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Section 3: Form ROW-A-5, Real Estate Appraisal Report

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Usage

Form ROW-A-5 has been designed for use in appraising all right of way parcels, both whole and partial acquisitions. It may be employed when estimating value for maintenance sites, aviation, surplus property sales and leases and other departmental uses as necessary. This form meets Federal Highway Administration requirements and is designed to comply with current industry standards. It is the appraisers’ responsibility to ensure that each report complies with federal, state, and USPAP requirements.

This form is distinguished from the other three types of valuation formats in that it documents the value of the whole property, the value of the part to be acquired and the values of the remainders before and after the acquisition. It provides for the utilization of the three approaches to value. If a particular approach to value is considered not applicable, the appraiser will state the reason why that approach does not apply. This form should be utilized in complex acquisitions involving significant improvements, damages, or enhancements and is recommended for eminent domain proceedings or where the other valuation formats are not appropriate.

NOTE: One copy of the appraisal report is to be submitted to the ROW Division HQ by R/W-PD.

This form is created to value properties in a simple, flexible format. The whole, part to be acquired, and remainder after will be separated into sections. Each section will carry an assigned standardized page indicator. For partial acquisitions, not all approaches will be applicable to every appraisal assignment. Any approach omitted must be explained on the appropriate Property Valuation Summary page. For whole property acquisitions, sections four, five and six should be omitted.

This form includes four multiple-use pages. They are Property Valuation Summary (PVS), Sale Comparison Approach (SCA), Cost Approach (CA), and Income Approach (IA). The specific numbering of these multiple-use pages is developed in the table below and further discussed within each section and will be used on all ROW-A-5 reports.

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Page Numbering

For best use of the multiple-use pages, TxDOT has developed a specific numbering system. Form ROW-A-5 appraisal assignments will require the use of this numbering system as outlined below in Table 4-1 below.

The narrative discussion, maps, and supportive information should be numbered in a progressive sequence following this format. Supportive information will follow the stated page and be numbered sequentially (i.e., PVS 3.1, PVS 3.2, PVS 3.3, etc.). See the next page for an explanatory page-numbering chart.

NOTE: Throughout the following instructions, the bold letter “X” inserted at a page reference is used to denote the need for sequential sub-numbering of pages by the appraiser, i.e., PVS-2.

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Section

Title of Page

Report Page Number

ONE

Property Identification and Certification

1

USPAP Requirements/Salient Facts Page

1.1

TWO

Photographs of Subject Property

2

Additional Photographs of Subject Property

2.X

Area and Neighborhood Analysis

2.X

Site Analysis

2.X

Improvement Analysis

2.X

THREE

Whole Property Valuation Summary

3.1

Additional Highest and Best Use Discussion

3.X

Sales Comparison Approach (Land), Documentation & Form ROW-A-5S

3.X

Cost Approach (Whole) & Documentation

3.X

Sales Comparison Approach (Improved), Documentation & Form ROW-A-5S

3.X

Income Approach & Documentation

3.X

FOUR (If required)

Part to be Acquired and Remainder Before the Acquisition

4.A

Economic Unit Analysis (if not discussed in the Whole)

4.B

FOUR

Part to be Acquired Property Valuation Summary

4.1

Additional Highest and Best Use Discussion

4.X

Sales Comparison Approach (Land), Documentation & Form ROW-A-5S

4.X

Cost Approach & Documentation

4.X

Sales Comparison Approach (Improved), Documentation & Form ROW-A-5S

4.X

Income Approach & Documentation

4.X

FIVE

Remainder Property Valuation Summary

5.1

Additional Highest and Best Use Discussion

5.X

Sales Comparison Approach (Land), Documentation & Form ROW-A-5S

5.X

Cost Approach (Remainder) & Documentation

5.X

Sales Comparison Approach (Improved), Documentation & Form ROW-A-5S

5.X

Income Approach & Documentation

5.X

SIX

Compensation Summary

6

SEVEN

Addendum



Table 4-1: ROW-A-5 Numbering System Chart

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Section One: Identification, Definitions, and Certification

Page 1 - This page identifies the parcel, account, property address, and other pertinent items. It also classifies the property as a whole or partial acquisition. The Federal Project Number is required on page 1, when applicable. In addition, on the first page, the purpose of the appraisal is stated and the market value is defined. The “Certificate of Appraiser” includes the appraiser’s estimate of value as of a given date, and the dates the subject and the comparables were inspected.

