# Presentation: 660281

## 49 CFR Part 24Subpart B

*Applicability*

## Applicability of Subpart B

- Applies to _all_ direct Federal acquisition.
- Federally assisted acquisition exceptions in § 24.101(b) (1)-(5), major exceptions are:
- Voluntary or willing seller transactions.
- Non-eminent domain acquisitions.

- B-

- March 2005

**Notes:**
NOTES: One of the more important changes: If a Federal Agency is (directly) buying real property for itself, Subpart B applies.
	Direct Federal Acquisition – refers to property acquisitions undertaken directly by a Federal Agency with its staff or a contractor in the employ of the Agency using Agency authorized funds for that purpose. For example,  Department of Interior Agencies would have to use Subpart B whether it is a voluntary transaction or not.  This is a significant change for Federal Agencies’ Direct Federal Acquisitions.
	Federally Assisted Projects – NO SIGNIFICANT CHANGE. These are carried out by state, local or other project sponsors with authorized funding from the Federal Agency.  In this case, the work is undertaken by the staff or contractors of the state, local or other sponsor and expenditures are billed to and reimbursed by the Federal funding Agency.  The Federal funding Agency has an oversight or stewardship responsibility for the work undertaken by its partners to ensure compliance with all Federal governing laws and regulations.  Compliance with the URA and its implementing regulations is a condition of receiving Federal assistance.
	Requirements for federally assisted acquisitions are unchanged with one exception: owners must now be given an early notice in writing. Previously, early interest/likelihood of acquisition notices may have been given at public hearings or meetings. The final rule also requires that a written notice be given to voluntary transaction owners about what the Agency is doing/intends to do. 
	In the second bullet, there are 3 additional situations that can be encountered involving Federally assisted acquisitions.  These are seldom encountered and the 2 on the screen are the most common situations.  
Acquisition from a Federal or State Agency without eminent domain authority 
Acquisition from a member of a cooperative where member has agreed as a condition of membership to provide property without charge
Programs of the Tennessee Valley Authority (TVA) or Rural Utilities Service (RUS).
IMPLEMENTATION:  Please reference “Applicability Decision Chart” on the next slide and page.  

## “Lets See How it Works” 

**49 CFR **§ **24.101 – Subpart B**
**Applicability Decision Chart**

- B-

- March 2005

**Notes:**
NOTES:   See following slides for this chart and also refer to the Informational Guide.

This chart provides an overview of the applicability requirements of Subpart B given various funding arrangements and circumstances under which property will be acquired.  You should be able to fit the program you are working on into one of the situations described in the chart.  

INSTRUCTOR NOTES:  For interactivity ask the student to volunteer where their program(s) fit.  

IMPLEMENTATION:  This will have an impact on Federal Agencies direct Federal programs using voluntary (willing seller) transactions as Subpart B is now fully applicable.  

## 49 CFR Part 24Subpart B

*Appraisal, Appraisal Review, and Waiver Valuations*

**Notes:**
NOTES:  This section of the training covers material related to Subpart B – Real Property Acquisition. The first part of this section deals with valuation items, including appraisal, appraisal review and waiver valuation option. The second part of this section deals with offers, negotiations, and settlement-related items.

IMPLEMENTATION NOTE:  Q.:  The final rule preamble section on Subpart B states that FHWA decided to retain the term “fair market value” throughout Subpart B except for § 24.102(b)(1) and (5).  Yet the term “market value” appears in the final rule in a number of other places, including §§ 24.102(d), 24.102(j), 24.103(b), and 24.105(c).  Which is correct?

A.  The Preamble is correct.  The FHWA will issue a technical correction in the near future to resolve the problem by changing the term to “fair market value” in all parts of the rule except § 24.102(b)(1)-(5).

## Key Topics

- Appraisal waiver and waiver valuation.
- Appraisal and appraisal review.
- URA appraisal *requirements*.
- USPAP *standards*.
- Qualifications.
- Responsibilities.

- B-

- March 2005

**Notes:**
NOTES:	Waiver valuation (formerly appraisal waiver) § 24.102(c)(2)(ii) and Appendix A

    Appraisal requirements § 24.103(a)

	Appraisal review requirements § 24.104(a), § 24.104(b), and § 24.104(c)

	URA appraisal requirements is found in § 24.2(a)(3) and § 24.103(a) and Appendix A.

