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Section 5: Procedures on Appraisals of Specific Types & Situations

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Advertising Sign Interests

Please read the detailed discussion in Volume 2, Chapter 7, Section 1, of TxDOT’s Right of Way Manual, before beginning an appraisal of a parcel that includes an outdoor advertising sign structure. The following is a very brief summary of the procedures applicable to advertising sign interests:

  • If the property owner does own the sign structure, then proceed with conducting the appraisal, and advise the appraiser of such ownership. The appraiser should be instructed to consider the sign structure itself to be personal property and not include the value of the structure in the appraisal of the real property.
  • If the property owner does not own the advertising sign, do not acquire the sign structure as part of the land being acquired, but consider the sign structure itself to be personal property.

If the District has been able to verify that there is a valid ground lease associated with the sign structure currently in effect with a remaining term of more than a month to month time period, the appraisal of the parcel may proceed, with the appraiser being instructed to consider the sign structure itself to be personal property and not include the value of the structure in the appraisal of the real property. All information obtained relating to the terms of the ground lease that is associated with the sign should be provided to the appraiser, and the appraiser should consider the ground lease as part of the real property appraisal in the manner set out below.

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Advertising Sign Sites

Sign sites for off premise advertising signs shall be valued for the present value of the land lease or by the analysis of comparable sign site sales. An advertising sign site becomes compensable as a property interest only if a legal advertising sign is unable to be relocated under the procedures discussed in Volume 2, Chapter 7, Section 1, of TxDOT’s Right of Way Manual. The present value of the sign site may be found by the appraiser by discounting the remaining lease payments to the date of the appraisal using market-derived data. It is required that a current written and executed lease must be in effect for the subject site to be compensable.

The valuation of sign sites utilizing discounted cash flow must be based on the economic or market rent derived from comparable sign site rentals. Discounting factors such as vacancy rates, expenses and discount rates are to be derived from market-derived data. As a guide and check, the value of a sign site should not exceed the capitalized value of the site. The above information and observations apply to how such a ground lease may affect the overall valuation of the parcel itself, relating to the value for owner of such parcel.

In the event an appraiser has found a “bonus value” or leasehold value for the sign owner as lessee, the appraiser should be mindful that this value exists at the disadvantage of the lessor or fee owner. A bonus value is a favorable lease for the lessee that provides for less rent than the market rent which results in a compensable value for the lessee. Therefore, the bonus value of sign site must be excluded from the site value for the owner if their valuation is based on market rents.

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Americans with Disabilities Act (ADA)

Appraisers and review appraisers must remember that existing improvements on a parcel may not comply with ADA requirements, which could affect their market value. Appraisal reports contain statements on “Basic Assumptions” and/or “Contingent and Limiting Conditions” such as:

“It is assumed that there is full compliance with all applicable federal, state, and local land use laws and environmental regulations and unless non-compliance is noted, described , and considered herein.”

Some appraisers may comment:

“The Americans with Disabilities Act (ADA) became effective January 26, 1992. The appraiser has not made a specific compliance survey and /or analysis of this property to determine whether it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property does not comply with one or more elements of the ADA. If so, this fact could have a negative effect upon the value of the property. Since the appraiser has no direct evidence relating to this issue, the appraiser did not consider possible noncompliance with the requirements of the ADA in estimating the value of the subject property.”

Though the above-noted statements may be made in appraisal reports, if an improvement is being “Category II” bisected, and depending on local requirements, older improvements may need “cost to cure” measures to add ramps, elevators, and/or other special equipment to comply with ADA requirements. A technical expert’s report could be secured to help determine the adequate measures and costs for the improvement’s compliance with ADA.

For further information and study, a special Federal website lists various publications and regulations on ADA.

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Bisected Improvements

A bisected improvement is a building or structure severed by the proposed right of way line. Special consideration must be given to bisected improvements in the appraisal process and in recommending values.