It is the appraiser’s obligation to provide the property owner or their representative the opportunity to accompany the appraiser during the property inspection. The individual who accompanies the appraiser must be identified.

A new page 1 of this form must be submitted to R/W-PD when a report is revised, supplemented or the date of valuation changes. Data must be provided when the revision affects the final estimate of value. A transmittal letter must accompany the submission in all cases.

The appraiser’s name should appear in print followed by their certification number. The appraiser is required to sign and date the appraisal report. The appraisal reviewer is required to sign the report.

Compliance with USPAP requirements should follow page 1. If it is appropriate and the appraiser feels it is necessary to invoke a jurisdictional exception, specific comments and discussion should be developed on an attached page 1.1.

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Section Two: Photographs, Neighborhood, Site, And Improvement Analysis

Page 2 - Photographs of the Subject: One or two color photographs will be sufficient when appraising vacant land. On improved properties, a color photograph identifying each significant improvement should be included. Items in the part acquired or bisected by the new right of way line must be photographed. It is essential that photographs clearly show each improvement within the area to be acquired. The intent of these photographs is to depict the condition of the improvements and to support the conclusions within the report. This page may be repeated to accommodate additional photographs. These additional pages will be numbered sequentially (i.e., 2.1, 2.2, etc.).

The description of the whole property should follow the picture pages and be numbered according to the instructions. The subject property should be discussed in a narrative manner. Analysis of the whole property will include area, neighborhood, site, improvement, maps, and sketches.

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  • Area and Neighborhood Analysis: Neighborhood boundaries may be identified by significant arterial or geographical limitations shown in a boundary map. A brief narrative discussion may be included.
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    • The following is an example of how the information may be presented. The tables are included to assist in visualization of the required information. The format may vary but the content must remain unabridged.
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      Location

      Urban

      Suburban

      Rural

      Development Stage

      Over 75%

      25 - 75%

      Under 25%

      Growth Rate

      Rapid

      Steady

      Slow

      Property Values

      Increasing

      Stable

      Declining



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    • A brief narrative discussion should include social, economic, governmental, and environmental factors and provide support for the information presented.
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  • Site Analysis: The description of the site should follow the area map and be numbered according to the instructions. The site may be presented in a table format or discussed in a narrative manner. The following features should be discussed.
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  • Utility Services:
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  • Give a description of each item:
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    • Legal Description: A general description of the whole property should include information as contained in the most recent conveyance. Examples are lot and block, grant and township, or abstract identification.
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    • Five-Year Sales History: Identify any transactions involving the subject property during the previous five years. Identification should include county record page, date of sale and parties involved.
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    • Location: Arterial linkage, distance to schools, shopping, employment centers, etc.
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    • Current Roadway Design: Existing surface type, lane delineation, drainage, and existing access.
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    • Soil/Subsoil Conditions: Type of soil, desirability for development, suitability for use.
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    • Flood Plain: Flood zone determination, F.E.M.A. map (number), date of the map, and effect on development.
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    • Easements: Discussion of all easements including those having an adverse effect on development or use.
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    • Encroachments/Restrictions: Identify and describe each item including deed restrictions.
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    • Surrounding Land Usage: Identify and describe surrounding land uses and any effect on the subject property.
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    • A whole property sketch showing perimeters and approximate improvement location must be included. This page should follow the narrative discussion and be numbered sequentially.
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  • Improvement Analysis: This portion is designed to provide a clear and detailed description of each improvement on the subject parcel. Improvements not effected by the acquisition may be discussed in a brief narrative format. Those improvements effected by the proposed right of way line should be discussed in detail and have a separate analysis page and will be numbered sequentially. This page may be treated as an “Appraiser’s Checklist” with concise comments rather than a lengthy narrative format. The appraiser is required to identify and describe the type, condition and functional use of each of the following items:

The appraiser’s statement as to which improvements, if any, are not being appraised because they have been declared as personal property should be noted in this section (see discussion in Chapter 3, Section 2, Legal Instructions - Personalty and Realty.

The conformity of the improvements to the current Americans with Disabilities Act (ADA) should be discussed.

