Appraisers' Free Forum

**Otis** · Posted: Fri Jul 18, 2008 10:30 pm Post subject: June USPAP Q&A

http://www.appraisalfoundation.org/s_appraisal/bin.asp?CID=12&DID=1223&DOC=FILE.PDF

**Steve Owen** · Posted: Sat Jul 19, 2008 2:58 pm Post subject:

Interesting. I've never actually done work under the Act, and therefore, have not acquainted myself with it. Maybe something I should look up.
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**Otis** · Posted: Tue Aug 05, 2008 7:04 pm Post subject:

**Pina Colada** · Certified General Joined: 13 Aug 2007 Posts: 552

I agree with the yes/no answers, but some of the reasoning just loses me, like the third question on ignoring the effect on value of the project. This would give the curious a taste of some of the issues involved.

1. Let's say there is a blighted area where land sells for $1/sf per square foot. At some point, the govenment announces a project (like a stadium or something). Land near the proposed take starts to sell around $5/sf in anticipation of the benefits of being near the stadium. Then, after due bureaucratic process, the government hires an appraiser.

2. As I understand the rulings of the federal courts, it would not be "just" to compensate the owners of blighted land $4/sf in value created by the condemantion. That is, they owned blighted land worth $1/sf, and that is what was taken, thus that is what they should be paid. The appraiser should use the comps that set $1/sf as the value of blighted land, either by using sales from before the announcement or using blighted comps from outside the scope of the project's effect, or both. The bottom line is the $1/sf represents "credible results" for the before-the-taking value, and $5/sf doesn't.

3. Uspap says you have to make sure the changes noted in point #1 (land going from $1/sf to $5/sf) "are reflected in the actions of the market." Yeah, so why is that a conflict? It's already been done.

4. The indicated just compensation for a blighted parcel that is taken is thus: value before of $1/sf, less value after of $0, equals just compensation of $1/sf.

The ASB seems to be saying there is no conflict between 1-4f and the rule in point #2, because 1-4f is conditional. The SR says what to do when you are making the analysis. The ASB is saying that because of the court's rule, the analysis is not needed at all, so the requirement for how it must be done is irrelevant. There might be some set of circumstances in which that reasoning would be sound, but this set of facts is not such a circumstance.

IMO, it is impossible to avoid the analysis required by SR 1-4f and have credible results other than by luck. As my example shows, the appraiser is not avoiding making the analysis. The appraiser is making the SR 1-4f analysis. There is a difference between 1) not making a change analysis that finds land went from $1/sf to $5/sf, and 2) making a change analysis but using $1/sf and not $5/sf as the indicator of subject's before-the-taking value. It seems to me that complying with SR 1-4f is essential to complying with the federal rules on taking, because the appraiser who doesn't make the analysis is the one likely to misreport the before-the-taking value for blighted land at $5/sf. Making the analysis referred to in SR 1-4f is necessary to produce credible results.

As you can see, this kind of work entails a lot of arguing. Lots of "stips" - real and imagined.

**Steve Owen** · Posted: Wed Aug 06, 2008 9:48 am Post subject:

I'm not sure I'm following all of that... perhaps my ignorance of the act is getting in the way. Are you basically saying that the Fed rule creates jurisdictional exception, but you still have to do the analysis to be credible?
_________________
I haven't a particle of confidence in a man who has no redeeming petty vices.
- Mark Twain, a Biography

**Pina Colada** · Certified General Joined: 13 Aug 2007 Posts: 552

**Jim Plante** · Posted: Wed Aug 06, 2008 11:00 am Post subject:

PC, I took the AI's Yellow Book course last fall. Your explanation is a lot clearer that what the course offers.
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Jim Plante

**Pina Colada** · Certified General Joined: 13 Aug 2007 Posts: 552

I took a Yellow Book class in 1993, for the 1992 Yellow Book. Very Happy

The class I took highlighted passages of the book in an ad hoc sequence - do this, don't do that. Yuk.

Don't you find that once it is made into a case study with actual numbers, it makes itself clear?

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I'll bet, since it was an AI course, it talked about the book like it was gospel. In terms of standards theory, the book is moot and so is CFR 49. In the example I gave, the owner would get paid for blighted land, because that is how the courts have interpreted "just compensation." To the extent that the Yellow Book or CFR 49 happens to paraphrase the court correctly - goody for them. Other than that, the condemnation agencies are just another greedy client with a pecuniary interest in the outcome of the appraisal, even if they aren't supposed to be.

**Jim Plante** · Posted: Wed Aug 06, 2008 12:42 pm Post subject:

Actually, the course wasn't that yucky. Hank Wise taught it, and related some really good tips for working with this type of client. He didn't try to spoon-feed the yellow book to a roomful of general appraisers (I was the only cert res in the room.)

Instead, he took a problem-solving approach to things. He particulary emphasized the need to hire experts for the more complex jobs (like the market study his firm did in the Everglades.) He hired professional statisticians to do the needed regression analyses. He also stressed completing a good, comprehensive job proposal. Takes from three to ten days at his shop just to complete the RFP on some jobs. But he never has trouble getting paid.

I don't know that I learned a whole lot more about how to DO a YB appraisal, but I sure learned a lot about how to avoid trouble. (And what's to learn? The format and data verification are about the only things different from a plain commercial appraisal. The other stuff is just good appraisal practice to start with.)
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Jim Plante

**Pina Colada** · Certified General Joined: 13 Aug 2007 Posts: 552

But what form does it go on? Very Happy

**Jim Plante** · Posted: Wed Aug 06, 2008 1:03 pm Post subject:

Yes, that was Hank's job. He did the market analysis, and all the appraisers hired to find values used Hank's analysis as the basis for their value opinions. I think that analysis is still posted on the web.
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Jim Plante

**Steve Owen** · Posted: Wed Aug 06, 2008 2:15 pm Post subject: