r/w appraisal report · damnum absque injuria: damage without a violation of a legal right (in some...

Appraisal 104

The R/W Appraisal Report

(RE 25-17)

Fall, 2017

RE 25-17: R/W Appraisal Report

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DISCLAIMER

This student handbook has been created by the Appraisal Unit of the Acquisition Services Section, Office

of Real Estate,Ohio Department of Transportation and is intended for use as a study guide and desk

reference for agencies, consultants and individuals involved in land acquisition by anyone having the

power of eminent domain in the State of Ohio.

ACKNOWLEDGMENTS

This handbook was assembled by staff from the ODOT Office of Real Estate and questions or comments

should be directed to the following:

Harvey Norton Jr., Realty Specialist,

ODOT Central Office of Real Estate, 1980 West Broad St., 4th fl.

Columbus, Ohio 43223,

614-466-2512


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Table of Contents

I. Introduction ......................................................................................................................... 7

II. Purpose of R/W Appraisals ................................................................................................. 8 Why do we have them? (FAQ) ........................................................................................... 8 Market Value vs. Just Compensation.................................................................................. 8 Federal Rule vs. State Rule: ................................................................................................ 9

III. Citations ............................................................................................................................ 11

Federal Laws: .................................................................................................................... 11 Federal Regulations: ......................................................................................................... 11 State Laws ......................................................................................................................... 13 State Regulations .............................................................................................................. 14

Case Law ........................................................................................................................... 15

IV. ODOT R/W Appraisal Report Procedures – ..................................................................... 24

ODOT Real Estate Manual Sections 4000 through 4400: ................................................ 24 Required and Optional Information Needed to Prepare the RE 25-17: ............................ 25

RE 25-17 R/W Appraisal Report .................................................................................. 27

RE 25-1 Summary Sheet ........................................................................................... 40 RE 25-6 Certificate of Appraiser .............................................................................. 42

RE 25-7 Supplemental Sheet ..................................................................................... 44 RE 91 Owner Verification of Property Inspection .................................................... 45 RE 95 Property Inventory Classification ................................................................... 46

V. Six (6) Basic Case Studies: ............................................................................................... 48

Case Study #1: Cost-to-Cure Eliminates All Damages .................................................. 48 Case Study #2: Cost to Cure Does Not Eliminate All Damages .................................... 61 Case Study #3: Cost to Cure Is Not Feasible ................................................................. 74

Case Study #4: Only a Partial Cure Is Feasible ............................................................. 84 Case Study #5: Cost to Cure Is Not Possible ................................................................. 95

Case Study #6: Limited Scope Appraisal (but still Complex) ..................................... 104

VI. Addenda .......................................................................................................................... 113 ODOT PRE APPRAISAL FORMS: ............................................................................... 117

The Appraisal Pre-Assignment Checklist .................................................................. 117 APA – Appraisal Problem Analysis: ......................................................................... 118

PIN – Parcel Impact Notes: ........................................................................................ 120

Blatnik Findings .............................................................................................................. 122

Sample Scope of work .................................................................................................... 130 The Sales Data Sheet ..................................................................................................... 132

THE ISSUES .............................................................................................................. 135


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Class Schedule

8:30 to 9:00 AM Registration/Sign In

9:00 to 9:50 AM Introduction, Federal & State Regulations and Case Law, Frequently Asked

Questions (FAQ’s), ODOT Procedures and Introduction to ODOT forms (RE 25-

17, RE 25-6, RE 25-01, RE 25-07), ODOT Appraisal Manual Sections 4000

through 4400

9:50 to 10:00 AM Break

10:00 to 10:50 AM The RE25-17 R/W Appraisal Report (by the numbers), Eleven (11) Major

PARTS with Seventy-eight (78) Sub Sections

10:50 to 11:00 AM Break

11:00 to 11:45 AM Examples of Proper Analysis (Case Study #1& #2),

Case Study #1 is where Cost to Cure Eliminates All Damages; and,

Case Study #2 is where Cost to Cure Does Not Eliminate All Damages

11:45 to 12:30 PM Lunch

12:30 to 1:20 PM Examples of Proper Analysis (Case Study #3 & #4),

Case Study #3 is where the Cost to Cure is NOT Feasible; and

Case Study #4 is where only a Partial Cure is Feasible to Implement

1:20 to 1:30 PM Break

1:30 to 2:20 PM Examples of Proper Analysis (Case Study #5 & #6),

Case Study #5 is where No Cure is Possible; and

Case Study #6 is where (only) a Limited Scope Appraisal is needed (and/or

appropriate)

2:20 to 2:30 PM Break

2:30 to 3:00 PM Case Study Wrap-Up, RE 25-17 Conclusions, and Items in the Addenda

3:00 PM Class Dismissed


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I. Introduction

This course will demonstrate how ODOT, the acquiring agency has delivered to it the complex before and

after appraisal reports. The procedures followed in order to get these appraisals completed that meet its

program needs will be shown. This course will emphasize the difference between the six (6) basic

scenarios of likely complex appraisal problems and explain those different situations that no doubt will be

found in the real world of eminent domain/condemnation practices.

In the Real Estate Appraisal Scoping Process: Appraisers always go from the

GENERAL

to the

SPECIFIC

This concept of looking at the big picture and then funneling our knowledge down to the specific

property is common in real estate appraisal because it recognizes that while real estate is immovable

and unique, it does not exist unto itself but exists in a larger marketplace. Impacted by a condemnation

proceeding. All of this information is then used to support before and after value conclusions.


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II. Purpose of R/W Appraisals

Why do we have them? (FAQ)

1. Highway projects are public works projects and benefit the public at large and often result in

acquisition of private property and the displacement of people from their homes, businesses or

farms. These projects are typically funded, in part, with federal dollars from the Federal Highway

Trust fund. The use of federal funds in any part of the project “federalizes the entire project”

including the appraisal process. As a result, the appraisal process must meet federal standards as

well as State of Ohio standards.

2. The federal government and the State of Ohio have the inherent power to take real property for

these public purposes based on the reason of general welfare for the public. This power is known

as eminent domain. This power is not absolute, but is stringently regulated to assure that people

are treated fairly, equitably, that they receive fair compensation for what is taken from them and

that they are afforded all rights and privileges they are provided for under law and regulation.

!

3. The appraisal process is a key component of the highway development process. Highway

projects can be stopped without an appraisal and the part it plays in making an offer of

compensation to an owner.

4. As the appraisal process is a critical component in the delivery of a highway project, project

managers must manage the appraisal process in such a way to assure that acquisition time lines

are adhered to. These time lines are created so that district offices can certify to FHWA that

rights of way are cleared by a specific date and FHWA may then allow the construction phase to

begin by permitting ODOT to advertise for construction bids to build the project.