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  • Attach Improvements Sketch with Dimensions. An interior floor plan sketch is required for any improvement located in the area to be acquired or is bisected by the proposed right of way line. In the case of improvements affected by the acquisition, distances from both the existing and new right of way lines must be detailed in the sketch. In the case of bisected improvements, the right of way line must be shown at the point of bisection.
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Section Three: Analysis of Whole Property

Page 3 - Property Valuation Summary (PVS): This “PVS” page is a multiple-use page designed to report and summarize the applicable valuation approaches and develop the reconciliation of value. Within this section, the “PVS” page will be used for the whole property. The appraiser is to checkmark the “Whole” property box at the top of this page.

Description of easements and their effect(s) on the value of the whole property should be explained.

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  • Highest and Best Use Analysis: This section requires that the appraiser define, identify and address the four tests of highest and best use:
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    • what type of development is legally permissible;
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    • the physically possible uses of the subject parcel;
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    • the uses that are financially feasible as of the effective date of the appraisal; and finally
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    • the use that maximizes the subject’s productivity. The appraiser analyzes the subject’s highest and best use as vacant and then, if applicable, as improved. If it is determined that the subject parcel improvement(s) represent an interim use, this should be fully discussed.
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  • Valuation Approaches: Insert value estimate for the approach after the dollar sign. Briefly describe, analyze, and support each approach. Briefly describe the reasoning for any approach not developed.
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  • Reconciliation of Approaches: This portion of the page is for the discussion of the reconciliation and the justification of the final value conclusion.
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  • Contributory Value of Improvements: The contributory value of the improvements should be itemized in such a manner that a summation of the component parts will equal the total improvement value. Any depreciation and/or obsolescence should be applied individually to each component item. If rounding is necessary, the parts should be rounded separately rather than rounding the total.
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  • Land Valuation: Land size in acres, square feet, or typical units is multiplied by the unit value to arrive at the total land value.
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  • Reconciled Value. The reconciled value is the summation of the total improvement value and the land value.
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  • NOTE: Enter the actual page number you have assigned to the TxDOT multiple-use page for each approach developed. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

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  • Cost Approach: In developing the cost approach, the appraiser will use the “SCA” page to develop and support the vacant land value. The comparables should be thoroughly screened before using them in this grid. It is suggested that at least three comparables be utilized in developing the valuation grid. A full explanation is appropriate when fewer sales are utilized.

Page 3.X Land as Vacant: This “SCA” page is a multiple-use page designed to report and summarize the sales comparison approach for land. It enables the appraiser to identify, outline, and discuss the adjustments to the comparables. The use of the SCA page in the cost approach will require the appraiser to checkmark the “Whole” property and “Land” boxes provided at the top of this page.

The comparable land sales must be adjusted to the subject property. Use one word to describe the characteristic of the comparable followed by plus (+) or minus (-) and the adjustment amount. All adjustments of comparable sales must be made either on a dollar or percentage basis. The indicated unit value is the culmination of the adjustments to each sale. Adjustments for physical characteristics should be made in a composite format.

All characteristics dissimilar to the subject should be noted on the form and explained in the discussion portion of the report. A lengthy explanation is not required; however, the appraiser should explain the factual basis for the adjustment. If there is a question of comparability due to large adjustments, the appraiser should fully explain the reasoning for the use of that comparable. The explanation of the appraiser’s reasoning for the various elements of adjustment must be in sufficient detail to allow the reviewing appraiser to make a sound judgment as to the validity and acceptability of the appraiser’s adjustments. After completing the adjustment, the appraiser should arrive at an indicated value for each comparable. The estimated unit value is a reconciliation of the indicated unit values of the comparable sales. The appraiser will conclude the reconciliation explanation with a total value calculation.

Form ROW-A-5S - Comparable Data Supplement: At the top of this form, the appraiser should designate that this is a comparable land sale. This form should describe the essential facts regarding each comparable transaction. A color photograph clearly depicting the comparable is required. The appraiser and reviewing appraiser must personally inspect each comparable. The appraiser is to verify all sales information. The person with whom the sale is verified will be identified on the form. Information about each transaction is to include the names of the parties, total land area, current use, intended use, zoning, consideration paid, financing, and conditions of sale. A statement by the appraiser to the effect that the financing of the comparable sale did not affect its validity as a market value indicator is acceptable. If, however, the validity of the sale is affected by the financing, then an explanation is required of the effects of the financing on the sale as a market value indicator. For additional information, the appraiser may attach another sheet to this form. All spaces must be considered and any not applicable should be marked as N/A.

Page 3.X Cost Approach: This “CA” page is a multiple-use page designed to report the cost approach for improved properties. It enables the appraiser to identify, outline, and discuss the cost approach. In this section, this page is utilized for developing value estimates for the whole property. The appraiser is to checkmark the “Whole” property box at the top of this page.