	USPAP standards is found in § 24.103(a) and Appendix A

    Appraiser/review appraiser qualifications § 24.103(d) and Appendix A

    Agency responsibilities § 24.103(a)(1) & (2)

	Appraiser/review appraiser responsibilities is found in § 24.103(a) and § 24.104(a) and (b)

## New Definition

**§ 24.2(a)(33)*** *Waiver valuation.
-   “The term waiver valuation means the valuation process used and the product produced when the Agency determines that an appraisal is not required, pursuant to § 24.102(c)(2) appraisal waiver provisions.”

- B-

- March 2005

**Notes:**
NOTES:  This is a new definition, but not a new concept. that was added to the rule in Subpart A. The definition is related to the provisions in Subpart B that can be used when the Agency determines that an appraisal is not required. The determination is based on considerations related to the complexity of the appraisal problem and the expected value considering the available real estate market data in the area.

Stated another way, if the appraisal problem is uncomplicated and has a low value, the concept of waiver valuation may be applicable if the Agency options to do it.  

## Determining Necessity for An Appraisal

**§ 24.102(c)(2)** Appraisal not required if:
- Owner is donating property.
- Agency determines the appraisal problem is:
- Uncomplicated.
- Low value.

- B-

- March 2005

**Notes:**
NOTES:  The rule provides two instances when an appraisal is not required:
When the owner is donating his/her property. This is conditional, and is based on the owner giving the Agency a release from having to prepare an appraisal.
Based on an Agency determination.

For an Agency to make the determination that an appraisal is not required, the Agency must first decide if it will use the procedure on uncomplicated and low-value properties. The use of the appraisal waiver procedure is both an opportunity to save time on low-value and uncomplicated acquisitions and it is also the Agency’s responsibility to be sure that knowledgeable personnel are available to make the determination of when a waiver valuation will be prepared.  A major consideration in this determination is whether there is sufficient local market data (comparable sales) available which is essential to support such a valuation.  If there is not good data available, the waiver valuation should not be used.   

## Valuation Streamlining

- Define low value up to $10,000:
- Increased from $2,500.
- Option available for up to $25,000:
- Federal funding Agency must approve.
- Owner must be offered option for appraisal.
-  Prepare a waiver valuation.

- B-

- March 2005

**Notes:**
NOTES:  Under § 24.102(c)(2)(ii), the Agency has an option to determine whether an appraisal is necessary. If certain criteria are met, a simpler approach can be used. Although the prior regulation provided such use, it was limited to $2,500, while the new rule allows Agencies to use any amount up to $10,000. This has to be both a business decision and one related to the market conditions in the project area. The maximum amount does not have to be used; any amount up to $10,000 could be adopted by the Agency and included in its procedures.

The waiver of appraisals for amounts more than $10,000 is covered in § 24.102(c)(2)(ii)(C). That provision creates a programmatic option up to $25,000.  It requires approval by the Federal funding Agency and the owner must be offered the option for an appraisal. Implementation of the owner’s consent to forgo an appraisal could be placed in the offer which is acknowledged by the owner.  These practices should also be included in the Agency’s procedure manual if the Agency uses a limit over $10,000.

For FHWA, Federal funding Agency approval will be done by local division offices according to FHWA policy criteria issued on January 18, 2005.  Note that this is not a waiver in accordance with § 24.7.

## Waiver Valuation	

**Waiver Valuation****	**

- Is the acquisition uncomplicated?

- Is the value expected to be less than $10,000? (or  less than $25,000 if this option is approved.)

- Waiver Valuation

- Appraisal

- YES

- YES

- NO

- NO

- B-

- March 2005

**Notes:**
IMPLEMENTATION:  Federal Agencies or Project Sponsors would need to: 

Decide if they want to use this option
If already using the procedure, the can adjust the maximum amount per the revised regulation if desired.
If not presently using this concept, then procedures consistent with the regulation would need to be developed. 
Decide whether programmatic option of up to $25,000 will be used and obtain approval to do so, including appropriate revision of operating procedures.  

