Flowchart 5C: Appraisal and/or Waiver Valuation Process
You should contact CDOT as early as possible about any federal-aid project the agency plans to do that requires real property appraisal. The prospective appraiser and review appraiser (CDOT staff or consultant) both should be selected as early as possible, and both should be involved as much as possible in the right-of-way planning stage that might include review of various draft right-of-way plans and field inspections of affected properties along the project.
CDOT 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 depends on the complexity of the appraisal problem.
CDOT's list of approved appraisers and approved review appraisers is available from the CDOT region ROW manager.
Additional information is available in FHWA's video on valuation.
Before the initiation of negotiations, your agency must obtain its own appraisal of the real property to be acquired if the anticipated value of the proposed acquisition is greater than $25,000.
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. (49 CFR § 24.2(a)(3)). Appraisal is also defined in § 24-56-117(1)(k), C.R.S. Real property acquisition appraisal requirements for federal and federally-assisted programs are stated in 49 CFR § 24.103(a).
See CDOT ROW Manual, Chapter 3 Appraisal.
It is helpful if the appraiser and the review appraiser are able to participate together in right-of-way project planning and have the opportunity to discuss various appraisal aspects and concerns of the different parcels that will be appraised (e.g. complex valuation issues and likely appropriate appraisal methods in certain situations). This up-front time can help reduce confusion, misunderstanding and sometimes difficult appraisal review processes between the reviewer and appraiser that might otherwise take a lot longer to finish than originally planned.
In developing a real property appraisal, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete research and analyses necessary to produce credible assignment results. The appraiser's responsibility is to produce a credible appraisal that meets or exceeds CDOT's expectations.
See Chapter 3, Section 3.1.10 – Appraisal Requirements in the CDOT ROW Manual for components of the appraisal.
Draft appraisals will be delivered to the CDOT region ROW manager or, with the manager's permission, directly to the CDOT staff or contract review appraiser.
All appraisals for federal-aid projects must be reviewed by a qualified staff or consultant review appraiser.
The requirements pertaining to appraisal review are set forth in 49 CFR 24.104; CDOT ROW Manual, Chapter 3, Appraisal and Appraisal Review; FHWA Real Estate Acquisition Guide for Local Public Agencies; and the FHWA Project Development Guide, Appraisal Review.
The appraisal review is CDOT's process to ensure appraisal reports show good research and analysis, are technically proficient, well written and presented, and result in well supported conclusions.
Depending on circumstances, CDOT's ROW manager may require or allow the local agency to outsource appraisal review by an appraiser on CDOT's qualified review appraiser list. The CDOT ROW manager may require the local agency to engage a specific review appraiser on the list, or may allow the local agency to choose the review appraiser from that list. CDOT's qualified review appraiser list may be obtained from the CDOT region ROW manager.
The review appraiser will review the draft appraisal for necessary corrections, which may include discussion on points of appraisal judgement and opinion, to the point where a final signed appraisal report will be accepted and may be delivered to the reviewer. If the appraisal report is not acceptable, the local agency is required to submit a substitute appraisal. The reviewer will review all appraisals submitted in connection with the proposed acquisition, and will determine one of the appraisals as most appropriate and supportable as basis for Fair Market Value (FMV).
See Chapter 8, Section 8.8 – Appraisal Review, of the CDOT ROW Manual for further information.
Fair Market Value (FMV) represents the amount of compensation that will be offered to the property owner for the proposed acquisition.
The appraisal reviewer will review all appraisals submitted in connection with the proposed acquisition, and will determine one of the appraisals as most appropriate and supportable as basis for FMV. The reviewer will determine each reviewed appraisal as:
- Recommended (basis for the FMV), or
- Accepted (meets all basic appraisal requirements, but not recommended as FMV), or
- Not accepted (does not meet minimum appraisal standards and might be egregious in appraisal error or advocacy or bias, or all of these and more. An appraisal that is not accepted is one where it might be questionable whether it is appropriate to pay the appraisal fee).
The review appraisal process from draft review to an FMV in the agent's hands will easily take from two weeks to several weeks for each appraisal reviewed, depending on circumstances. It is helpful for the local agency to stay in close contact with both the appraiser and review appraiser to stay informed on the process, as at any given time a draft appraisal may be coming in for review, some appraisal work is in review (desk and field review work), and some appraisal reports have been delivered in final print and the reviewer is writing FMVs and review reports.
A review report is written on each appraisal reviewed, and when more than one appraisal (agency and property owner) is reviewed, the reviewer will include basic information in the review report explaining why one appraisal report is recommended over the other as basis for FMV.
The review appraiser will sign the FMV as review appraiser and deliver the FMV to CDOT's ROW manager (typical), or to the delegated local agency signatory, as signing approver of the FMV as basis for the offer of just compensation to the property owner.
See CDOT ROW Manual, Chapter 4 – Acquisition for more information.
There are two instances when an appraisal of real property may not be required:
- The acquisition is estimated to be $25,000 or less
- A donation is made and the property owner releases the agency from the obligation to obtain an appraisal.
Based on 49 CFR 24.102(c)(2) and CRS 24-56-117(b), an appraisal of a proposed acquisition parcel may be waived if a qualified local agency right-of-way employee, or an acquisition or appraisal consultant under contract to the local agency, determines that an appraisal is unnecessary because the valuation problem is uncomplicated and the anticipated value of the proposed acquisition is estimated at $10,000 or less, based on a review of available data.
This waiver valuation threshold may rise to $25,000, including site improvements and minor damages and/or cost-to-cure considerations, at the discretion of the CDOT region ROW manager. However, Waiver Valuations at more than $10,000 up to $25,000 may only be performed upon written permission from the property owner to release the agency from the requirement to prepare an appraisal, otherwise an appraisal must be performed for valuations expected to exceed $10,000.
A waiver valuation is not represented as an appraisal. It is an opinion of value for real property where the value and compensation conclusion for the acquired property is $25,000 or less.
When CDOT concurs with the local agency that an appraisal is unnecessary, the local agency or fee agent (acquisition or appraisal consultant) will prepare a waiver valuation on CDOT Form 919 – Fair Market Value Waiver Valuation (contact the region ROW Manager to obtain this form). The person performing the waiver valuation must have sufficient understanding of the local real estate market to be qualified to make the waiver valuation. The same person who performed the waiver valuation may also negotiate for the acquisition of the parcel.
A qualified staff person for the local agency or a fee agent (acquisition or appraisal consultant) must review the waiver valuation estimate.
If the value finding is acceptable, the review person will sign the waiver valuation form as approved.