This table is designed to document the individual improvements to the land. The space within the table denoting main building is designed to reflect the most prominent improvement. In all cases involving bisection or damages to that improvement, diagrams detailing the perimeter dimensions must support its size. Accessory improvements should include buildings that function in association with the main building. Site improvements should be itemized in the area provided.

The contributory value of all improvements is the summation of the depreciated value of the buildings, accessory, and site improvements. The land value as derived on the SCA page should be added to the contributory value of all improvements to arrive at the estimated value by the Cost Approach.

The specific sources of cost data will be shown, including volume and page numbers in case of local costs, and section and page numbers when using a valuation service. The depreciation factors and any obsolescence should be adequately documented, supported, and explained. Each type of depreciation or obsolescence must include discussion of the appraiser’s reasoning. The discussion should be in sufficient detail to allow a review appraiser to make a sound judgment regarding its validity and acceptability.

NOTE: When an appraiser refers to a building cost service in supporting the new cost of an improvement, he/she must cite the page number within the cost manual where the support for that type of improvement may be found.

All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

Page 3.X - As Improved: This “SCA” page is a multiple-use page designed to report and summarize the sales comparison approach for improved properties. It enables the appraiser to identify, outline, and discuss the adjustments to the comparables.

The comparable improved sales must be adjusted to the subject property. Use one word to describe the characteristic of the comparable followed by +/- and the adjustment amount. All adjustments of comparable sales must be made either on a dollar or percentage basis. The indicated unit value is the culmination of the adjustments to each sale. Adjustments for physical characteristics should be made in a composite format. The use of the SCA page in the sales comparison approach will require the appraiser to checkmark both the “Whole” and “Improved” boxes at the top of this page.

Use one word to describe the characteristic of the comparable followed by plus (+) or minus (-) and the adjustment amount. All adjustments of comparable improved sales must be made either on a dollar or percentage basis. The indicated unit value is the culmination of the adjustments to each sale. Adjustments for physical characteristics should be made in a composite format.

The comparable improved sales should be thoroughly screened before using them in this grid. It is suggested that at least three comparables be utilized in developing the valuation grid. A full explanation is appropriate when fewer sales are utilized.

All characteristics dissimilar to the subject should be noted on the form and explained in the discussion portion of the report. A lengthy explanation is not required; however, the appraiser should explain the basis for each adjustment. If there is a question of comparability due to large adjustments, the appraiser should fully explain the reasoning for the use of that comparable. The explanation of the appraiser’s reasoning for the various elements of adjustment must be in sufficient detail to allow the reviewing appraiser to make a sound judgment as to the validity and acceptability of the appraiser’s adjustments. A reconciliation of the comparable improved sales to an indicated value must be given. The appraiser will conclude the reconciliation explanation with a mathematical calculation. The estimated value is a reconciliation of the indicated unit values of the comparable improved sales.

Form ROW-A-5S - Comparable Data Supplement: At the top of this form, the appraiser should designate that this is a comparable improved sale. This supplement is used to describe the essential facts regarding each comparable transaction. A photograph clearly depicting the comparable is required. The appraiser and reviewing appraiser must personally inspect each comparable. The appraiser is to verify the sales information of each sale. The person with whom the sale is verified will be identified on the form. Information about each sale is to include the names of the buyer and seller, total land area, gross building area, net rentable area, complete improvement description, current use, intended use, zoning/restriction, consideration paid, financing, and conditions of sale.

If the validity of the sale is affected by the financing, then an explanation is required. If additional information is required, the appraiser may attach a separate sheet to this form. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

Page 3.X - Income Approach: This “IA” page is a multiple-use page designed to report and summarize the income approach. It allows the appraiser to identify, outline, and discuss the income stream and expenses to the property. The use of this page will require the appraiser to checkmark the “Whole” property box at the top of this page.

This income approach to value is based on the valuation of the real property involved and not the business being conducted on the property. Income attributable to the personal equipment of a business should not be included in the valuation of the real property. However, non-equipment related income to the property must be explained. If this type of income approach is not used, a thorough explanation must be included. Questions pertaining to personalty versus real property should be directed to ROW Division HQ. The appraiser must furnish full documentation and explanation of the income, vacancy, and expense assumptions. Capitalization rate methodology used to derive the estimate of value must also be supported. Such support and explanation should be shown on the lower portion of this page. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

The appraiser is not limited to the use of the direct capitalization methodology in estimating value. If a discounted cash flow (DCF) analysis, building residual technique, or other technique is more appropriate to the valuation of the subject, then that technique should be presented on the lower portion of this page. It may be appropriate to provide more than one technique to support a value conclusion.