Market Value vs. Just Compensation

Market Value: The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or

in other precisely revealed terms, for which the specified property rights should sell after

reasonable exposure in a competitive market under all conditions requisite to a fair sale,

with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and

assuming that neither is under undue duress. Source: Appraisal of Real Estate 14th edition Page 58

Market Value: You will award to the property owner(s) the amount of money you determine to be the

fair market value of the property taken. Fair market value is the amount of money which

could be obtained on the market at a voluntary sale of the property. It is the amount a

purchaser who is willing, but not required to buy, would pay and that a seller who is

willing, but not required to sell, would accept, when both are fully aware and informed of

all the circumstances involving the value and use of the property. You should consider

every element that a buyer would consider before making a purchase. You should take

into consideration the location, surrounding area, quality and general condition of the

premises, the improvements thereon and everything that adds to or detracts from the

value of the property. Source: Ohio Jury Instruction CV 609.05 Masheter v. Kebe (1976), 49 Ohio St.2d 148, 3 O.O.3d 86, 359

N.E.2d 74.

Just Compensation: in a condemnation case, the amount of money that the landowner is entitled to be

paid; under the “State Rule” it is the value of the part taken plus any decrease in the value

of the remainder; under the “Federal Rule” is the decrease in the value of the property

after the taking. Just Compensation: the payment (to a property owner) the acquiring

agency must make in order to acquire property for a federally funded or federally assisted


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project. The payment includes the value of the real estate acquired and any damages

caused to the remainder of the property by the acquisition and / or construction.

Compensable Damages: damages that can be considered and paid for in a condemnation

case under applicable state or federal law; a damage to property arising as a consequence

of a taking and/or construction on other lands.

Damages: in civil case, outside the field of eminent domain law, the term “damages” is

non-specific generic term used by lawyers and others to refer to the monetary

compensation that one claimant or litigant seeks or receives from another; in the field of

eminent domain law, however, the term damages is a “term of art” possessing a very

specific meaning; “damages” or “damages to the remainder”.

Damages: in some instances when the acquiring agency acquires a part of a person’s

property, the acquisition, planned use, or construction may cause a loss in value of the

remaining property (damages may also extend to adjoining properties in which the

property owner has an interest). Normally, the value of the damage is based on a before

and after appraisal or on the cost to cure. An owner is entitled to payment of damages

and receives this payment as a part of the payment of just compensation.

Damage to the Remainder: (also called proximity damage, severance damage,

consequential damage); a lessening in the value of a remainder or residue of property

acquired for a public improvement which damage is caused by the public improvement or

the acquisition.

Damnum Absque Injuria: damage without a violation of a legal right (in some states

installing median barrier).

Appropriation: term used in some jurisdictions for the act of exercising the power of eminent domain;

see also “Condemnation” and “Expropriation”.

Condemnation: the procedure by which the power of eminent domain is exercised whether it is

established by statue or otherwise. In Ohio this term is interchangeable with

“Appropriation”. See Appropriations

Federal Rule vs. State Rule:

1. Federal Rule: the rule used in condemnations initiated by the federal government and some

state governments in which the compensation is calculated by subtracting the value of the

property after the taking from the value of the property before the taking; all of the special

benefits and damages are considered in making these calculations also used by some states.

Before-And-After Rule: in eminent domain valuation, a procedure in which just

compensation is measured as the difference between the value of the entire property

before the taking and the value of the remainder after the taking; synonymous with

“Federal Rule”.

2. State Rule: the rule for determining just compensation in most state courts; the subject parcel is

valued as a separate economic unit before the taking and after the taking: taking into

consideration all reasonable uses that the part taken can be used for and considering all of the

special benefits and damages; the difference in these two evaluations is added to the value of the

part taken and the sum is just compensation. aka: Part Taken plus Damages Rule

3. Ohio – Is a “Hybrid State”, Compensation is based on case law which demands the “Before and

After” process but also the state constitution which requires payment for “the part taken and

damages if any to the residue property.”


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III. Citations

Federal Laws:

“The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970”, as amended

was codified into federal law as 42 USC Ch. 61. The requirement to have an appraisal is found in

Subchapter III Section 4261 and the proper way to write the citation is:

42 USC §4651

(2) Real property shall be appraised before the initiation of negotiations, and the owner or

his designated representative shall be given an opportunity to accompany the appraiser

during his inspection of the property, except that the head of the lead agency may

prescribe a procedure to waive the appraisal in cases involving the acquisition by sale or

donation of property with a low fair market value.

42 USC §4655

(a) Notwithstanding any other law, the head of a Federal agency shall not approve any

program or project or any grant to, or contract or agreement with, an acquiring agency

under which Federal financial assistance will be available to pay all or part of the cost of

any program or project which will result in the acquisition of real property on and after

January 2, 1971, unless he receives satisfactory assurances from such acquiring agency

that--

(1) in acquiring real property it will be guided, to the greatest extent practicable under

State law, by the land acquisition policies in section 4651 of this title and the

provisions of section 4652 of this title, and

(2) property owners will be paid or reimbursed for necessary expenses as specified in

sections 4653 and 4654 of this title.

Federal Regulations:

23 CFR §710.309 Acquisition

The process of acquiring real property includes appraisal, appraisal review, establishing

just compensation, negotiations, administrative and legal settlements, and condemnation.

The State shall conduct acquisition and related relocation activities in accordance with

49 CFR part 24.

49 CFR §24.103 Criteria for appraisals

(a) Appraisal requirements.

This section sets forth the requirements for real property acquisition appraisals for

Federal and federally-assisted programs. Appraisals are to be prepared according to

these requirements, which are intended to be consistent with the Uniform Standards of

Professional Appraisal Practice (USPAP). 1 (See appendix A, §24.103(a).) The Agency

may have appraisal requirements that supplement these requirements, including, to the

extent appropriate, the Uniform Appraisal Standards for Federal Land Acquisition

(UASFLA). 2

(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


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appraisal problem. The scope of work and development of an appraisal under these

requirements depends on the complexity of the appraisal problem.

1 Uniform Standards of Professional Appraisal Practice (USPAP). Published by The

Appraisal Foundation, a nonprofit educational organization. Copies may be ordered

from The Appraisal Foundation at the following URL:

http://www.appraisalfoundation.org/htm/USPAP2004/toc.htm.

2 The Uniform Appraisal Standards for Federal Land Acquisitions@ is published by the

Interagency Land Acquisition Conference. It is a compendium of Federal eminent

domain appraisal law, both case and statute, regulations and practices. It is available

at http://www.usdoj.gov/enrd/land-ack/toc.htm or in soft cover format from the

Appraisal Institute at

http://www.appraisalinstitute.org/econom/publications/Default.asp and select

ALegal/Regulatory@ or call 888B570B4545.

(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).)

(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, a

statement of the known and observed encumbrances, if any, title information,

location, zoning, present use, an analysis of highest and best use, and at least a

5-year sales history of the property. (See appendix A, §24.103(a)(1).)

(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

to value used that is sufficient to support the appraiser's opinion of value. (See

appendix A, §24.103(a).)

(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.

(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.

(v) The effective date of valuation, date of appraisal, signature, and certification of

the appraiser.

Appendix A:

Section 24.103 Criteria for Appraisals.

The term ‘requirements’ is used throughout this section to avoid confusion with

standards referred to in The Appraisal Foundation's Uniform Standards of


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Professional Appraisal Practice (USPAP). Although this section discusses appraisal

requirements, the definition of ‘appraisal’ itself at 24.2(a)(3) includes appraisal

performance requirements that are an inherent part of this section. The term ‘Federal’

and ‘federally-assisted program or project’ is used to better identify the type of

appraisal practices that are to be referenced and to differentiate them from the private

sector, especially mortgage lending, appraisal practice.

