USPAP and 49 CFR Part 24
(Appraisal Provisions of 49CFR)
The State of the Real Estate
Industry in 2010
The State of the
Appraisal Industry in 2010
Definitions of Appraisal
Terminology
(NOT from USPAP or 49 CFR)
Purpose of the Appraisal –
To make a living in the appraisal business.
Definitions of Appraisal
Terminology
(NOT from USPAP or 49 CFR)
Highest and Best Use –
Whatever the person who is paying for the
appraisal wants to do with the property.
Definitions of Appraisal
Terminology
(NOT from USPAP or 49 CFR)
Capitalization Rate –
The number which is arrived at by dividing
the number the client wants by the net
operating income.
Definitions of Appraisal
Terminology
(NOT from USPAP or 49 CFR)
Eminent Domain –
From the Latin. Eminent, meaning big, or
prominent. Domain, meaning where one lives.
Hence, a big house.
49 CFR Part 24 - Subpart B
1. Appraisal Requirements
2. Appraiser Qualifications
3. Uniform Act Appraisal “Requirements”
vs. USPAP “Standards”
4. Scope of Work
Key Topics

Appraisal Requirements
§ 24.2(a)(3) and § 24.103(a) and
Appendix A
Agency Responsibilities
§ 24.103(a)(1) & (2)
Key Topics
Appraiser/Review Appraiser Responsibilities
§ 24.103(a) and § 24.104(a) and (b)
Uniform Act Appraisal “Requirements” vs.
USPAP “Standards”
References to USPAP standards are found
in § 24.103(a) and Appendix A
Key Topics

Scope of Work
§ 24.103(a) and Appendix A
49CFR Appraisal - Definition

24.2 (a) (3) – “Appraisal. The term
appraisal means a written statement
independently and impartially prepared by a
qualified appraiser setting forth an opinion
of defined value of an adequately described
property as of a specific date, supported by
the presentation and analysis of relevant
market information.”
USPAP Appraisal - Definition
“(noun) the act or process of developing an opinion of value; an
opinion of value.
(adjective) of or pertaining to appraising and related functions
such as appraisal practice or appraisal services.”
(USPAP; “Definitions”)
“(noun) the act or process of developing an opinion of value; an
opinion of value.
(adjective) of or pertaining to appraising and related functions such
as appraisal practice or appraisal services.”
(USPAP; “Definitions”)
24.2 (a) (3) – “Appraisal. The term appraisal means a
written statement independently and impartially prepared
by a qualified appraiser setting forth an opinion of
defined value of an adequately described property as of a
specific date, supported by the presentation and analysis
of relevant market information.”
Criteria for Appraisal

Reference: 24.103 and Appendix A
49 CFR and USPAP

49 CFR appraisal “requirements”
USPAP “standards”
49 CFR and USPAP

24.103 Criteria for appraisals.

(New Rule Appendix A)

The term "requirements" is used throughout
this section to avoid confusion with The
Appraisal Foundation's Uniform Standards
of Professional Appraisal Practice (USPAP)
"standards."
49 CFR and USPAP
“ Section 24.103(a) Appraisal requirements.
The first sentence instructs readers that
requirements for appraisals for Federal and
federally-assisted programs or projects are
located in 49 CFR part 24. These are the
basic appraisal requirements for Federal and
federally-assisted programs or projects.”
Section 24.103(a) (continued)
“ However, Agencies may enhance and
expand on them, and there may be specific
project or program legislation that
references other appraisal requirements.”
Section 24.103(a) (continued)
“ These appraisal requirements are necessarily
designed to comply with the Uniform Act
and other Federal eminent domain based
appraisal requirements.