For residential properties, the gross rent multiplier (rather than the direct capitalization technique) will perhaps better reflect the reactions of the market. If the gross rent multiplier is used, sales establishing the multiplier should be included in the report using the Comparable Data Supplement pages.

In some instances, it may be necessary for the appraiser to include factors not accounted for in the typical direct capitalization calculation. If supported by the market, the value of excess land should also be reflected on the line provided on this page.

Form ROW-A-5S - Comparable Data Supplement: At the top of this form, the appraiser should designate that this is a comparable rental. This supplement is used to describe the essential facts regarding each comparable transaction. A photograph clearly depicting the comparable is required. The appraiser and reviewing appraiser must personally inspect each comparable. The appraiser is to verify the lease information on each comparable rental property. The person with whom the lease information is verified will be identified on this form. Information about each rental is to include the rental rate, lease term, occupancy and tenant information, operating expenses, any special lease terms, and the parties named in the lease. If additional information is required, the appraiser may attach another sheet to this form.

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Section Four: Analysis Of The Part To Be Acquired

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  • Page 4 - Part to be Acquired & Remainder Before the Acquisition: This page is required for partial acquisitions. The top portion of the page is a summary of the valuation of the part to be acquired. If rounding is necessary, the parts should be rounded separately rather than rounding the total. If the part to be acquired derives its value from the whole property, then the appraiser may estimate the value of the part to be acquired based on the whole property analysis. A separate Page 4.A could be prepared by the appraiser to describe the part to be acquired, its highest and best use and whether it is or not a separate economic unit.
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  • Page 4 - Remainder Before the Acquisition: The bottom portion of this page is for a summary of the component parts of the remainder before the acquisition. The value indicated in this section of the report is based on a mathematical calculation wherein the part to be acquired is deducted from the whole property. This amount sets the basis for the calculation of any damages or enhancements to the remainder after the acquisition.
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  • Page 4.1 - Property Valuation Summary of the Part to be Acquired (if applicable): This “PVS” page is a multiple-use page designed to report and summarize the applicable valuation approaches and develop the reconciliation of value. A PVS page will be used if the part to be acquired is determined to be a separate economic unit, with its own separate components of land valuation, cost approach, and/or income approaches. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

This portion of the report is considered a new appraisal. Some of the data previously used may be utilized in the valuation of the part to be acquired. The appraiser should explain any changes in the character of the subject. This applies to changes in the site, improvement, and highest and best use analyses in the part to be acquired. The appraiser is to checkmark the “Part to be Acquired” box at the top of the form.

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  • Highest and Best Use Analysis: A change in the Highest and Best Use in the Part to be Acquired condition requires a detailed discussion. When the Highest and Best Use differs from that of the whole property, the sales comparables chosen should reflect the different use. This section requires that the appraiser define, identify, and address the four tests of highest and best use: (1) what type of development is legally permissible; (2) the physically possible uses of the subject parcel; (3) the uses that are financially feasible as of the effective date of the appraisal; and finally, (4) the use that maximizes the subject’s productivity. The appraiser analyzes the subject’s highest and best use as vacant and then, if applicable, as improved. If it is determined that the subject’s improvements represent an interim use, this should be fully discussed.
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  • Approaches to Value: Insert the value estimate after the dollar sign and then briefly describe the analysis and support that approach. If not applicable, then briefly describe the reasoning. Each approach will be handled in a similar manner.
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  • Reconciliation: This section is for the discussion of the reconciliation and the justification of the final value conclusion. The reconciled value is the summation of the total improvement value and the land value.
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  • Contributory Value of Improvements: The contributory value of the improvements should be itemized in such a manner that a summation of the component parts will equal the total improvement value. Any depreciation and/or obsolescence should be applied individually to each component item. If rounding is necessary, the parts should be rounded separately rather than rounding the total.
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  • Land Valuation: The land size of the part to be acquired in acres, square feet, or typical units is multiplied by the unit value to arrive at the total contributory land value.
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  • NOTE: Enter the actual page number (4.2, 4.3, etc.) you have assigned to the TxDOT multiple-use page for each approach developed. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system. The “Part Acquired” boxes should also be check marked at the top of each page in this section.