Section 24.103(a) Appraisal requirements.

The term ‘scope of work’ defines the general parameters of the appraisal. It reflects

the needs of the Agency and the requirements of Federal and federally-assisted

program appraisal practice. It should be developed cooperatively by the assigned

appraiser and an Agency official who is competent to both represent the Agency's

needs and respect valid appraisal practice. The scope of work statement should include

the purpose and/or function of the appraisal, a definition of the estate being appraised,

and if it is market value, its applicable definition, and the assumptions and limiting

conditions affecting the appraisal. It may include parameters for the data search and

identification of the technology, including approaches to value, to be used to analyze

the data. The scope of work should consider the specific requirements in 49 CFR

24.103(a)(1) through (5) and address them as appropriate.

State Laws

ORC 163.04 (C)

An agency may appropriate real property only after the agency obtains an appraisal of

the property and provides a copy of the appraisal to the owner or, if more than one, each

owner or to the guardian or trustee of each owner. The agency need not provide an

owner with a copy of the appraisal when that owner is incapable of contracting in person

or by agent to convey the property and has no guardian or trustee or is unknown, or the

residence of the owner cannot with reasonable diligence be ascertained. When the

appraisal indicates that the property is worth less than ten thousand dollars, the agency

need only provide an owner, guardian, or trustee with a summary of the appraisal. The

agency shall provide the copy or summary of the appraisal to an owner, guardian, or

trustee at or before the time the agency makes its first offer to purchase the property. A

public utility or the head of a public agency may prescribe a procedure to waive the

appraisal in cases involving the acquisition by sale or donation of property with a fair

market value of ten thousand dollars or less.

163.59 (C)

Real property to be acquired shall be appraised before the initiation of negotiations, and

the owner or the owner’s designated representative shall be given a reasonable

opportunity to accompany the appraiser during the appraiser’s inspection of the

property, except that the head of the lead agency may prescribe a procedure to waive the

appraisal in cases involving the acquisition by sale or donation of property with a low

fair market value. If the appraisal values the property to be acquired at more than ten

thousand dollars, the head of the acquiring agency concerned shall make every

reasonable effort to provide a copy of the appraisal to the owner. As used in this section,

Aappraisal means a written statement independently and impartially prepared by a

qualified appraiser, or a written statement prepared by an employee of the acquiring

agency who is a qualified appraiser, setting forth an opinion of defined value of an


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adequately described property as of a specified date, supported by the presentation and

analysis of relevant market information.

State Regulations

5501:2-5-06 (C) Criteria for appraisals:

(1) Appraisal requirements: This rule sets forth the requirements for real property acquisition

appraisals. Appraisals are to be prepared according to these requirements, which are intended to

be consistent with the uniform standards of professional appraisal practice (USPAP). The agency

may have appraisal requirements that supplement these requirements, including, to the extent

appropriate, the uniform appraisal standards for federal land acquisition (UASFLA).

(a) 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.

(b) The agency has the responsibility to assure that the appraisals it obtains are relevant to its

program needs. The agency shall develop minimum standards for appraisals consistent with

established and commonly accepted appraisal practice for those acquisitions which, by virtue

of their low value or simplicity, do not require the in-depth analysis and presentation

necessary in a detailed appraisal. A detailed appraisal shall be prepared for all other

acquisitions. A detailed appraisal shall reflect USPAP and to the extent appropriate, the

UASFLA. All appraisals shall reflect established and commonly accepted appraisal practice,

and as a minimum, complies with the definition of appraisal in paragraph (B)(3) of rule

5501:2-5-01 of the Administrative Code and the five following requirements:

(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, a statement of the known and

observed encumbrances, if any, title information, location, zoning, present use, an

analysis of highest and best use, and at least a five year sales history of the property.

(ii) All relevant and reliable approaches to value consistent with established appraisal

practices including published appraisal practices of the lead agency. If the appraiser

uses more than one approach, there shall be an analysis and reconciliation of

approaches to value used that is sufficient to support the appraiser's opinion of value.

(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.

(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.

(v) The effective date of valuation, date of appraisal, signature, and certification of the

appraiser.

(2) Influence of the project on just compensation: The appraiser shall disregard any decrease or

increase in the market value of the real property caused by the project for which the property is

to be acquired, or by the likelihood that the property would be acquired for the project, other

than that due to physical deterioration within the reasonable control of the owner.

(3) Owner retention of improvements.: If the owner of a real property improvement is permitted to

retain it for removal from the project site, the amount to be offered for the interest in the real


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property to be acquired shall be not less than the difference between the amount determined to be

just compensation for the owner's entire interest in the real property and the salvage value

(defined in paragraph (B)(25) of rule 5501:2-5-01 of the Administrative Code) of the retained

improvement.

(4) Qualifications of appraisers and review appraisers:

(a) The agency shall establish criteria for determining the minimum qualifications and

competency of appraisers and review appraisers. Qualifications shall be consistent with the

scope of work for the assignment. The Agency shall review the experience, education,

training, certification/licensing, designation(s) and other qualifications of appraisers, and

review appraisers, and use only those determined by the agency to be qualified.

(b) If the agency uses a contract (fee) appraiser to perform the appraisal, such appraiser shall be

state licensed or certified in accordance with title XI of the Financial Institutions Reform,

Recovery, and Enforcement Act of 1989 (FIRREA) (12 U.S.C. 3331 et seq.). Contract

appraisers and review appraisers must also be pre-approved by the Ohio department of

transportation before the acquiring agency may enter into a contract for services.

Case Law

Compensation in Ohio is generally estimated as follows:

The Value of the Whole Property (Before Value)

Less - The Value of the Residue Property (After Value - Uncured)

Difference - which Ohio case law requires to be allocated into

The Part Taken, and

Damages (if any) to the remainder property

Plus + Temporary Easements (if any) .

Amount Due the Owner

THE BEFORE AND AFTER RULE

Atlantic & Great Western Railway v. Campbell – 1855 (It is not enough to offer an opinion that a

residue property has lost value but instead the residue must be separately appraised to

demonstrate it’s after value in relation to the whole.

Powers v. Railway Company (1878) (This rule prohibiting damage testimony without indicating

the pre- and post-appropriation fair market values of the residue applies equally to the testimony

of an expert appraiser and the property owner.)

Railway v. Gardner (1887) (it is improper for a witness to state his opinion on the amount of

damages arising from an appropriation of property without giving an opinion as to the value of

the property before and after the appropriation);

Am. Louisiana Pipeline Co. v. Kennerk (1957) ("[a] witness qualified to give an opinion with

respect to value should be required to state such opinion separately as to the value before and

after and also be permitted to testify as to the elements or basis upon which he has formed such

opinion").


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Masheter v. Kebe (1973) ("the proper procedure to be followed is for the expert to give his

opinion as to the value of the property prior to the taking and the value of the residue after the

taking");

Wray v. Svartak (1997) (in giving an opinion as to the damages to the residue, an expert is

required to state the before and after fair market values of the property)

Hilliard v. First Industrial (2004) It is well established by clear and venerable case law that an

opinion as to the damages to the residue must be expressed in terms of the difference between the

pre-and post-appropriation fair market value of the residue.