In order to classify each bisected improvement properly, as acquired in its entirety, (Category I), or partially acquired, (Category II), one of the following should be determined:

  • Category I: If the part of the bisected improvement remaining outside of the right of way cannot be reconstructed to restore its use economically or if there is nothing but salvage left, the entire structure may be acquired by purchase or condemnation.
  • Category II: If the part of the bisected improvement outside of the right of way can be reconstructed to restore its use economically, then it cannot be acquired by purchase or condemnation.

If the right of way line bisects an improvement, the appraiser should be instructed to make the appraisal on the basis that the bisection will occur. A technical expert may be contracted to assist the appraiser in determining if the use of the improvement has been destroyed and/or determine the costs that would have to be incurred in restoring its use to the bisected improvement.

The appraisal report will then include the information necessary for the District in its review to determine if the use of the improvement has been destroyed. The appraisal report will include the information needed to arrive at a value based on acquiring either the entire improvement or only the part located within the right of way. If it becomes necessary later to acquire the parcel by eminent domain proceedings, and the whole improvement is to be acquired, the appraiser should be instructed to appraise the bisected improvement as a whole unit and as being located in the right of way acquisition.

The appraiser should also be instructed that TxDOT usually bears the demolition cost of a Category I bisected improvement within the State’s right of way (unless it is retained/removed by the property owner). If a bisected improvement is Category II, TxDOT bears the demolition costs to remove the bisected portion within the State’s right of way and the appraiser should include restorative costs as damages to the remainder.

District right of way personnel will review the appraisal reports and inspect the bisected improvement to make such determination and specifically recommend the Category into which the structure falls, (either I or II). This recommendation should be made in the reviewing appraiser’s review comments for the parcel involved. This recommendation must identify the improvement and include a discussion of the appraisal data. If the structure is classified as Category II bisection in ROWIS, a supplemental paragraph will be automatically added to the ROW-A-10. It will be 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 transportation purposes.” This recommendation will then bear the signature of the District Engineer; however, the designated representative must be a Texas Licensed Professional Engineer.

If it is determined that the improvement is properly classified as Category I and therefore to be acquired in its entirety, the recommended value on the ROW-A-10 will show the value of the improvement as determined in the appraisal report, and no appraised damages will be shown to the remainder of the improvement. The indicated value for the whole improvement will be supported within the appraisal reports.

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Canals or Irrigation Lines in Private Ownership

If a privately owned irrigation line, irrigation canal, or drainage canal crosses the entire width of the proposed right of way, any adjustment or relocation will be considered as a construction item at State expense. This shall include required adjustment or relocation of any minor laterals and pumps, etc., leading off the main line or canal crossing being adjusted. Any costs for replacement property for the line or canal relocation shall be an appraisal item. The appraiser should be informed that this is a construction responsibility.

If the privately owned line or canal will not cross the right of way but is to be relocated as an improvement out of the way of the highway project, the relocation work will be handled as a right of way acquisition item. Such adjustments should be handled in the appraisal process as a part of the right of way parcel. In the appraisal process, it will be necessary to consider the size and general value of the remainder before making a decision about the irrigation line or canal. It will be necessary to estimate the value of the line or canal restored and unrestored in order to ascertain if restoration is the most economical procedure. After this determination, the appraiser should determine the estimated restored and unrestored cost rather than a value for the improvement plus damages, if any, to the remaining facility, since the State does not desire to take title to a line or canal facility as a part of the right of way parcel. The owner will be paid accordingly and will perform the adjustment work himself; refer to 90-10 Canals Having a Private Function, Chapter 8.

If a property remainder is of such a size and apparent value that the adjustment of the irrigation facility is unwarranted, the parcel should be appraised in the normal manner. This amount would be paid to the property owner. Refer to Irrigated Land for information on the appraisal of such property.