## Waiver Valuation (cont.)	

- Prepared by knowledgeable person.
- Not an appraisal.
- Review not required.
- Owner accompaniment not required.
- Agency responsible for:
- Basis for preparing.
- Establishing just compensation amount.

- B-

- March 2005

**Notes:**
NOTES:  
URA = Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970.
USPAP = Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice.

The waiver valuation is not an appraisal. The URA Rule appraisal requirements and USPAP standards relating to appraisals do not apply. An appraisal review is not required, but within the Agency, there must be a process to assure that the basis for not preparing an appraisal is appropriate and that the waiver valuation amount is used to determine what is believed to be just compensation.

The basic concept is that the valuation will be prepared by a knowledgeable person who is aware of the general market values in the project area. It is not intended that the person preparing the valuation be an appraiser. The process is designed to free the appraisal staff to concentrate on more complex and difficult appraisal problems. Additionally, the URA requirement for offering the owner the opportunity to accompany the appraiser does not apply to waiver valuations. This will further streamline the process.

There is no specific requirement for “approval” of the waiver valuation (reviewing either the valuation itself or the decision to use a waiver valuation.)  Like an appraisal, the waiver valuation is input to the (separate) determination of the just compensation offer.  Also, the waiver valuation (or an appraisal) need not directly represent what is believed to be just compensation.  Both estimate fair market value, from which the Agency determines the just compensation offer (which may not be less than the appraised/valued amount).

## Criteria for Appraisals	

-  Reference: rule and Appendix A
- 				**§ 24.103**
- This rule defines appraisal requirements for Federal and federally assisted real property acquisition.
- URA _*requirements*_ and USPAP _*standards*_.
- This rule is consistent with USPAP.

- B-

- March 2005

**Notes:**
NOTES:   49 CFR 24.103 defines the Federal appraisal requirements for Federal and federally-assisted real property acquisition.  No other resource, including USPAP, is appropriate for Federal and federally-assisted acquisition appraisal requirements. 

The rule update is the first since USPAP was issued. To avoid confusion with USPAP, the new rule has adopted requirements as the reference to Uniform Act appraisal criteria in order to avoid confusion with USPAP Standards Rules.

Despite the fact that Uniform Act requirements are separate from USPAP standard rules, the two are consistent.  In 1990 FHWA wrote the Standards Board asking for a review of 49 CFR Part 24 appraisal and appraisal review requirements vis-à-vis USPAP.  The Appraisal Standards Board replied on October 25, 1990 that they had reviewed 49 CFR 24.103 and 24.104 and determined they were consistent with provisions and standards rules in USPAP. Since that time there has been no change in 49 CFR 24.103 and 24.104 that would be inconsistent with USPAP.

So what does “consistency” mean and how significant is it?  Let’s take a look: 

URA = Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended.
USPAP= Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice.

## Criteria for Appraisal (cont.)	

- URA - Regulatory requirements, found at § 24.103.
- USPAP
- UASFLA

- 	Secondary, non regulatory resources on URA projects.

- B-

- March 2005

**Notes:**
NOTES:

UASFLA = Uniform Appraisal Standards for Federal Land Acquisition, published by the Interagency Land Acquisition Conference, chaired and managed by the US Department of Justice. It is fundamentally an appraisal manual for Federal eminent domain appraisal preparation and Federal court testimony. These are appraisal standards utilized by the Department of Justice and other Federal Agencies when processing appraisals for direct Federal acquisitions.
	UASFLA is primarily relevant to direct Federal projects where the Federal Agency has adopted the standard and is undertaking the acquisition directly. UASFLA is not specifically applicable to federally assisted projects undertaken by state and local Agencies.  Most states will have their own body of law as to what is compensable in eminent domain and have definitions of “market value” that vary from the Federal ground rules. Additional rules will differ among the states and Federal government on such things as how appraisals are undertaken for partial acquisitions.
	The UASFLA may however, provide useful insight to States on issues of compensability and valuations encountered when doing acquisitions under eminent domain.  It may be particularly helpful if a state follows the “strict before and after” Federal rule for partial acquisitions.  The USASFLA has no legal standing (like the URA and this Regulation do) – It is essentially, a publication of the US Department of Justice.

