acquisition process. If the LPA suspects that donated property may be contaminated, it should obtain right of entry from the property owner and investigate prior to accepting the donation. Refer to the Environmental Checklist for LPAs.

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Establishment of Just Compensation Required

Before initiation of negotiations, appraise the real property, and have the values reviewed by a qualified review appraiser, to establish just compensation. An exception to this requirement occurs when a parcel will be donated and the property owner waives the establishment of just compensation through the appraisal process. Refer to Procedures for Receiving Donations in the Real Estate Acquisition Guide for Local Public Agencies, as well as Right of Way Donations and Exchanges in TxDOT’s Right of Way Manual Vol. 2 - Right of Way Acquisition, Chapter 6, for more information on donations.

If the state is participating in the cost of acquisition, the LPA must use TxDOT forms. Just compensation will not be approved until the appraisals are reviewed and accepted by TxDOT personnel.

The amount of just compensation will not be less than the approved appraisal, taking into account the value of allowable damages or enhancements to any remaining property. For acquisition by negotiation, just compensation is the amount established as the approved value through the appraisal process and shown on the completed form ROW-A-10, Tabulation of Values. For more information, refer to Chapter 6 of this manual.

In accordance with the agreement, the county judge, city mayor, or their appointed designees shall approve all appraisal reports, thereby approving the values.

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Policies on Use of Appraisers

The LPA shall establish criteria for determining the minimum qualifications of appraisers. Appraiser qualifications shall be consistent with the level of difficulty of the appraisal assignment. As standard procedure, instead of establishing its own qualifications of appraisers, the LPA may elect to use fee appraisers approved by the department.

Appraisal assignments to fee appraisers on projects where there is federal aid in right of way and/or construction of the project may only be made to individuals that are licensed as certified residential or certified general appraisers by the Texas Appraiser Licensing and Certification Board. The appraisal assignment must fall within the scope of practice permitted under the appraiser’s licensure level. TxDOT ROW Division HQ maintains a roster of department-certified appraisers, and the roster is available in the R/W-PD office. In addition, TxDOT’s list of approved fee appraisers contains the certification/license information for each appraiser and may be used by the LPA for reference and verification.

No appraiser or review appraiser shall have any interest, direct or indirect, in the real property being appraised for the LPA that would lead to a conflict with the preparation or review of the appraisal. Compensation for making an appraisal shall not be based on the amount of the valuation.

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Appraisal Standards

A detailed appraisal shall reflect nationally recognized appraisal standards, including, to the extent appropriate, the Uniform Appraisal Standards for Federal Land Acquisition and Uniform Standards of Professional Appraisal Practice (USPAP). An appraisal must contain sufficient documentation, including valuation data and the appraiser's analysis of that data, to support his or her opinion of value. LPAs are encouraged to consult with TxDOT Right of Way personnel regarding acquisitions that require a detailed appraisal as well as those presenting uncomplicated valuations. As a minimum, the LPA appraiser shall prepare complete appraisal reports on each parcel to be acquired utilizing TxDOT forms ROW-A-5 and/or ROW-A-6 as applicable. Reports shall be signed by the assigned appraiser only. This requirement does not preclude the assigned appraiser from accepting significant professional assistance from competent personnel as long as the assistance is appropriately documented per USPAP requirements.

The LPA shall develop minimum standards for appraisals consistent with established and commonly accepted appraisal practice for those acquisitions that, by virtue of low value or simplicity, do not require the in‑depth analysis and presentation necessary in a detailed appraisal.

An appraisal is not required if the owner is donating the property and releases the LPA from this obligation.