This Difference is allocated into an award ($) for the “Part Taken” and an award for ($)

“Damages” (if any) to the residue.

THE PART TAKEN PLUS DAMAGES RULE

In a partial taking, a property owner is entitled to compensation for the property taken and “damages

for injury to the property which remains after the taking, i.e., the residue." (Norwood v. Forest

Converting Co. - 1984)

Damages: Outside the field of Eminent Domain is a non-specific term used by lawyers and others to

refer to the monetary compensation that one claimant or litigant seeks or receives from another.

Damages: In the field of Eminent Domain law this is a “term of art” with very specific meaning.

“A lessening in value (loss in value) of the residue property as a result of the project.”

ODOT Value Finding Report

An ODOT Value Finding Report, while acceptable in an acquisition setting [OAC

5501:2-5-06(C)(1)(b)], is not appropriate for trial purposes because:

“it is not enough to offer an opinion that a residue property has lost value but instead the

residue must be separately appraised to demonstrate it’s after value in relation to the

whole. Only after testifying to both the before value and the value of the remaining

property may an appraiser then state the value of the part taken and damages (if any) to

the residue.” (Masheter v. Kebe – 1973)

The ODOT Value Finding Report, when properly scoped by the acquiring agency, infers

through its very use that there are no damages to the residue, however it does not go

through the steps necessary to demonstrate this conviction in a fashion satisfactorily

detailed enough to meet the tests outlined in Masheter v. Kebe.

“COST-TO-CURE”

Where damage is caused to the residue of property remaining after a taking, and, if, by the

expenditure of money in an amount less than the difference between the before and after fair market

value of the residue, the property owner could make improvements to such residue to restore the fair

market value of the residue to that which it was before the improvement, then, evidence of such "cost

of cure" would be admissible and, if proved, would limit the amount of damages to be assessed.

(Stvartak, supra, citing City of Columbus v. Farm Bureau Cooperative Assn. 1971)

Before a party can utilize a cost-of-cure analysis, it is clear that the party must establish the

diminution in value of the land after the taking by deducting the fair market value of the property

after the taking from the fair market value before the taking. (Proctor v. Jamieson, 2001 Ohio)

Evidence relating to proposed “cost to cure” must be excluded, unless such cost-to-cure items

mitigates damages.


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Defendants have indicated that they seek “cost to cure” expenses in addition to damages to

residue. Cost to cure compensation is only available if the cost to cure mitigates damages; it is

not available in addition to other damages.

Under Ohio law, where part of a tract of land is taken for public use by an exercise of power of

eminent domain, the legal measure of damages is the market value of the land taken plus the

damage to the residue. City of Columbus v. Zanes, 120 Ohio App. 229, 201 N.E.2d 837 (10th

Dist.1964); In re Appropriation for Highway Purposes, 15 Ohio App.2d 131. 239 N.E.2d 110 (3rd

Dist. 1968) As an exception to the general rule, it is recognized in Ohio that in determining

damages to the residue, evidence of modification which, if made, would restore the property and

improvements thereon to their former usefulness are admissible under the rule that it is the duty

of an injured party to minimize his damages. Trustees of Cincinnati Souther Ry. Co. v.

McWilliams, 18 Ohio App. 225 (1st Dist.1923)

Gohman v. City of St. Bernard, 111 Ohio St. 726, 753, 146 N.E. 291 (1924) the Ohio Supreme

Court explained that the purpose of allowing an inquiry into the expense of alterations and

restorations necessary to adapt the property and its improvements to the new condition is to

ascertain whether the damages shown by decrease in market value can be minimized by

resort to alterations and adjustments. The Court clearly explained the concept of “cost to cure” in

the following hypothetical:

If, for example, property left after a street improvement in an unsightly condition

should be estimated to be worth $1,000 less than before the improvement, and by the

expenditure of $100 the property could be restored to its former value, the property

owner would be made full whole by payment of $100, and the costs of alteration and

adjustments should then become the measure of damages. A different rule prevails

when the cost of alterations to suit the fancy of the owner, or to meet the different

ideas of witnesses called to testify as experts on the subject of alterations, shall

exceed the amount of the difference in values of the property before and after the

improvement.

111 Ohio St. 726, 753-754. Thus, only when the cost of cure is less than the damages to the

residue can it be used.

The costs of restoring the usefulness of residue property not condemned are the measure of

damage to the remaining property if such rehabilitation will return the whole of the residue to its

present usefulness. Gano v. The Cleveland, Cincinnati, Chicago & St. Louis Ry. Co., 33 Ohio

App. 142, 168 N.E. 566 (1st Dist.1929). Restoration expenditures must be in such an amount as

will not exceed the difference between the market value of the residence before and its value after

the taking which would have existed with the expenditure. Zaras v. City of Findlay, 112 Ohio

App. 367, 176 N.E.2d 451 (3rd. Dist.1960). In other words, “evidence showing the cost of cure

of damage to the residue to real estate cannot be utilized to increase the before and after

fair market value damages; but may be admitted only to reduce such damages.” Columbus

v. Farm Bureau Cooperative Assn., 27 Ohio App.2d 197, 273 N.E.2d 888 (10th Dist.1964). See

also, City of Columbus v. Zanes, 120 Ohio App. 229, 201 N.E.2d 837 (10th. Dist.1964). In

Gohman v. City of St. Bernard, supra, testimony as to the amount of the difference in the fair

market value of the real estate before and after construction of the public improvement never

exceeded $2,500.00. However, testimony on the subject of costs of alterations ran much

higher. The Supreme Court held that the trial court erred in allowing the jury to consider

evidence on costs of restoration which exceeded the difference in the before and after value of the


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land, because, “such testimony, according to the authorities is only competent when alterations

could be made at a cost which would be less than the amount of the difference in values.” 111

Ohio St. at 754.

This concept of a curable damage causes a modification to the formula stated previously:

(Current ODOT Summary R/W Appraisal Template)

The Value of the Whole (Before Value)

Less - The Value of the Residue (After Value – Uncured)

Difference - which is allocated into the

Part Taken, and

Damages (if any) which is further allocated into

Net Cost-to-Cure, and

Remaining Damages Uncured (if any)

Plus + Temporary Easements (if any) .

Amount Due the Owner

What this modified formula infers is that whenever a cost-to-cure is employed, a third appraisal

is required: an appraisal of the residue property in its cured condition is necessary to

demonstrate whether the proposed cure actually cures all damages.


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Other important case law and its impact on compensation

“GOING CONCERN VALUE / BUSINESS VALUE”

City of Bellevue v. Stedman (1939) Going concern value may not be taken into consideration in

arriving at the amount which an owner is entitled to recover in an appropriation action.

Going Concern Value (Business Value) is made up of many components

Tangible Property

Personal

Real

Intangible Property

Reputation

Workforce

Contracts

Copyrights

Patents

Trademarks

Other Assets

Other Income

Preston v. Stover Leslie Flying Serv. Inc. (1963)

Loss of future profits to be derived by a landowner whose property is taken in an appropriation

proceeding is too speculative and uncertain for an accurate and satisfactory measurement of the

present value of the land taken.

“ACCESS ISSUES”

“CIRCUITY OF TRAVEL - EXTERNAL”

State, ex rel. Merritt v. Linzell (1955)

Circuity of travel to and from real property is not compensable.