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Section Five: Analysis Of Remainder Property

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  • Page 5 - Property Valuation Summary of the Remainder After: This “PVS” page is a multiple-use page designed to report and summarize the applicable valuation approaches and develop the reconciliation of value. A separate PVS page will be used for the remainder after property. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system (Pages 5.1, 5.2, etc).
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  • This portion of the report is considered a new appraisal. Some of the data previously used may be utilized in the valuation of the remainder after property. The appraiser should explain any changes in the character of the subject. This applies to changes in the site, improvement, and highest and best use analyses in the remainder after the acquisition. In the appraisal of the remainder after the acquisition, the appraiser will be faced with possible damages and/or “cost to cure.” The matter of whether damage is compensable or non-compensable is a legal matter rather than an appraisal issue. If there is a question regarding compensability, R/W-PD should be contacted.

The appraiser is to checkmark the “Remainder After” box at the top of each of the pages in this section.

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  • Highest and Best Use Analysis: A change in the Highest and Best Use in the remainder after condition requires a detailed discussion. When the Highest and Best Use differs from that of the whole property (and/or of the Part to be Acquired), the sales comparables chosen should reflect the different use. This section requires that the appraiser define, identify, and address the four tests of highest and best use: (1) what type of development is legally permissible; (2) the physically possible uses of the subject parcel; (3) the uses that are financially feasible as of the effective date of the appraisal; and finally, (4) the use that maximizes the subject’s productivity. The appraiser analyzes the subject’s highest and best use as vacant and then, if applicable, as improved. If it is determined that the subject’s improvements represent an interim use, this should be fully discussed.
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  • Approaches to Value: Insert the value estimate after the dollar sign and then briefly describe the analysis and support that approach. If not applicable, then briefly describe the reasoning. Each approach will be handled in a similar manner.
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  • Reconciliation: This section is for the discussion of the reconciliation and the justification of the final value conclusion. The reconciled value is the summation of the total improvement value and the land value.
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  • Contributory Value of Improvements: The contributory value of the improvements should be itemized in such a manner that a summation of the component parts will equal the total improvement’s value in the remainder after. Any depreciation and/or obsolescence should be applied individually to each component item. If rounding is necessary, the parts should be rounded separately rather than rounding the total. If there is NO contributory value of an improvement(s) because of the state’s acquisition, this should be fully explained (proximity, bisected improvement, loss of use, etc).
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  • Land Valuation: The remainder after land size in acres, square feet, or typical units is multiplied by the unit value to arrive at the total contributory land value.
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  • NOTE: Enter the actual page number you have assigned to the TxDOT multiple-use page for each approach developed. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system (Pages 5.1, 5.2, etc).

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  • Page 5.X - Land As Vacant: This “SCA” page is a multiple-use page designed to report and summarize the sales comparison approach for land and improved properties. It allows the appraiser to identify, outline, and discuss the adjustments to the remainder after comparables.
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  • The comparable sales must be adjusted to the subject remainder after property. Use one word to describe the characteristic of the comparable followed by plus (+) or minus (-) and the adjustment amount. All adjustments of comparable sales must be made either on a dollar or percentage basis. The indicated unit value is the culmination of the adjustments to each sale. Adjustments for physical characteristics should be made in a composite format.

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  • In developing the cost approach, the appraiser will use the SCA page to develop and support the vacant land value of the remainder after. The use of the SCA page in the cost approach will require the appraiser to checkmark the “Remainder After” and “Land” boxes at the top of this page.

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  • The remainder after comparables should be thoroughly screened before using them in this grid. It is suggested that at least three comparables be utilized in developing the valuation grid. A full explanation is appropriate when fewer sales are utilized.

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  • All characteristics dissimilar to the subject should be noted on the form and explained in the discussion portion of the report. A lengthy explanation is not required; however, the appraiser should explain the basis for the adjustment. If there is a question of comparability due to large adjustments, the appraiser should fully explain the reasoning for the use of that comparable. The explanation of the appraiser’s reasoning for the various elements of adjustment must be in sufficient detail to allow the reviewing appraiser to make a sound judgment as to the validity and acceptability of the appraiser’s adjustments. A reconciliation of the sales to an indicated value must be given. The appraiser will conclude the reconciliation explanation with a mathematical calculation. The estimated value is a reconciliation of the indicated unit values of the comparable sales.

