Section 9: Reviewing for Compensability

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The appraiser and review appraiser should have knowledge of the several elements of value in an appraisal report that may be non-compensable under the law, both concerning the part acquired and the remainder after. In Texas, the loss of business, circuity of travel, loss of direct access to main lanes, the introduction of center medians, etc. are considered non-compensable (see Chapter 3, Section 3, Legal Instructions - Noncompensable Items).

A review appraiser needs to determine if the appraiser permitted subjective thoughts and feelings to influence the exercise of an objective appraisal judgment (particularly if the appraisal is of a partial acquisition). For example, at the property inspection, the property owner will express his/her feelings about the acquisition, including the possible negative effects it will have on the remaining property. Appraisers should not have their objective judgment influenced by these emotional pleas. What might result would be the appraiser first valuing the remainder after, rather than first valuing the part to be acquired and then how the acquisition will affect the value of the remainder after.

Whenever streets and highways are realigned (or the direction of traffic on an existing roadway is changed or restricted), a loss in value to the properties abutting the road could occur. However, under existing state law, this loss in value caused by circuity of travel is not considered compensable. The basis for this reasoning is that the state cannot guarantee to property owners (or the traveling public) that they will always travel the same route on the abutting roadway. Some appraisers may wish to include a loss in value due to circuity of travel because they do not understand the law regarding it or do not believe the law to be just and fair. Often, this “damage” is actually the anticipated “inconvenience” of the abutting property owners, instead of an actual damage to the real estate. In some of these cases, the real estate is actually enhanced in the general market, though not under the specific use desired by the present property owner. The review appraiser should determine if an appraiser has valued the remainder after based on the owner’s preferred use, rather than its highest and best use.

Another element that may appear in an appraisal report that is not compensable is a value for personal property. Due to the legal nature of all types of property, it is not always easy to make a determination between what is real estate and what is personal property (see Chapter 3, Section 2, Legal Instructions - Personalty and Realty). Many items are of questionable classification such as machinery, equipment, appliances, etc. When such questionable items are included in the appraisal report, the review appraiser must have positive assurance that they have been determined by ROW PD personnel to constitute a part of the realty, preferably with a signed form ROW-A-9 Property Classification Agreement. The review appraiser is expected to include a listing of such items in the review comments of form ROW-A-10 Tabulation of Values or make such other identification as may be appropriate.

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