“…The fact is, of course, that their property does not and never did abut on the new section of the

highway and consequently they do not have an easement of access to that section. Their right of

access is to the old highway which has not been obstructed or destroyed and is still open to travel

and connected with the same main highway. The only change is that it is now a county instead of

a state highway.”

“…the premises in question had been improved by the erection of a gas and oil filling station, a

store and a restaurant … that said filling station, store and restaurant business furnished relators

their principal means of livelihood before the relocation of the highway; that most of the business

and patronage enjoyed by relators came from persons traveling on the old highway…”


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“Relators claim that their property has in effect, been taken for a public purpose by the

respondent, and that relators' access easement, business and value of their premises will be

destroyed and rendered worthless.”

“the facts in the instant case do not show the impairment of the use of the highway on which

relators’ property abuts, but only the opening of a new highway which diverts public travel from

the old highway…Mere circuity of travel, necessarily and newly created, to and from real

property does not of itself result in legal impairment of the right of ingress and egress to and from

such property”

“It is now an established doctrine in most jurisdictions that such an owner has no right to the

continuation or maintenance of the flow of traffic past his property. The diminution in the value

of land occasioned by a public improvement that diverts the main flow of traffic from in front of

one's premises is non-compensable.”

New Way Family Laundry v. Toledo (1960)

Construction of 7 inch center divider performed in the existing right of way

Result for landowner was that “traffic is limited to right turns and hence must take a circuitous

route of approximately two miles in one direction and one mile in the other.”

“In view of the foregoing pronouncements in the Jackson, Bucsi, Merritt and Schiederer cases,

supra, can recovery be permitted in the instant case for the sole reason that the plaintiff is no

longer allowed to use the opposite half of the highway for left turns in entering or leaving its

property but is limited to right turns and hence is required to take a circuitous route of

approximately one mile in one direction and two miles in the other? Consistent with the reasoning

previously expressed, the answer must be in the negative.”

Kotchmar v. ODOT (2009)

CLAIM: “unreasonable interference with truck access by implementation of detours” and loss of

business as a result.

DECISION: “Although the detours made access to [owner’s] property inconvenient for truck

traffic, ingress and egress to [owner’s] property was not denied. Moreover, the detours did not

prevent [owner’s] from operating [their] convenience store.”

Profits from a hypothetical business cannot be the basis upon which the damage to the residue can

be properly and reliably calculated.”

Richley v. Jones (1974)

ODOT appropriated property in order to construct center divider causing a right-in right-out

condition on owner’s property


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Owner distinguished New Way Laundry by saying that case was done in the existing right of

way, however, here “…part of the take was used in the construction of the median strip, so that

any damage to the residue is incident to the exercise of the power of eminent domain.”

“A neighbor who might have similar problems with traffic flow because of the construction of the

median strip, but who has had no land taken by the state in connection with the project, will

receive no recompense for whatever is done to his land.”

“The fact that this loss is coincident with an appropriation of land in no way changes the

noncompensable character of the damage.”

“CIRCUITY OF TRAVEL - INTERNAL”

State ex rel. OTR v. City of Columbus (1996),

However, circuity of travel created within the property owner's property is compensable. Circuity

of travel within one's own property occurs when one entrance/exit way is removed and another is

not created. (State ex rel. OTR v. City of Columbus (1996), 76 Ohio St.3d 203, 1996 Ohio 411,

667 N.E.2d 8.)

“LOSS OF VIEW”

State, ex rel. Schiederer v. Preston (1960)

Sandusky Street originally level 60 feet of pavement. Project reduced Sandusky Street to 26 feet

of pavement and added 18 foot high embankment.

Owner claimed "the construction of the fill partly on the original right of way of South Sandusky

has substantially interfered with * * * [relator's] enjoyment of her property right of an

unobstructed view of the street together with the relative harmony of said street with her abutting

lot."

“Generally, there are two primary purposes for the existence of a street or highway. The first is to

provide a means of passage for the public and the second is to provide a means of access to and

egress from abutting lands…any rights which owners of such abutting land may have with respect

to such other benefits are necessarily held subject to the public right to make improvements for

accomplishment of the foregoing two primary purposes…”

Our conclusion is that there is no taking of property merely because the raising of the grade of

part of a street in front of land on that street, in making an improvement for street or highway

purposes only, substantially interferes with the view that the owner of that land had over that

street and with the relative harmony of the street with his land.

“HYPOTHETICAL IMPROVEMENTS AS THE H&B USE”

United States v. 75.13 Acres of Land,(1982)

It is generally recognized that it is improper to appraise the market value of a property, for federal

acquisition purposes, by capitalizing the net income from a non-existent, hypothetical

improvement proposed as the highest and best use for the subject land, and then deducting for


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development costs of the hypothetical improvement. [See United States v. 75.13 Acres of Land,

693 F.2d 813, 816 (8th Cir. 1982). Fruit Growers Express v. City of Alexandria, 221 S.E.2d 157,

161- 162 (S. Ct. Va. 1976); Matter of City of New York (Blackwell’s Island Bridge), 103 N.Y.S.

441, 443-444 (N.Y. 1907); Levitin v. State of New York, 207 N.Y.S.2d 798, 799 (N.Y. 1960).]

United States v. L. E. Cooke Company, Inc., 991 F.2d 336, 341 (6th Cir. 1993)

In the conduct of appraisals for federal land acquisition purposes, there is a presumption that the

existing use of land is its highest and best use. [United States v. L. E. Cooke Company, Inc., 991

F.2d 336, 341 (6th Cir. 1993); United States v. 62.50 Acres of Land, 953 F.2d 886, 890 (5th Cir.

1992); United States v. 69.1 Acres of Land., 942 F.2d 290, 292 (4th Cir. 1991).] Therefore, when

there is a claim that the highest and best use of a property is something other than the property’s

existing use, the burden of proving that different highest and best use is on the party making the

claim. [United States v. 62.50 Acres of Land, 953 F.2d 886, 890 (5th Cir. 1992); Tennessee Gas

Pipeline Co. v. 104 Acres of Land, 780 F.Supp. 82, 86 (D.R.I. 1991).]

Clark Co. v. Seminole Ave (2008)

“Seminole's expert utilized the income approach based upon the capitalization of net income to

determine the damage to the residue. In order to determine the pre- and post-appropriation fair

market value of the residue, he estimated the income that the subject property would most likely

produce if a nursing home or assisted living facility was built on said property. Factors present

included actual lost buildable area at the site after the portion of land for the easement was

appropriated, as well as the ‘net present value of lost income.’”

“The appraiser also considered the ‘net operating income’ of the proposed facility as a basis upon

which to calculate the damage to the residue. He considered eight sales of similar facilities in the

surrounding region, then took the average net operating income and multiplied that number by the

number of rooms he estimated would exist in the proposed facility. Using the average of net room

incomes from other facilities, he opined that if a certain number of the rooms at the facility were

occupied, the pre-appropriation value of the subject property would be $179,532 and that the

post-appropriation value of the subject property would be $60,962. The damage to the residue

was approximately $118,570.”