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  • Form ROW-A-5S - Comparable Data Supplement: At the top of this form, the appraiser should designate that this is a comparable land sale. This form should describe the essential facts regarding each comparable transaction. A photograph clearly depicting the comparable is required. The appraiser and reviewing appraiser must personally inspect each comparable. The appraiser is to verify the sales information of each sale. The person with whom the sale is verified will be identified on the form. Information about each transaction is to include the names of the parties, total land area, current use, intended use, zoning, consideration paid, financing, and conditions of sale. A statement by the appraiser to the effect that the financing of the comparable sale did not affect its validity as a market value indicator is acceptable. If, however, the validity of the sale is affected by the financing, then an explanation is required of the effects of the financing on the sale as a market value indicator. For additional information, the appraiser may attach another sheet to this form. All spaces must be considered and any not applicable should be marked as N/A.

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  • Page 5.X - Cost Approach: This “CA” page is a multiple-use page designed to report the cost approach for improved properties. It allows the appraiser to identify, outline, and discuss the cost approach. This page may be utilized for developing value estimates for the remainder after. The appraiser is to checkmark the “Remainder After” box at the top of this page.
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  • This table is designed to document the individual improvements on the remainder after land. The space within the table denoting main building is designed to reflect the most prominent improvement on the remainder after. The remaining accessory improvements should include buildings that continue to function. Site improvements with contributory value should be itemized in the area provided.

    The contributory value of all improvements is the summation of the depreciated value of the buildings, accessory, and site improvements. If there is NO contributory value of an improvement(s) because of the state’s acquisition, this should be fully explained (proximity, bisected improvement, loss of use, etc). The remainder after land value as derived on the SCA page should be added to the contributory value of all improvements to arrive at the estimated value by the Cost Approach.

    The specific sources of cost data will be shown, including volume and page numbers if appropriate. The depreciation factors and any obsolescence should be adequately documented, supported, and explained. Each type of depreciation or obsolescence must include discussion of the appraiser’s reasoning. The discussion should be in sufficient detail to allow a review appraiser to make a sound judgment regarding its validity and acceptability.

    If there is a reduction in value, that reduction must be explained and supported by market information, if applicable.

    All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

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  • Page 5.X - Sales Comparison Approach - As Improved: This “SCA” page is a multiple-use page designed to report and summarize the sales comparison approach for improved properties. It allows the appraiser to identify, outline, and discuss the adjustments to the comparables.
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  • The comparable improved sales must be adjusted to the remainder after property. Use one word to describe the characteristic of the comparable followed by plus (+) or minus (-) and the adjustment amount. All adjustments of comparable sales must be made either on a dollar or percentage basis. The indicated unit value is the culmination of the adjustments to each sale. Adjustments for physical characteristics should be made in a composite format. The use of the SCA page in the sales comparison approach will require the appraiser to checkmark the “Remainder After” and “Improved” boxes at the top of this page.

    The comparables should be thoroughly screened before using them in this grid. It is suggested that at least three comparables be utilized in developing the valuation grid. A full explanation is appropriate when fewer sales are utilized.

    All characteristics dissimilar to the subject should be noted on the form and explained in the discussion portion of the report. A lengthy explanation is not required; however, the appraiser should explain the basis for the adjustment. If there is a question of comparability due to large adjustments, the appraiser should fully explain the reasoning for the use of that comparable. The explanation of the appraiser’s reasoning for the various elements of adjustment must be in sufficient detail to allow the reviewing appraiser to make a sound judgment as to the validity and acceptability of the appraiser’s adjustments. A reconciliation of the sales to an indicated value must be given. The appraiser will conclude the reconciliation explanation with a mathematical calculation. The estimated value is a reconciliation of the indicated unit values of the comparable sales.

    Form ROW-A-5S - Comparable Data Supplement: At the top of this form, the appraiser should designate that this is a comparable improved sale. This supplement is used to describe the essential facts regarding each comparable transaction. A photograph clearly depicting the comparable is required. The appraiser and reviewing appraiser must personally inspect each comparable. The appraiser is to verify the sales information of each sale. The person with whom the sale is verified will be identified on the form. Information about each sale is to include the names of the buyer and seller, total land area, gross building area, net rentable area, complete improvement description, current use, intended use, zoning/restriction, consideration paid, financing, and conditions of sale.