If LPA determines that a formal appraisal is unnecessary because the valuation problem is uncomplicated and the fair market value is estimated at $10,000.00 or less, based on a review of available data, and there is no state cost participation involved, it shall use the form ROW-A-PVD, Parcel Value Determination for LPAs. When form ROW-A-PVD is used , the report shall be completed by agency personnel with sufficient understanding of the local real estate market to be qualified to make the parcel value determination. The ROW-A-PVD shall be submitted with supporting documentation to TxDOT for its review and acceptance. Should TxDOT disapprove the value, either additional documentation or a formal appraisal will be required. If state cost participation is involved, the LPA must use a TxDOT department-certified appraiser to prepare a formal appraisal report.

An administrative settlement may be made on a parcel value determination, even if the total settlement may exceed $10,000.00. For more information on administrative settlements, refer to Administrative Settlements in the Real Estate Acquisition Guide for Local Public Agencies.

The Uniform Act requires that the property owner, or the owner's designated representative, be given an opportunity to accompany the appraiser during the appraiser's inspection of the property. The invitation to the property owner may be given either by the acquiring agency or by the appraiser. The invitation should be made in writing, with sufficient lead-time for the owner to arrange to be present or to request an alternative time. If the owner declines the invitation to accompany the appraiser, the declination should also be in writing and be retained in the agency's file. A form type of letter may be used for this purpose. TxDOT personnel should be consulted if additional information regarding owner accompaniment is desired.

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Appraisal Review Requirements

The LPA shall have an appraisal review process that includes as a minimum:

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  • A qualified review appraiser shall examine all appraisals to assure that they meet TxDOT appraisal requirements and shall, prior to acceptance, seek correction or revision of those that do not.
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  • If the review appraiser is unable to approve or recommend approval of an appraisal as adequate support for compensation, the review appraiser may develop appraisal documentation to support a new value conclusion or recommend a new appraisal be ordered.
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  • The review appraiser's certification and the recommended or approved value of the property shall be set forth in a signed written statement that identifies the appraisal reports reviewed and explains the basis for such determination. Any damages or enhancements to any remaining property shall also be identified in the statement.
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  • The environmental condition of the property.

The review appraiser plays an important role in the acquisition process and is charged with a great deal of responsibility. Persons assigned this task should be thoroughly qualified by education and experience to review appraisal and specialty reports to ensure that the approved estimate of fair market value is reasonably supported. Review appraisers are also responsible for obtaining corrections and/or revisions to reports when necessary. For details concerning specific educational and experience qualifications and for assistance in selecting qualified review appraisers, LPAs are encouraged to contact TxDOT right of way personnel. They should also refer to Appendix B, Appraisal Review Guide and Corrections Report, for checklists to aid right of way map and appraisal review.

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Policies on Appraisal and State Acquisition of Improvements

Include all buildings, structures, or other improvements located on right of way parcels in appraisals, whether owned by landowner or lessees, when determined to be real property under state law.

The LPA may make payments to the property owner, acquiring all improvements in the name of the state on state program system projects. Alternately, the LPA may allow the property owner to retain improvements. Make appropriate reductions in the parcel price if the property owner retains improvements.

If an improvement is classified as a Category II bisection, a supplemental paragraph will be submitted on the Tabulation of Values, signed by responsible engineering personnel stating that the cutting of the building is a design and location requirement and that any reduction in right of way would adversely affect requirements for highway purposes. This recommendation will then bear the signature of the district engineer.

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Updating Offer of Just Compensation

Have an appraisal updated or obtain a new appraisal if any of the following conditions occur:

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  • Information provided by the property owner indicates a need for a new or updated appraisal, such as the owner locating an overlooked improvement.
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  • A material change in the property’s condition indicates a need for a new or updated appraisal.
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  • Significant time passes since the last appraisal.
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  • Real estate market conditions change significantly.

If the updated appraisal report or new appraisal received prior to the filing of the condemnation petition indicates a need to change the just compensation purchase offer, then submit the appraisal and a revised written offer to the property owner. The revised written offer must rescind the original offer.

For updated appraisals acquired after the filing of the condemnation petition, a revised offer is not required. However, send a copy of the appraisal to the property owner along with a ROW-N-PostPetition transmittal letter.

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