“The 5.51 acre tract of land was originally zoned for single-family residences…. At no point prior

to the commencement of the appropriation proceedings, however, was an application filed to have

the subject property re-zoned so that a nursing home could be built. Nevertheless, Seminole's

witnesses testified that the highest and best use of the subject property was as an assisted living

facility that did not presently exist and was not contemplated prior to the appropriation

proceedings. Portions of the appraisal report are based on speculation of future profits from a

hypothetical assisted living facility. Speculation, based on supposed future profits.

“PRIOR SALES OF THE SUBJECT PROPERTY”

United States v. 428.02 Acres of Land, 687 F.2d 266, 271 (8th Cir. 1982)

Prior sales of the same property, reasonably recent and not forced, are extremely probative

evidence of market value. [United States v. 428.02 Acres of Land, 687 F.2d 266, 271 (8th Cir.

1982); Surfside of Brevard, Inc. v. United States, 414 F.2d 915, 917 (5th Cir. 1969); A prior sale


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of the same property is not, as a matter of law, entitled to greater weight than sales of comparable

property; the relative importance of the two being dependent upon the facts in the particular case.

Hickey v. United States, 208 F.2d 269, 273 (3rd Cir. 1953), cert. denied, 347 U.S. 919 (1954).]

“DIVERSION OF TRAFFIC AWAY FROM A PROPERTY”

In re Appropriation for Hwy. Purposes (3rd Dist. 1968 Ohio)

US 23 was relocated to by-pass Waldo and property owner went from having the highway in

front of his business to behind his business.

Over objection by ODOT, the owner’s expert was permitted to testify as to damages to the

residue “predicated upon diversion of the traffic flow.”

“We, therefore, conclude that the diminution in the flow of traffic past a business property by

action of the state in relocating a highway is not the taking of a property right and, hence, where

some of the land of that business property is taken, it is not a proper element of damage to be

considered in arriving at the fair market value of the residue after the taking. For this reason the

admission of testimony as to traffic flow on Marion Street after the taking and its possible impact

on the landowner's business in the present case was error, and the valuation testimony of the

expert witness who included this in arriving at fair market value after the taking was, to this

extent, invalid and prejudicial and should have been excluded.”

“CHANGE IN GRADE”

Smith, Director of ODOT v. Sembach (11th Dist. 1988)

Owner complained that “the one foot drop in the grade of the highway in front of his property

was ‘appreciable’ and, as such, ‘* * * substantially hinders the property owner’s access to his

property’”

Trial court correctly “refused to instruct the jury that they could consider a one foot lowering of

the grade as a damage factor in assessing the damages to the residue”


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IV. ODOT R/W Appraisal Report Procedures –

Steps that must be followed each time to ensure a consistent, quality and acceptable product..

Below are selected sections of the ODOT Real Estate Manual, etc. that specifically address real

estate R/W Appraisal Report Writing Procedures.

Procedures: definition(s)

• Are a fixed, step-by-step sequence of activities or course of action (with definite start and

end points) that must be followed in the same order to correctly perform a task.

• Are a specified series of actions or operations which have to be executed in the same

manner in order to always obtain the same result under the same circumstances (for

example, the appraisal method).

• Are a sequence of activities, tasks, steps, decisions, calculations and processes, that when

undertaken in the sequence laid down produces the described result, product or outcome

The Appraisal Valuation Process at ODOT is a set series of Procedures:

ODOT Real Estate Scoping is a step-by-step procedure that must be followed each time

to ensure a consistent, quality, and acceptable appraisal product. ODOT’s procedures

recognize that proper determination of a scope of work is the second major step of the

appraisal process (See Chart above).

ODOT Real Estate Manual Sections 4000 through 4400:

ODOT Real Estate Manual Section 4000 covers the basic General Organizational topics applicable in

ODOT’s Appraisal Operating Manual. Sub-section topics are referenced as 4000.01 through 4000.17

ODOT Real Estate Manual Section 4100 outlines ODOT’s FMVE Delivery Process. This chapter

contains three Sub-sections of 4100.01 through 4100.03. See the outlined ODOT “Chart of the ODOT

FMVE Delivery Process” found on page 4100-16.

Uniform Appraisal Standards for Federal Land Acquisitions (UASFLA), commonly known as the

“Yellow Book”, last written in 2000 is now a bit outmoded. The ODOT RE 25-17 has been developed to

comply, to the extent appropriate, with UASFLA.

ODOT Real Estate Manual Section 4200 outlines ODOT’s Valuation Formats. ODOT’s RE 25-17 format

instruction is found at Sub-section 4200.02, D, on page 4200-10. See the outlined ODOT “Types of Real

Estate APPRAISAL REPORTS” “(FORMS/FORMATS/TEMPLATES)” shown in the VII ADDENDA

below.

ODOT Real Estate Manual Section 4300 addresses only appraisal “Review” and as such is not applicable

for this Class.

http://www.businessdictionary.com/definition/activity.html

http://www.businessdictionary.com/definition/course-of-action.html

http://www.businessdictionary.com/definition/definite.html

http://www.investorguide.com/definition/start.html

http://www.investorwords.com/9570/end.html

http://www.investorguide.com/definition/point.html

http://www.investorwords.com/10993/same.html

http://www.investorguide.com/definition/order.html

http://www.investorguide.com/definition/perform.html

http://www.businessdictionary.com/definition/task.html

http://en.wikipedia.org/wiki/Action_(philosophy)(philosophy)

http://en.wikipedia.org/wiki/Operation

http://en.wikipedia.org/wiki/Activity

http://en.wikipedia.org/wiki/Task

http://en.wikipedia.org/wiki/Step

http://en.wikipedia.org/wiki/Decision

http://en.wikipedia.org/wiki/Calculation

http://en.wikipedia.org/wiki/Process_(science)(science)


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ODOT Real Estate Manual Section 4400 is the ODOT Guide to Compensability which contains forty-five

Sub-sections. Particular attention should be paid to Sub-sections 4400.44 and 4400.45 as guidance to

prepare the RE 25-17 properly.

Required and Optional Information Needed to Prepare the RE 25-17:

A. The ODOT Forms Needed(as applicable) are:

1 Appraisal Pre-Assignment Checklist (use is currently optional)

2 APA-Appraisal Problem Analysis (use is currently optional)

3 PIN-Parcel Impact Notes (need “final”, signed PIN attached as part of the RE 25-17 report)

4 RE 25-17, the Right-of-Way Appraisal Report

5 RE 25-1, the Summary Sheet

6 RE 25-6, the Certificate of Appraiser

7 RE 25-7, the Supplemental Sheet to the RE 25-1 (as may become applicable)

8 RE 91, the Owner Verification of (Accompaniment) Property Inspection form (use of this form

is optional, but the offer of the property owner “accompaniment” is mandatory)

9 RE 95, this form is used to distinguish which improvements in a Take area are real estate and

which are personal property (it is used when legal ownership(s) are different and/or uncertain

for the improvements in the Take area)

B. Other Attachments Used to Meet ODOT Procedures Appraisal Manual are shown on the

Attachments/Addenda page to the ODOT RE 25-17. See Part VI., the Addenda

Other General Instructions for Completing the RE 25-17; Right-of-Way Appraisal Report:

a.) The District may only use appraisers who have been prequalified by ODOT to perform

the appraisal and appraisal review function [OAC 5501:2-5-06(C)(4) and 49CFR

24.103(d)]. Appraisers may be agency staff or consultants, but all must be prequalified.