    If the validity of the sale is affected by the financing, then an explanation is required. If additional information is required, the appraiser may attach a separate sheet to this form. All supporting documentation should follow each promulgated page and be numbered sequentially using the structured page numbering system.

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  • Page 5.X - Income Approach: This “IA” page is a multiple-use page designed to report and summarize the income approach for the remainder after. It allows the appraiser to identify, outline, and discuss the income stream and expenses to the property.
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  • The use of this page will require the appraiser to checkmark the “Remainder After” box at the top of this page.

    If the income stream is impacted by the acquisition, it should be reflected in this approach. New rental comparables may be selected. Other factors affecting the income stream such as, reduced rental income, vacancy, or expenses should also be considered.

    The appraiser is not limited to the use of the direct capitalization methodology in estimating value. If a discounted cash flow (DCF) analysis, building residual technique, or other technique is more appropriate to the valuation of the subject, then that technique should be presented on the lower portion of this page. It may be appropriate to provide more than one technique to support a value conclusion.

    For residential properties, the gross rent multiplier (rather than direct capitalization technique) will perhaps better reflect the reactions of the market. If the gross rent multiplier is used, sales establishing the multiplier should be included in the report using the Comparable Data Supplement pages.

    In some instances, it may be necessary for the appraiser to include factors not accounted for in the typical direct capitalization calculation. If supported by the market, the value of excess land should be reflected on the line provided.

    Form ROW-A-5S - Comparable Data Supplement: At the top of this form, the appraiser should designate that this is a comparable rental. This supplement is used to describe the essential facts regarding each comparable transaction. A photograph clearly depicting the comparable is required. The appraiser and reviewing appraiser must personally inspect each comparable. The appraiser is to verify the lease information on each comparable rental property. The person with whom the lease information is verified will be identified on this form. Information about each rental is to include the rental rate, lease term, occupancy and tenant information, operating expenses, any special lease terms, and the parties named in the lease. If additional information is required, the appraiser may attach another sheet to this form.

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Section Six: Compensation Summary

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  • Page 6: Compensation Summary The top portion of this page has a section for an explanation of Damages and/or Cost to Cure Estimates. According to The Dictionary of Real Estate Appraisal, “cost to cure” may be defined as “The cost to restore an item of deferred maintenance to new or reasonably new condition.” The American Institute of Real Estate Appraiser’s 1995 publication, Real Estate Valuation in Litigation, cost to cure is defined as the method “used in situations where a property has suffered a damage which can be physically and economically corrected, e.g., correction of drainage, replacement of fencing, reestablishment of physical access, and replacement of sewage or water systems. Under no circumstances, however, can the cost to cure measure of damage be applied if the cost to cure exceeds the diminution in value if such cure were not undertaken.” The appraiser should discuss the cost to cure analysis and its feasibility.
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  • This section is the appropriate place for the appraiser to reference a technical expert’s report(s) relied upon to arrive at a cost to cure. The technical expert’s report(s) should be included in an addendum in or to the appraisal report.

    Care must be exercised to avoid any double compensation. An example would be the payment of a private water line or fence as an improvement and a “cost to cure” payment for replacing it (the double compensation would occur if the improvement’s depreciated value was not deducted from the cost of replacing it to determine its “net” cost to cure).

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  • Compensation Summary: The bottom portion of this page is a summary of the compensation due the property owner because of the state’s acquisition. This table will show the value of the whole property, the value of the part to be acquired, the value of the remainder before the acquisition, the value of the remainder after the acquisition, and any damages or enhancements resulting from the acquisition. If it is necessary to include a separate cost to cure, the amount should be inserted below Net Damages or Enhancement. This item may be included in the Total Compensation. The total compensation shown on this page is the same as the compensation figure reflected on page 1.
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Section Seven: Addendum

Items in the addendum should be sequenced as they appear. Some appraisers prefer to insert all of their comparable sales forms and maps in the addendum rather than within the body of the appraisal report.

Other items in the Addendum can include the appraiser’s “Certificate of Value”; “Contingent and Limiting Conditions”; “Basic Assumptions”; and his/her list of Qualifications such as educational background, work experience, professional affiliations/designations, and partial list of clientele, etc.

As stated beforehand, technical expert’s reports can be included in the Addendum or furnished by separate cover.

Form ROW-A-9, Property Classification Agreement, should also be included in the Addendum if it was secured to declare personalty items that were not appraised as realty items within the appraisal report (see Section 2, Legal Instructions - Personalty and Realty, of Chapter 3).

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