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Cemeteries

Under provisions of Transportation Code, §203.051(e), the Commission cannot condemn property used for cemetery purposes, nor dedicated for cemetery purposes, as defined in Health and Safety Code, §§711.034 and 711.035. In some situations, through cooperation of local officials, a dedication may be set aside, but generally, this will not be possible.

There are certain cemeteries such as private ones and those maintained by fraternal and religious organizations to which the provisions of Health and Safety Code, §§711.034 and 711.035, apparently do not apply. It is suggested, however, that the acquisition of any cemetery be undertaken only if it is definitely impractical to avoid such an acquisition.

For more information on TxDOT’s acquisition policy on cemeteries, refer to the Right of Way Manual, Volume 2, Chapter 5, Section 29, Cemeteries (For State).

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Channel, Private, and Temporary Easements

The appraisal of an easement constitutes a valuation of only part of the property rights of the fee interest. The appraisal process and support documentation are the same as for other types of property. However, since there is only a partial acquisition of property rights, there are five issues, rather than the normal three issues of the Carpenter Case (refer to Updated or New Appraisal Reports in Chapter 7 for legal case reference).

If the acquisition of an easement will apparently cause no resultant damage to the remainder of the parent tract, the appraisal should supply information to establish the following:

  • value of the fee interest of the easement area before the imposition of the easement, and
  • value of the fee interest of the easement area after the imposition of the easement.

If it is possible that there will be damages or enhancements to the property remainder, appraisal Form ROW-A-5 should be used with narrative support not only establishing the answers to items 1 & 2 above, but also establishing the:

  • value of the remainder before the acquisition;
  • value of the remainder after the acquisition; and
  • value of the whole property before imposition of the easement.

Comparable sales may be difficult to ascertain. Sales of properties subject to easements having effects similar to those occurring in the appraised property should be used.

When a temporary easement secured by Form ROW-N-83 will deny the owner the use of the easement area for a given length of time, items 2 and 4 above may be the difference between the value of items 1 & 3 above and the present worth of the land value at the termination of the easement. This should be the same amount as the present worth of the annual rent value of the land for the term of the easement.

When an existing easement is privately owned by a third party and is to be acquired along with the property it crosses, a separate value should not be itemized on Form ROW-A-10; however, the ownership of the easement should be noted on the form. Should the fee owner not be able to work out a release of the third party private easement and/or requests that TxDOT directly negotiate the release of the easement, a separate value should be determined for the private easement by the appraiser. This value would then be offered to the private easement holder for the easement’s release by Form ROW-N-17. If rejected, condemnation proceedings would be requested to secure both the fee and easement rights.

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County, City, State, or Federal Property

When county, city, State or Federal lands which were acquired for other than highway, street, road or alley purposes are needed for the construction or operation of the State Highway System, such lands should be appraised in the same manner as lands under private ownership. For property adjustment work in the acquisition of Federal lands and in the acquisition of property from U.S. Forest Service, Corps of Engineers, Bureau of Land Management, U.S. Fish and Wildlife Service in TxDOT’s Right of Way Manual.

For all the parcels to be purchased from a county or city, a note should be made on the Form ROW-A-10 and right of way map stating that the parcel was not acquired by the county or city for public road purposes.

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Crop Allotments

The Federal Government, through county committees, grants crop allotments to farmers on such crops as cotton, peanuts, and soybeans. The farmer is allowed to grow only his allotment in order to qualify for Federal loans on these crops. The allotments are granted to the farmer and do not necessarily attach to the land. The owner, usually, can transfer his allotment to other land. In addition, he may be able to sell or lease the allotment.

Land appraised for right of way should be valued at its market value without an allotment, even though it is currently being farmed with a crop grown under an allotment. To appraise it considering its earnings under an allotment would produce a value for both the land and the allotment. Since the owner will retain the allotment, such a value is improper. The appraiser should use comparable sales that have been sold without the allotment being transferred as part of the purchase price, or the value of the allotment should be adjusted out of the sale price, such adjustment being supported by market data.