Prequalified consultants are listed by the Office of Consultant Services on the following

website:

www.dot.state.oh.us/Divisions/Engineering/Consultant/Consultant/prequal-row.pdf

Prequalified agency staff are listed by the Office of Real Estate on the following website:

www.dot.state.oh.us/Divisions/Engineering/RealEstate/Pages/LPA.aspx

b.) The PIN’s have been finalized and the appraiser has been scoped by the District and

review appraiser. Follow the instructions in the PIN’s AND include a copy of these

PIN’s in the RE 25-17 report

c.) The appraiser has been provided a copy of the title report and should know its pertinent

contents

d.) The appraiser is provided a final copy of the RE 95, if applicable

If there is a site improvement or structure in the take area, the appraiser shall be provided a

final, signed copy of the RE 95. The RE 95 form is used to document the classification of site

improvements or structures in the take area as real estate or personal property. The appraiser


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must know to include these items in the appraisal or not as items of personal property owned

by an occupant are moved to another site and are not purchased. Disagreements between the

District and the appraiser regarding classification of improvements documented in the RE 95

must be resolved. The RE 95 is to be included in the addenda of the appraisal report. The

procedure for the RE 95 process is in section 5202.01 of the Real Estate Manual.

e.) The appraiser shall be provided sufficient (final) plans and legal descriptions.

Sufficient plans are required for the appraiser to competently estimate fair compensation. To

estimate fair compensation, the appraiser must understand the taking and the impact of the

taking to the residue property. Only with this knowledge, can and does the appraiser estimate

damages to the residue. Sufficient plans include: 1) final right of way plans and legal

descriptions of the take areas in accordance with the Right of Way Plan Manual, sections

3100 through 3300; 2) pertinent parts of the construction plans to enable the appraiser to

understand the impacts of the taking to the residue. This includes cross sections, plan and

profile sheets, driveway profile plans of the subject parcel and any other pertinent

information relating to the property

Note: See VI. Addenda for these Forms and Checklists:

A.) The “Appraisal Pre-Assignment Checklist”

B.) The “Appraisal Problem Analysis” (APA)

C.) The “Parcel Impact Notes” (PIN’s)

D.) The “Issues” Checklist


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RE 25-17 R/W Appraisal Report


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RE 25-1 Summary Sheet


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RE 25-6 Certificate of Appraiser


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RE 25-7 Supplemental Sheet


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RE 91 Owner Verification of Property Inspection


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RE 95 Property Inventory Classification


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V. Six (6) Basic Case Studies:

Case Study #1: Cost-to-Cure Eliminates All Damages


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Value Before the Taking

Value of the Property As Improved

The income Approach

PGI 3,200 SF x $12.00/SF $38,400

V/C Loss @ 15% ( - ) $5,760

EGI $32,640

Operating Expenses

Real Estate Taxes $2,511

Insurance $325

Maintenance and Repairs $480

Management $1,632

Misc./Reserves $326

Total $5375

NOI $27,265

OAR ÷ 9.5%

Value Before the Taking $287,000

Value of the Property As Vacant

Sale Comparison Approach

110 x 230 = 25,300 SF x $6.00/SF= $151,800


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The Part Taken

Land:

7,700 SF X $6.00/SF $46,200

Site Improvements:

Pavement 5,900 SF x $3.50/SF $20,650

Landscape/1,800 SF $5,000

$25,650

Structures:

None - 0

Total Part Taken: $71,850

Notes:


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Value of Residue Property - Without Any Consideration of a Cure

Without a cure, highest and best use changes from mixed commercial use (office/retail) to storage on low-

end commercial use.

PGI 3,200 SF x $400/SF = $12,800

V/C Loss @ 50% (6,400)

EGI $6,400

Operating Expenses


Insurance $326

Maintenance/Repairs $480

Management $320

Misc./Reserves $100

Total $3,837 (60%)

NOI $2,563

OAR 12.0%

Value of Residue (No Consideration of a Cure) $21,358

Land Value: .

110 x 160 = 17,600 SF x $4.60/SF = $80,960

Rounded to: $81,000

Demolition Costs ($10,000)

Land Value $71,000

As land value less demolition cost exceeds the value of the property as improved, the land as vacant is the

highest and best use of the property. The value of the residue property without any consideration of a cure

is $71,000.

Residue Value With No Cure $71,000


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Statement of Total Damages Suffered by the Residue As IF It Were Uncured


Value of the Residue Uncured ($71,000)

Difference $216,000

Part Taken ($71,850)

Total Damages Uncured $144,150

The Cost-to-Cure


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The Cost of the Cure

Cost to Create New Drive along Side of building:

12 x 40 = 480 SF x $7.00/SF = $ 3,360

Cost of the New Parking Lot

110x60 = 6,600 SF x $7.00/SF = $46,200

Cost to Create New Concrete Walk at Back of Property

5x80 = 400 SF x $10.00/SF = $4,000

Total Cost to Cure: $53,560

Rounded to $53,600

Determination if Cure is Feasible

From the Uniform Standards of Federal Land Acquisitions, page 81 and 82:

It must be remembered that a cost to cure method of estimating a diminution in value is only valid when

the cost to cure is less than the diminution in value if the cure is not undertaken.

Cost of the Cure Diminution in Value without a Cure

$53,600 < $144,150

The cost of the cure is less than the diminution in value if the cure was not undertaken, therefore, it is

feasible to cure the residue property.


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Value of the Residue Property — As Cured

PGI 3200 SF x $10.00/SF = $32,000

V/C Loss @ 155% ($4,960)

EGI $27,040

Operating Expenses


Insurance $326

Maintenance/Repairs $480

Management $1,358

Msc./Reserves $270

Total $5045 (18.6%)

NOI $21,995

OAR 9.5%

Value of Residue as Cured $231,526

Rounded: $231,500

Determination If There Are Damages Remaining After the Residue Is Cured

Value of the Residue as Cured $231,500


Value of the Cure ($160,500)



(-) $16,350

Rounded to: 0

As the Value of the Cure exceeds Total Damages Uncured, there are no remaining damages. The cure

has eliminated all damages caused by the uncured severance.


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Determination If Any Items Cured Have Been Paid For In the Take

The Cost of the Cure $53,600

New asphalt paved drive and parking lot,

and concrete walk

The Part Taken

Land, asphalt paved parking, landscape $71,850

Item(s) paid for in the take arid also paid for in the cure

Asphalt pavement

Determination of net cost to cure

The purpose of a cost to cure is to mitigate damages caused by the severance of the take area from

the larger property. The WD acquisition has physically taken. 5,900 SF of asphalt pavement that

includes 6 parking spaces. The allocation of value for the pavement taken is $20,650. The taking has

rendered another 11 spaces on the residue to be nonfunctional. In total, the taking has impacted 17

parking spaces.

The cure replaces 7,080 SF of asphalt pavement that includes 16 parking spaces and a new 12 foot

drive along the easterly side of the building. The cure allows the building to be used as it was before

the taking and it mitigates all damages caused by the severance (severance damages). This type of

cure is known as a whole cure or total cure.