## Working to Maintain Consistency

- URA appraisal _*requirements*_.
- USPAP _*standards*_.

- B-

- March 2005

**Notes:**
NOTES:  In March of 1992, the Federal Office of Management and Budget issued OMB Bulletin 92-06 which, in Attachment A, instructed all Federal Agencies to, “...prepare real estate appraisal and appraiser review reports in accordance with written and approved Agency standards consistent with the Uniform Appraisal Standards of Professional Appraisal Practice (USPAP) sections I – II ...”

Note the use of the word “consistent” in the OMB Bulletin: Government-wide regulations already in place, that is 49 CFR 24.103 and 104, already met the test. 

So just what does “consistent” mean?  It in fact recognizes there may be operational differences, but that both USPAP and Uniform Act rules meet the Webster’s definition of consistent, which is “showing steady conformity to character, profession, belief or custom.”  The fundamentals of appraisal are clearly embraced by both. 

There are, however, operational differences. Perhaps the clearest is expressed by the Uniform Act requirement to disregard the influence of the project on value. 

While the URA requirements and USPAP Standards are consistent, neither can supplant the other.  Each provision is neither identical or interchangeable.  Appraisals performed for Federal or federally-assisted real property acquisition must follow the URA requirements.  An appraiser encountering conflicting requirements between URA and USPAP, may be able to work within USPAP standards via the USPAP’s Jurisdictional Exception Rule1, where applicable.  The Jurisdictional Exception Rule states if any part of the USPAP Standards is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction.
____________________________
 1 For a complete description of Jurisdictional Exception Rule refer to 2005 Edition USPAP Jurisdictional Exception Rule.  

## Agency Responsibility

**Agency Responsibility**

- Acquiring Agency has the responsibility to assure that appraisals:
- Are relevant to its program needs.
- Reflect established and commonly accepted Federal and federally-assisted program appraisal practice.
- As a minimum, comply with both:
- Definition of appraisal in §24.2(a)(3).
- Five requirements in §24.103(a)(2).

- B-

- March 2005

**Notes:**
NOTES: The Federal or federally-assisted Agency obtaining an appraisal must take an active role in the appraisal process to ensure that its needs are efficiently met. The goal is to obtain the needed appraisal product without overachieving. The Agency has a greater role in the public acquisition appraisal process than is typical in the private sector. The Agency must specifically ensure that the assignment (for a staff appraiser) or the contract (for a contract appraiser) address the Agency’s unique needs, as well as assuring compliance with URA requirements. This responsibility carries over to the development of the appraiser’s scope of work. The Agency role is discussed further in Appendix A.  

## Appraisal	Assignment

-  Reference: rule and Appendix A
- 		**	****   ****§ 24.103(a)**
- Agency is to participate in:
- Defining the appraisal problem.
- Developing the scope of work.
- Identify personal property.

- B-

- March 2005

**Notes:**
NOTES: § 24.103 (a) (2)(i) requires the appraiser must identify “personal property,” while the appendix adds that “real property” also be identified. Please see the example personalty/realty report in the Informational Guide.  

Appendix A, § 24.103(a)(1): “The appraisal report requires identification of the items considered in the appraisal to be  real property, as well as those identified as personal property.”

## Appraisal Realty/Personalty Report

- New Emphasis:
- Personal Property – § 24.103(a)(2)(i).
- Real Property – Appendix A § 24.103(a)(1).

- B-

- March 2005

**Notes:**
NOTES:  From an implementation standpoint, it is critical to achieve responsible allocation of what is realty what is personalty. The allocation will drive what is acquired vs. relocated.  If this is not sorted out correctly, duplicate payments can result from situations where items acquired and owned by the Agency are relocated at an additional expense. The determination of realty/personalty items as part of the appraisal process ensures proper handling of such items. The result is fair compensation and/or reimbursement of relocation expenses to the owners of the respective items. Legal counsel should be consulted if there are any questions as to the status of a given item.
An on-site meeting of the appraiser and relocation staff is essential to accomplishing this process. The result is then included in the appraisal report and serves as a guide in this area for the balance of the acquisition process.