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Crops, Timber, Orchards, and Nursery Stock

Before appraisal assignments, it should be determined if the time schedule for right of way acquisition will allow harvesting of crops and nursery stock in the ground. If not, the appraiser should be instructed to consider the crops or nursery stock in the ground as improvements. If the fact situation changes during negotiation, and the appraisals and approved values do not reflect the true situation, they should be revised accordingly. Letters from the appraisers together with a District staff analysis and the proper recommended value forms may accomplish such changes.

When considering timberlands where marketable timber is grown for commercial purposes, the value of the timber should be established just as it is for any other improvements. Thus, a retention value may be established if the owner desires to retain the timber. Due to the specialized nature of appraising timber, it might be desirable for the District to employ a technical expert for determining retention value. Although orchards and cultivated trees are often considered as part of the land, they are to be appraised and values recommended independently of the land value so that the grantor may retain them.

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Donated Parcels

All parcels donated to the State must be appraised by acceptable appraisal standards. Forms ROW-A-7 and ROW-A-8 may be used by staff appraisers for uncomplicated parcels, and Forms ROW-A-5 and ROW-A-6 for all other parcels. Parcels whose value is estimated in excess of $10,000.00 may be appraised by a State-certified fee appraiser, unless the landowner waives his/her right, in writing, to an appraisal.

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Driveways and Entrances

With the increased volume of traffic on all traveled ways, entrances, and exits of adequate design must be provided for abutting properties, especially commercial properties, making ingress and egress as safe as possible to the traveling public and to those who patronize roadside commercial establishments.

Under the provisions and policies of Minute Order No. 83941, the Department will issue access driveway permits to owners of property abutting State highways. Issuance of permits, construction, and maintenance of these driveways should be in accordance with the department’s pamphlet Regulations for Access Driveways to State Highways prepared by the Maintenance Division. The purpose of the rules and regulations is to accomplish a coordinated development between the highway and the abutting property it serves, rather than to restrict, unreasonably, access to abutting property.

A few of the overall criteria from the booklet are:

  • Existing Driveways

Any existing access driveway structures which are destroyed or removed in the construction or reconstruction of a section of highway will be replaced or reconstructed by TxDOT to a design within these regulations and a condition equal to or better than the original structures. The maintenance of these access driveway structures shall be the responsibility of the property owner.

  • Public Access Driveways

The maintenance, construction, and/or reconstruction of all side road approaches from all public thoroughfares intersecting or joining highways under State maintenance shall be the responsibility of TxDOT. This shall include all approaches from county or city maintained roads and streets, and approaches to schools, churches, cemeteries and other places or buildings of like character.

  • Maintenance and Reservations

Maintenance of all driveways, islands, and other access driveway appurtenances on the right of way shall be the responsibility of the abutting owner. TxDOT reserves the right to inspect these installations at the time of construction and at all times thereafter, and to require that changes, maintenance and repairs be made when they are considered necessary to provide protection of life and property on or adjacent to the highway. The cost of changes, maintenance, and repairs shall be borne by the owner, except as provided under Existing Driveways, above.

  • Limitations

These regulations shall apply on all highways under the jurisdiction of TxDOT except that, within the corporate limits of municipalities, they shall be superseded by ordinances and policies of the municipalities in conflict herewith, and shall be subject to concurrence by the municipality.

  • Additional or New Driveways

The owner shall do all work and pay all costs in connection with the construction of access driveways and their appurtenances on the right of way. In areas outside the corporate limits of municipalities, TxDOT will assist by establishing flow-line grades for drainage structures and finished grades for driveway structures across the highway ditch. The District Engineer may also agree to furnish other comparable assistance, provided the owner furnishes materials at the site.

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Environmental and Hazardous Material Issues

Anyone who has knowledge of any environmental hazards within the vicinity of the subject property should disclose such information to the District or ROW Division so proper acquisition may be made.