They are also considered to be consistent
with Standards Rules 1, 2, and 3 of the 2004
edition of the USPAP.”
Consistency with USPAP

Consistency with USPAP has been a feature
of these appraisal requirements since the
beginning of USPAP. This "consistent"
relationship was more formally recognized
in OMB Bulletin 92-06.
Comparison of 49CFR & USPAP

Government
acquisition of private
property in support of
public programs

Various private sector
needs but dominated
by mortgage lending
Comparison of 49CFR & USPAP

Comply with
Constitution:
 “Just Compensation”,
 based on
 “Fair Market Value”
appraisal

Provide order and
control of the
appraisal profession
 Avoid confusing and
misleading appraisal
users and protect
appraisers
Comparison of 49CFR & USPAP

Fair treatment of
owner(s) and taxpayer
 Based on the
assumption that the
acquiring agency is a
knowledgeable user or
appraisal services

Set nationwide
standards
 Appraisal user may
have limited or no
appraisal knowledge
Comparison of 49CFR & USPAP

Agency knows what is
needed and why
 Appraiser may need
information and
guidance to comply
with applicable laws,
regulations, policies
and procedures

Appraiser determines
what is needed and
sets the appraisal
parameters
Consistencies with USPAP

A written statement

Standard 2 – Reporting

Independently and
impartially prepared

Ethics provision – conduct

By a qualified appraiser


Setting forth an opinion of
defined value
Standard 1, Standards
Rule 1
 Standards Rule 1 and 2
Consistencies with USPAP

of an adequately described
property

Standards Rule 1 and 2

as of a specific date

Standards Rule 1 and 2

supported by the
presentation

Standards Rule 2
Consistencies with USPAP

and analysis

Standards Rule 1

of relevant market
information

Standards Rule 1 and 2
Appraisal Requirements
Identification of “Real Property” and
“Personal Property”
 Reference 24.103(a) and Appendix A
The Appraisal Assignment

Reference 24.103(a) and Appendix A
 The agency is to participate in :
– Defining the appraisal problem
– Developing the scope of work
The Appraisal Assignment

§ 24.103 (a) (1)
 “The Agency acquiring real property has a
legitimate role in contributing to the
appraisal process, especially in developing
the scope of work and defining the appraisal
problem. The scope of work and
development of an appraisal under these
requirements depends on the complexity of
the appraisal problem.”
The Appraisal Assignment

“2) The Agency has the responsibility to
assure that the appraisals it obtains are
relevant to its program needs, reflect
established and commonly accepted Federal
and federally-assisted program appraisal
practice, and as a minimum, complies with
the definition of appraisal in § 24.2(a)(3)
and the five following requirements: (See
appendix A, §§ 24.103 and 24.103(a).
The Appraisal Assignment
(i) “An adequate description of the physical
characteristics of the property being
appraised (and, in the case of a partial
acquisition, an adequate description of the
remaining property), including items
identified as personal property, . . .”
The Appraisal Assignment
(ii) All relevant and reliable approaches to
value consistent with established Federal
and federally-assisted program appraisal
practices. If the appraiser uses more than
one approach, there shall be an analysis and
reconciliation of approaches . . .”
The Appraisal Assignment
(iii) A description of comparable sales,
including a description of all relevant
physical, legal, and economic factors such
as parties to the transaction, source and
method of financing, and verification by a
party involved in the transaction.
The Appraisal Assignment
(iv) A statement of the value of the real
property to be acquired and, for a partial
acquisition, a statement of the value of the
damages and benefits, if any, to the
remaining real property, where appropriate.
The Appraisal Assignment
v) The effective date of valuation, date of
appraisal, signature, and certification of the
appraiser.
Qualifications of Appraisers
and Review Appraisers

24.103(d) - The agency shall establish
criteria for determining the minimum
qualifications and competency of appraiser
and review appraisers.
 Qualifications shall be consistent with the
scope of work for the assignment.
Qualifications of Appraisers
and Review Appraisers

24.103(d) (continued) “The agency shall
review the experience, education, training
licensing, designation(s) and other
qualification of appraisers, and review
appraisers, and use only those determined
by the agency to be qualified.”
Qualifications of Appraisers
and Review Appraisers

Agency considerations/factors:
– Competency
– Experience
– Education
– Training
– Certification/licensing
– Professional designations
Qualifications of Appraisers
and Review Appraisers

Agency responsibility:
– Set criteria on minimum qualifications
– Assure qualifications match the scope of work
– Contract (fee) appraisers must be state
licensed/certified.
49 CFR Part 24
“Scope of Work”
Link to FHWA Appraisal
“Scope of Work” Template:
http://www.fhwa.dot.gov/realestate/sow4.htm
Scope of Work
Why was the “scope of work” text added to
the regulation?
The Scope of Work language replaces and
supplants the former appraisal problem
statement.
Scope of Work