IMPLEMENTATION:  This will require a revision in the appraisal assignment to staff or contract specifications for fee appraisers to ensure inclusion of this information in the appraisal report.  Additionally, if an onsite meeting with a relocation specialist is required, it should be specified as well.  

Acquiring Agencies will need to revise appraisal assignment and procurement procedures to accommodate this requirement.  It will add work items for both the appraiser and relocation specialist , but this early coordination will save time, effort and cost as the acquisition/relocation phase is implemented.  

Reference sample realty/personalty report in Informational Guide.  

## Written statement.
Developed together by appraiser and Agency.
Defines general parameters of work.
Prepared before appraisal work starts.
May be updated as needed

- Written statement.
- Developed together by appraiser and Agency.
- Defines general parameters of work.
- Prepared before appraisal work starts.
- May be updated as needed

**Scope of Work**

- B-

- March 2005

**Notes:**
NOTES:	The scope of work is a written statement agreed upon by the appraiser and the Agency describing the appraisal work the appraiser is to do. 

It should be developed cooperatively by the assigned or contract appraiser and an Agency official who is competent to both represent the Agency's needs and respect valid appraisal practice.

The scope of work should describe what the Agency and the appraiser each are to do, and what is the mutually expected outcome of the assignment/contract.

Although this is a revised approach from what was required in the past relative to abbreviated and detailed appraisal formats, actually greater flexibility is afforded.  Under the new rule, once a “scope of work” has been developed, existing appraisal formats that Agencies have in use can continue to be utilized if they fit the scope that has been developed.

Existing guidance for developing an appraisal scope of work has been compiled and is included in the Informational Guide for further clarification on this issue.  

BACKGROUND: The scope of work concept is coming into wide acceptance. Not only does this Rule adopt it, but The Appraisal Foundation is working on scope of work in the USPAP context. Their latest Exposure Draft (2/15/2005) proposes to define Scope of Work as: “the type and extent of research and analysis in an assignment.” Their draft Scope of Work Rule proposes “An appraiser must properly identify the problem to be solved in order to determine the appropriate scope of work. The appraiser must be prepared to demonstrate that the scope of work is sufficient to produce credible assignment results.”  The draft further comments: “Scope of work includes, but is not limited to: • the extent to which the property is identified, • the extent to which tangible property is inspected, • type and extent of data researched, and • the type and extent of analysis applied to arrive at opinions or conclusions.” The draft also comments, “Appraisers have broad flexibility and significant responsibility in determining the scope of work . . . “  We agree with and support these statements, and anticipate continuing convergence with USPAP as we and the Appraisal Standards Board “flesh out” the scope of work concept.

## Scope of Work

- Match the URA and URA rule requirements to the appraisal problem, covering:
- The definition of “appraisal” in the URA.
- Specific rule requirements in § 24.103(a)(2) and § 24.103(b).

- B-

- March 2005

**Notes:**
NOTES: The scope of work defines the specific parameters of the appraisal, which should be based on the requirements in this rule, especially the definition of “appraisal.”
The scope of work should consider the specific requirements in § 24.103(a)(1) through § 24.103(a)(5). and § 24.103(b), and address each as appropriate.

## Should address:
Purpose/function of appraisal.
Definition of estate to be appraised.
Definition of fair market value, if applicable.
Assumptions and limiting conditions.
§ 24.103(a)(1)-(5) requirements.

- Should address:
- Purpose/function of appraisal.
- Definition of estate to be appraised.
- Definition of fair market value, if applicable.
- Assumptions and limiting conditions.
- § 24.103(a)(1)-(5) requirements.

**Scope of Work**

- B-

- March 2005

**Notes:**
NOTES: The scope of work statement should include the purpose and/or function of the appraisal, a definition of the estate being appraised (if it is fair market value, include its applicable definition), and the assumptions and limiting conditions affecting the appraisal.

The scope of work should consider the specific requirements in the URA definition of “appraisal,” § 24.103(a)(1) through § 24.103(a)(5). and § 24.103(b), and address each as appropriate.

## May include:
Data search parameters.
Analysis approaches.

- May include:
- Data search parameters.
- Analysis approaches.

**Scope of Work**

- B-

- March 2005

**Notes:**
NOTES: . It should include parameters for the data search and identification of the technology, including approaches to value, which are to be used to analyze the data.  These are areas where a knowledgeable Agency can provide input to assure it gets what it really needs without going overboard on appraisal work.