When the appraiser inspects the property to be acquired, he/she should report any conditions observed during inspection or discovered through appraisal research leading the appraiser/reviewer to believe that adverse environmental conditions affect the subject property, or is contrary with information or descriptions provided by others.

If the District and/or the appraiser are not qualified to determine the extent or impact suspected contamination might have on the parcel, ROW Division should be notified in order that a professional consultant may be obtained to render an environmental evaluation. Environmental concerns include hazardous wastes/storage/materials, or manufacturing processes that pose a threat to the environment or human health and natural resources, such as wetlands, which may affect the appraisal process.

It must be noted that an environmental evaluation of a parcel is only possible when the property owner gives consent.

The Appraisals Standards Board has issued Advisory Opinion A09, which addresses this issue.

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Exempt Damages (Cost to Cure)

Exempt damages are estimates of damages for the remainder property that the appraiser and reviewer determine should not be offset by enhancements or benefits. Typically, exempt damages are cost to cure estimates for curative work the appraiser believes to be necessary for the remainder property to function.

The following situations are especially applicable in the consideration and determination of exempt damages:

  • where remainder properties must have curative work performed to restore functionality and the offsetting of enhancements will leave the property owner without the financial resources to perform the cure.
  • for the State to avoid the exposure of greater claims for damages if the cost to cure cannot be performed by the owner due to offsetting of enhancements.
  • to address safety and health issues that must be resolved for remainder properties.
  • to comply with Minute Order 80872 of the Texas Transportation Commission that requires adequate compensation be paid to property owners to re-fence their remainder properties.

It is emphasized that appraisers and reviewers should consider each situation individually to decide if certain damages or curative values qualify as exempt damages, and therefore must be exempted from the offsetting of values found for enhancements and benefits.

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Fencing

Fencing falls into two categories: access fencing and property fencing. The first type is State-owned control of access fencing, which is a design and construction responsibility. Access fencing is built along or immediately inside the control of access lines as needed to act as a physical barrier to the through lanes. It may also be built along the right of way line as a necessary safeguard against traffic hazards caused by the intrusion of people, animals, vehicles, machines, etc. from outside the right of way. If control of access fences are to be provided, the appraiser should be advised about location and type of fence. Control of access fences may, as a secondary function, afford the property owner the benefits of a property fence. In this case, the appraiser should be instructed to recognize the benefits of the fence to eliminate damages otherwise resulting from an unfenced condition. The appraiser should consider the fencing in the acquisition as part of the land value. When parcels are submitted for condemnation, complete details regarding fencing plans should be included for the information of the OAG.

The second type is privately owned property fencing placed immediately outside and along the right of way line to serve the abutting property needs and will be provided by the owner. If the appraisal report(s) includes information on the estimated cost to re-fence, and such amount is considered adequate, this amount would be the extent of reduced value due to an unfenced condition. TxDOT’s formal finding of value will be based upon this appraisal procedure; refer to Chapter 8, Section 1, 90-10 90-10 Right of Way Fencing.

A sketch showing fence and gate locations together with the specifications and a letter size reduction of the fence and gate plans showing the design to be used will also be submitted with the appraisal report. Cattle guards located on public roads will be handled as construction items as a part of the highway facility; however, any relocation or construction of new cattle guards at private entrances will be considered a part of the property fence as a right of way item. The cost will be borne by the property owner and should be included as a part of the fencing plans and estimate. It is to be understood that these instructions concerning private entrances relate only to the portion that is an incremental part of the right of way line fence. TxDOT will not perform other entrance work on the property remainder. In addition, policy is not changed as to the property owner’s and State’s responsibilities in replacing existing entrances or building new entrances from the right of way line to connect with the highway facility.

When appraising a rural type property that is fenced, the value of the fencing normally should be included in the value of the land. Comparable sales that have fencing should be used to support the value of the subject without special reference to or adjustment for fences unless they are not comparable. For record purposes, when fencing is included in the land value, it will be necessary for the reviewer to subtract the fencing from the land value. Normally, the amount subtracted and shown as fencing value on Form ROW-A-10 will be salvage value. When the subtracted value for fencing is salvage value, the retention value should be a like amount.