It is an infinitely variable standard driven by
the circumstances of the appraisal
assignment.
 It is a vehicle of agreement and
communication between the agency and the
appraiser.
Scope of Work

The scope of work requirements in the Final Rule
are written on the basis that the Acquiring Agency
is a “knowledgeable user” of appraisal services.
Scope of Work

It is a written statement that defines the
general parameters of the appraisal.
 It is developed together by the appraiser and
the agency.
 It is prepared before the appraisal work
starts
 It should be updated as needed.
Scope of Work

It matches the UA and 49CFR requirements
to the appraisal problem, covering:
– The definition of “appraisal” in the UA
– Specific rule requirement in 24.103(a)(2) –
appraisal shall be relevant to program needs
– Specific rule requirement in 24.103(b) – Project
influence
Scope of Work

Should address:
– Purpose/function of the appraisal
– Definition of the estate to be appraised
– Definition of “Fair Market Value”, if applicable.
– Assumptions and limiting conditions.
– 24.103(a)(1)-(5) requirements
Scope of Work

24.103(a)(2)(i) requirements
– Identify items of personal property
– An adequate description of the physical
characteristics of the property being appraised
– Title information, zoning, highest and best use
– At least a five year sales history
Scope of Work

24.103(a)(2)(i)-(v) requirements
– All relevant and reliable approaches to value
– If more than one approach is used, an analysis
and reconciliation of approaches to value shall
be included.
Scope of Work

24.103(a)(2)(iii) requirements
– A description and analysis of comparable sales
 A discussion of all relevant physical, legal, and
economic factors
– Verification of sales data with at least one
party involved in the transaction
Scope of Work

24.103(a)(2)(iv) requirements
– A statement of the value of the real property to
be acquired
– For a partial acquisition, a statement of the
value of the damages and benefits, if any to the
remaining real property, where appropriate
Scope of Work

24.103(a)(2)(v) requirements
– The effective date of the valuation
– A statement of the value of the real property to
be acquired, and a statement of damages, if any
– Date of the appraisal
– Signature and certification of the appraiser
Scope of Work
Example
The appraiser must, at a minimum:
PROJECT
disregard any decrease or increase in the fair
marketINFLUENCE
value of the property caused by the
– In developing and reporting the appraisal,
project for which the property is being acquired
or by the likelihood that the property would be
acquired for the project.
Scope of Work
Example

Definition of Market Value:

This will be determined by State law, but typically
includes the following:
– Buyer and seller are typically motivated
Scope of Work
Example

Definition of Market Value:

This will be determined by State law, but typically
includes the following:
– Buyer and seller are typically motivated
– Both parties are will informed or well advised, each
acting in what he or she considers his or her own best
interests
Scope of Work
Example

Definition of Market Value:

This will be determined by State law, but typically
includes the following:
– Buyer and seller are typically motivated
– Both parties are will informed or well advised, each
acting in what he or she considers his or her own best
interests
– A reasonable time is allowed for exposure in the open
market
Scope of Work
Example

Certification:
 Typically the required certification will be in the
State DOT’s FHWA-approved Right-of-Way or
Appraisal Manual.
Scope of Work
Example
Assumptions and Limiting Conditions:
The appraiser shall state all relevant
assumptions and limiting conditions necessary.
In addition, the acquiring agency may provide
other assumptions and conditions that may be
required for the particular appraisal assignment.
Realty/Personalty Report

Identify:
– Personal property – 24.103(a)(2)(i)
– Real property – Appendix A 24.103(a)(i)
Agency Responsibility

Acquiring agency responsible to assure that
appraisals:
– Are relevant to its program needs
– Reflect established and commonly accepted
Federal and federally-assisted program
appraisal practices
Agency Responsibility

Acquiring agency responsible to assure that
appraisals:
– As a minimum, comply with both:
 Definition of appraisal in 24.2(a)(3)
 Five requirements in 24.103(a)(2) (i)–(v)
Just Compensation
(a reminder)

Agency official must determine the just
compensation offer based on:
Just Compensation
(a reminder)

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
49 CFR Part 24
Subpart B
Questions and Answers
Discussing 49 CFR and USPAP
Appraisal Requirements and
Methodology with Management