##  Reference: rule and Appendix A
	  § 24.103(d)(1)  -  § 24.104
Considerations/Factors:
Competency.
Experience.
Education.
Training.
Certification/licensing.
Professional designations. 

- 	  **§ 24.103(d)(1)  -  § 24.104**
- Considerations/Factors:
- Competency.
- Experience.
- Education.
- Training.
- Certification/licensing.
- Professional designations.

**Appraiser and Review Appraiser Qualifications**

- B-

- March 2005

**Notes:**
NOTES:  The term “review appraiser” was adopted for consistency throughout the new rule, given much attention, and emphasized as a separate specialty apart from the appraiser. Specifically, review appraiser qualifications, along with appraiser qualifications, are addressed as needing to be consistent with the appraisal scope of work.

Qualifications now specifically include “review appraiser” and are delineated.

## Appraiser and Review Appraiser Qualifications (cont.)

-  Agency responsibility:
- Set criteria on minimum qualifications.
- Assure qualifications match the Scope of Work. This requires Agency involvement in the assignment process.
- Contract (fee) appraisers must be state licensed/certified.

- B-

- March 2005

**Notes:**
NOTES:  Information on the Agency role in qualifications can be found in § 24.103(d)(1) and § 24.104.

INSTRUCTOR NOTES:  Emphasize importance of 2nd sub bullet.  Requires knowledgeable Agency involvement in the selection process.  

## Appraisal Review

-  Reference: rule and Appendix A
**	****	****  ****§ 24.104(a) to (c) **
- Review appraiser responsibilities:
- Examine analysis and presentation of data.
- Assure all appraisal requirements are met.
- Meets definition of appraisal in § 24.2.

- B-

- March 2005

**Notes:**
NOTES:  The updated rule more completely addresses the appraisal review function. The requirements should not be that new to the transportation community because it reflects practices already in use there. The terms may be new, but the approach has not changed. §  24.104(a) of the updated rule specifically addresses what the review appraiser is to examine.  This slide highlights the criteria against which the review appraiser evaluates an appraisal. These are the requirements in § 24.103, Criteria for Appraisals.

IMPLEMENTATION:  Agency procedures would require revision to add this item of responsibility for review appraisers.  

## Reference: rule and Appendix A
§ 24.104(a) 
Review appraiser – required actions:
Appraisal is recommended.
Accept appraisal as complying with all requirements.
Not accept – including reasoning.
If authorized, staff review appraiser could do one or both:
Approve the appraisal.
Determine just compensation amount.

**§ 24.104(a)**** **
- Review appraiser – required actions:
- Appraisal is recommended.
- Accept appraisal as complying with all requirements.
- Not accept – including reasoning.
- If authorized, staff review appraiser could do one or both:
- Approve the appraisal.
- Determine just compensation amount.

**Appraisal Review (cont.)**

- B-

- March 2005

**Notes:**
NOTES:  The review appraiser has three options in reporting the review:
Recommend it for approval as the Agency’s approved appraisal of the fair market value.
Accept the appraisal as complying with all requirements. This option should be used when there are multiple appraisals on a property and more than one meet all requirements. If there are multiple appraisals, the review appraiser can accept two (or more) and recommend one.
The review appraiser should find an appraisal “not acceptable” only after he or she has been unsuccessful in working with the appraiser to obtain an acceptable appraisal. 

The Agency is given the option of authorizing the staff review appraiser, as part of the review, to approve the appraisal (as the basis for the Agency’s  establishment of the offer of just compensation), as well as the authority to develop and report the amount believed to be just compensation.
The above actions should not be significantly different from the process now followed, except that the review appraiser is now to more formally categorize the assessment of each report.

For most Agencies, the review appraiser is authorized to approve the appraisal.  This is a meaningful term because the URA refers to the “approved appraisal” as being necessary for supporting the determination of the amount believed to be just compensation.

There is, however, no direct requirement that a reviewed and accepted Agency appraisal automatically be the approved appraisal, even if it is recommended for approval.  An example situation would be where the property owner’s appraisal would be determined after Agency appraisal review to be the approved one.