Particular attention should be directed to the highest and best use of the property and whether such usage is dependent upon a fenced condition. If the appraisal reports establish a different highest and best use, such as subdivision or commercial use, for fenced land being used for farm or ranch purposes, the appraiser should make allowance for the contributory value of the fence considering the highest and best use. In a partial acquisition from a property of this nature, normally the appraisal of the remainder will indicate no damage due to an unfenced condition. If the highest and best use is an interim use requiring fences, the appraisal of the remainder may indicate damages due to unfenced conditions depending on the fact situation in each case.

By Minute Order Number 80872, the Commission authorized the release of procedures whereby offers of payments in negotiated settlements for highway right of way would include amounts sufficient for the cost of adequately re-fencing of owners’ property along the proposed right of way line. This actually affects only those properties for which the appraisal of the remainder indicates a reduction in value or for which at least some portion of the reduction in value due to an unfenced condition is offset by enhancements due to the remaining land after the acquisition. Therefore, the recommended value for a partial acquisition from property in this category should include a re-fencing adjustment in an amount to provide adequate re-fencing along the right of way. Fencing in kind will normally meet the requirement of being adequate re-fencing. It should be noted that cattle guards, ornate entrances, electric gates, etc. are not included in TxDOT’s re-fencing policies and are considered improvements.

In rural areas, a determination cannot be made before the appraisals are completed as to whether a particular acquisition will have enhancements offsetting damages due to an unfenced condition. If, after the review of the appraisals, it is determined that a re-fencing adjustment is appropriate, an entry for the adjustment should be made under “Special Damages” when entering appraisal values into ROWIS. The source of the re-fencing costs should be shown in the reviewing appraiser’s review comments. The purpose of this procedure is to encourage and expedite acquisition by agreement with owners and to avoid litigation. If it becomes necessary to acquire a parcel through eminent domain, the appraisal process must support value testimony.

Federal regulations regarding compensation may be found in 23 CFR 710.203.

This procedure of including an adjustment to compensate for re-fencing properties when damages due to an unfenced condition are offset by land enhancement is applicable to all right of way projects having State participation in the acquisition costs. It also applies to right of way acquired with Federal assistance, even though any amount greater than the approved values will be non-participating for Federal reimbursement.

Abutting owners often jointly own fences between their properties and the value of the fractional interest held by each must be determined and included in the appraised value of the parcels. The ownership of fences on property lines usually cannot be determined without personal contact with the owners involved. The appraiser and District personnel should make careful investigations to establish correct ownership so that the proper party or parties will be compensated for the interests involved. The State cannot acquire the partial interest held by one owner and allow retention of the interest held by the other. To avoid complications, it is preferred procedure to negotiate simultaneously for both parcels, handling both interests in the jointly owned improvement in the same manner, either through total acquisition by the State or through total retention by the owners. In the exceptional instance requiring acquisition of one parcel in advance of the other, it will be the District’s responsibility to avoid putting the State in the indefensible position of having acquired only a fractional interest in the improvement.

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Irrigated Land

Land may be irrigated by a sprinkler system through a system of pipes or through a surface program of ditches or pipes. The source of water may be a well, spring, or pond located on the property or the water may be purchased from a source outside the property. Besides the soil, the value of irrigated land is affected by the cost to grade or bench level the surface and to provide a source for water. The cost of grading the surface for irrigation purposes may exceed the cost of acquiring water; therefore, land that is properly graded, thus irrigable, is usually more valuable than ungraded land even though water is available to both.

When appraising irrigated land, the value of the irrigation facilities, such as a well, pump, pipe, etc., may be appraised as improvements.

Regardless of whether a source of water or other irrigation facilities are on the part acquired, the remainder should be appraised as it sta