## Review Appraiser Roles

-  During review:
- Consult with appraisers to clarify report conclusions.
- May need to prepare an independent valuation that meets § 24.103 requirements.
- Prepare a written report on results of reviews.
- May be an in-house consultant on appraisal.

- B-

- March 2005

**Notes:**
NOTES: The review appraiser has a critical and powerful role in the acquisition process.  It can be characterized as a two way street: representing the Agency’s needs and interests to the appraisal process, and representing (and sometimes defending) legitimate appraisal practice to the Agency.

If the initial appraisal submitted for review is not acceptable, the review appraiser is expected to communicate and work with the appraiser to the greatest extent possible to facilitate the appraiser’s development of an acceptable appraisal.
In doing this, the review appraiser is to remain in an advisory role, not directing the appraisal, and retaining objectivity and options for the appraisal review itself.

However, if the review appraiser is unable to obtain an acceptable appraisal from the appraiser, the rule allows the review appraiser to develop an independent approved or recommended value.  In doing so the review appraiser may reference any acceptable resource, including acceptable parts of any appraisal, including an otherwise unacceptable appraisal.  The review appraiser may independently present and/or analyze market data.  In doing so, though, the review appraiser must comply with § 24.103 appraisal requirements.

When a review appraiser develops an independent value, that independent value also becomes the approved appraisal of the fair market value for Uniform Act purposes.  It is within Agency discretion to decide whether a second review is needed if the first review appraiser establishes an independent value.

Agency review appraisers typically perform a role greater than technical appraisal review.  They are often involved in early project development.  Later they may participate in making appraisal assignments to fee and/or staff appraisers and be involved in devising the scope of work statements.  They may also be mentors and technical advisors, especially on Agency policy and requirements, to appraisers, both staff and fee.  Additionally, review appraisers are frequently technical advisors to other Agency officials.

## 49 CFR Part 24Subpart B

*Offers, Negotiations, and Settlements*

**Notes:**
NOTES:

Title Slide the starting point for covering the non-appraisal related changes in Subpart B.

## Key Topics

- Offer of just compensation.
- Contacting owners.
- Administrative settlements.
- Exceptions.
- Conflict of interest.

- B-

- March 2005

**Notes:**
NOTES:

Most of the changes here are just refinements of existing policies.

## Just Compensation

- Agency official must determine the just compensation offer based on:
- Waiver valuation.
- Approved appraisal.
- Staff review appraiser may be authorized by Agency to perform this function.

- B-

- March 2005

**Notes:**
NOTES:

Just compensation is an Agency responsibility. While this is not a new concept, it does apply to the waiver valuations. In addition, the Agency may authorize a staff review appraiser or other Agency official to  approve the just compensation amount.

The critical point is that it must be done in-house by the acquiring Agency.  Contract staff may not make the determination.  The Agency must authorize a staff review appraiser or other Agency official to approve the just compensation amount.

Waiver valuations are valid alternative inputs to the determination of the offer of just compensation. When a waiver valuation is used, the just compensation offer still needs to be determined independently.

## Contacting Owners

- Initiation of Negotiation (ION):
- New trigger for tenant eligibility.
- § 24.2(a)(15)(iv).
- Appendix A, § 24.2(a)(15).
- Notices and offers to owner must be “in writing” according to § 24.102(b).

- B-

- March 2005

**Notes:**
NOTES:
Appendix A, was revised as follows: 
§ 24.2(a)(15)(iv) Initiation of negotiations (Tenants.) Tenants that occupy property that may be acquired amicably, are entitled to the following [no use of eminent domain per § 24.101(b)(1) through (5)] : 

Informed as to eligibility for relocation assistance (i.e., potential eligibility at initiation of negotiations)
Notification when they become fully eligible, if the property is acquired from owner 
Notification that they are no longer eligible for relocation benefits if no agreement is reached with the owner to purchase the property

If a tenant is not readily accessible, as the result of a disaster or emergency, the Agency must make a good faith effort to provide these notifications and document its efforts in writing.
In the context of the second bullet above, where options are being used, this notice would be triggered by a written agreement that binds the acquiring Agency to purchase the property from which a tenant would be displaced.  That is the Agency and the property owner are subject to legally enforceable commitments to proceed with the purchase. 

FHWA is strengthening requirements for written notices and that now includes willing sellers.  The early notice of interest in acquiring property is also required in writing per § 24.102(b).

IMPLEMENTATION:  Will require potentially additional contacts with tenants occupants as the new procedures are followed. 

## Reference: rule and Appendix A
		        § 24.102(i)

- 		        **§ 24.102(i)**

**Administrative Settlements**

- B-

- March 2005

**Notes:**
NOTES:

Administrative settlements refer to agreements reached where the just compensation amount is exceeded and is justified based on considerations other than the appraised value. Examples may involve risk of trial, recent court awards, appraisal/value elements that are hard to estimate, etc. This listing of possible justifications was deleted and only “trial risks” added. The reason for this change was that it would be impossible to create an all inclusive list that would cover every possible justification for an administrative settlement.

Again, this is not a new provision, but the itemization of possible justifications of a settlement were eliminated. Now the Agency can consider anything relevant and provide the information on which the settlement was judged reasonable, prudent, and in the public interest. Also, there was a change to the documentation requirement.

Appendix A, § 24.102(i) Administrative settlement. This section provides guidance on administrative settlement as an alternative to judicial resolution of a difference of opinion on the value of a property, in order to avoid unnecessary litigation and congestion in the courts.
    All relevant facts and circumstances should be considered by an Agency official delegated this authority. Appraisers, including review appraisers, must not be pressured to adjust their estimate of value for the purpose of justifying such settlements. Such action would invalidate the appraisal process.

## Conflict of Interest

- Reference: rule and Appendix A
**	**** ****§ 24.102(n)**
- Requirements – appraisers, review appraisers, waiver valuation preparers:
- Shall not have any interest in property.
- Shall not be subject to influence or coercion regarding valuation.
- May be authorized to act as a negotiator where valuation role is for acquisitions <$10,000.

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- March 2005

**Notes:**
NOTES:  Waiver valuation preparers and review appraisers are now specifically included in conflict of interest provisions.
Also added is the provision that these individuals be protected from inappropriate pressure in performing their valuation duties.

The new rule also raised the maximum limit amount for appraising/valuing and negotiating to $10,000.

The overall objective is to minimize the risk of fraud while allowing Agencies to operate as efficiently as possible. This particular provision § 24.102(n)(2)is part of an emphasis in the new rule to assure the valuation process is not inappropriately influenced.

The use of an appraiser/value preparer to negotiate is not required but an option available to Agencies. It does not require approval, but if adopted, it should be a standard policy and applied with consistency.

IMPLEMENTATION: As noted above, preparer of waiver valuation would need to certify of having no interest in the property under appraisal.  Existing required certifications should suffice for appraisers and review appraisers.  

## Conflict of Interest

-  Reference: rule and Appendix A
- 			  **§ 24.102(n)(2)**
- Person functioning as negotiator cannot supervise or formally evaluate:
- Appraisers.
- Review appraisers.
- Persons performing waiver valuations.
- Federal funding Agency may waive.

- B-

- March 2005

**Notes:**
NOTES:  “Person functioning as a negotiator” refers to the person or persons immediately involved in making the initial offer and conducting initial negotiations.  It is not intended to cover everyone who may eventually be included in settlement negotiations.

The rule includes a new provision allowing the Federal funding Agency to waive supervisory prohibition provisions if compliance would create a hardship for the acquiring Agency.

This waiver is intended for acquiring Agencies with very small staffs where it may not be possible to have complete separation of functions. 

INSTRUCTOR NOTES:  Does this provision create a problem for Agencies? Who will be the knowledgeable person used to prepare waiver valuations and how will they be removed from being supervised by negotiators.  Isn’t the negotiation section where many of the current preparers of valuation documents housed in many organizations?  
Applies principally to staff positions, but intended to cover any situation that may foster coercion.

“Waiver” is programmatic – not a waiver of the rule under § 24.7 and can be considered where this may create a hardship on Agencies with a small staff.

## Conflict of Interest “Lets See How it Works” 

**	**

**   ****Reference examples of acceptable and non acceptable organizational/supervisory arrangements**

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- March 2005