The net cost to cure is estimated as follows:

Cost to Cure $53,600

Items Considered in the Cure,

but Paid for in the Take (-) $20,650

Net Cost to Cure $32,950


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77. PART 10 VALUATION SUMMARY AND COMPENSATION ESTIMATE

Valuation Summary From Section # in the Template

A) Value Before the Taking [39]

B) (-) Value of Residue Uncured [61]

C) Difference

D) (-) The Part Taken [43]

E) Total Damages, if Uncured [63]

Feasibility of the Cost to Cure

F) Cost of the Cure [65]

G) Total Damages, if Uncured (same as E) [63]

H) Cure is feasible if [F] is less than [G]

Determination if Uncured Damages Remain After Residue is Cured

I) Value of the Residue “As Cured” [72]

J) (-) Value of the Residue Uncured (same as B) [61]

K) Value of the Cure [74]

L) Total Damages, if Uncured (same as E) [63]

M) (-) Value of the Cure (same as K) [74]

N) Remaining Damages Not Cured [74]

Determination of Net Cost to Cure

O) Cost to Cure (same as F) [65]

P) (-) Improvements Cured, but Paid for in [D] [41]

Q) Net Cost to Cure [75]

The Compensation Estimate

The Part Taken $________

+ Damages

Net Cost-to-Cure $________

Damages Uncured $________

Total Damages $________

+ Temporary Easements $________

Total Compensation $________


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Notes on Case Study #1:


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Case Study #2: Cost to Cure Does Not Eliminate All Damages

The property before the taking:


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The income Approach

PGI 3,200 SF x $12.00/SF $38,400

V/C Loss @ 15% (-) $5,760

EGI $32,640

Operating Expenses


Insurance $326

Maintenance and Repairs $480

Management $1,632

Misc./Reserves $326

Total $5,375

NOI $27,265

OAR ÷ 9.5%



Sale Comparison Approach

110 x 185 = 20,350 SF x $6.00/SF= $122,100


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The Part Taken

Land:

7,700 SF X $6.00/SF $46,200

Site Improvements:

Pavement 5,900 SF x $3.50/SF $20,650

Landscape/1,800 SF $5,000

$25,650

Structures:

None - 0



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Value of the Residue without Any Consideration of a Cure

Without a cure, the highest and best use changes from mixed commercial use (Office/retail) to storage or

low-end commercial use.

Value of the Residue “As Improved”

PGI 3,200 SF x $4.00/SF = $12,800

V/C Loss @ 50%: (6,400)

EGI $6,400

Operating Expenses


Insurance 326

Maintenance/Repairs 480

Management 320

Misc./Reserves 100

Total ($3,837) 60%

NOI $2,563

OAR ÷ 12%

Value of Residue (No Consideration of a Cure) $21,358

Residue Land Value “As Vacant”

Land Value:

110 x 115 = $12,650 x $4.60/SF = $58,190, rounded to: $58,200

Demolition (10,000)

Adjusted Land Value $48,200

Analysis

As value of the site as vacant exceeds the value of the property as improved, the highest and best use is to

tear down the structure. The value of the site r as vacant» is the value of the residue uncured.

Value of the Residue Uncured: $48,200.

Statement of Total Damages Suffered by the Residue As If It Were Uncured


Value of Residue Uncured (48,200)

Difference $238,800

Part Taken (71,850)



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The Cure


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Cost to Create New Drive Along Side of Building $3,360

12 x 40 = 480 SF x $7.00/SF

Cost to Create a New Parking Lot $34,650

45 x 110 = 4,950 SF x $7.00/SF

Cost to Create a New Concrete Walk at

Back of Property $ 4,000

5 x 80= $400 SF x $10.00/SF

Total Cost to Cure $42,010

Rounded: $42,000


From the Uniform Standards for Federal Land Acquisitions, pages 81 and 82:

It must be remembered that a cost to cure method of estimating a diminution in value is only

valid when the cost to cure is less than the diminution in value if the cure is not undertaken.

The “diminution in value if the cure is not undertaken” is also known as Total Damages Uncured.

Cost of the Cure Total Damages Uncured

$42,000 ≤ $166,950

The cost to cure is feasible.


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Value of Residue As Cured

The residue property can only be cured with 7 parking spaces that are located to the rear of the building.

This is a functional problem because the building is oriented with patrons accessing the building from the

front. After the cure, patrons must park in the rear and walk around the building to access from the front.

Another functional problem occurs because the building is divided into four units and these units must

share 7 parking spaces. After the cure, the number of parking spaces is inadequate. The highest and best

use remains mixed retail/office use, but the intensity of use is affected and lower rents and higher

vacancies can be expected.


The Income Approach

PGI 3,200 SF x $8.00/SF $25,600

V/C Loss @ 25% (-) $ 6400

EGI $19,200

Operating Expenses


Insurance $ 326

Maintenance and Repairs $ 480

Management $ 960

Misc./Reserves $ 192

Total (-) $4,569

NOI $14,631

OAR ÷ 10.0%

Value of Residue As Cured $146,310

Rounded to: $146,300


Sales Comparison Approach

110 x 115 = 12,650 SF x $4.60/SF = $58,190, rounded to: $58,200


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Determination If There Are Damages Remaining After the Residue Is Cured

Value of the Residue As Cured $146,300





Remaining Damages Uncured (-) $68,850

Determination If Any Items Cured Have Been Paid For In the Take


New asphalt paved drive and parking lot,

and concrete walk

The Part Taken

Land, asphalt paved parking, landscape $46,200

Item(s) paid for in the take arid also paid for in the cure

Asphalt pavement

Determination of net cost to cure

The purpose of a cost to cure is to mitigate damages caused by the severance of the take area from

the larger property. The WD acquisition has physically taken. 5,900 SF of asphalt pavement that

includes 6 parking spaces. The allocation of value for the pavement taken is $20,650. The taking has

rendered another 11 spaces on the residue to be nonfunctional. In total, the taking has impacted 17

parking spaces.

The cure replaces 5,430 SF of asphalt pavement that includes 7 parking spaces and a new 12 foot

drive along the easterly side of the building. The cure allows the building to be used at higher

intensity of use than if left severed and uncured. However, there is insufficient room on the residue

to replace all parking that was lost in the acquisition. The type of cure is known as a limited (or

partial) cure.

The net cost to cure is estimated as follows:

Cost to Cure $42,000

Items Considered in the Cure,

but Paid for in the Take (-) $20,650



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C) Difference






H) Cure is feasible if [ F ] is less than [ G ]


I) Value of the Residue As Cured [72]








P) ( - )Improvements Cured, but Paid for in [ D ] [41]




+ Damages







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Case Study #3: Cost to Cure Is Not Feasible


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The income Approach

PGI 56,000 SF x $15/SF $840,000

V/C Loss @ 15% ( - ) $126,000

EGI $714,000

Operating Expenses

Management/

Administrative (3% EGI) $21,420

Reserves ($0.20/SF) $11,200

Total $32,620

NOI $681,380

OAR ÷ 10%

Value Indicated by Income Approach $6,813,800

Rounded $6,815,000

Land Value

300 x 410 = 123,000 SF x $25/SF = $3,075,000


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The taking:


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The Part Taken

Land:

18,800 SF X $25.00/SF $470,000

Site Improvements:

Asphalt Pavement 18,800 SF x $3.50/SF = $65,800

Structures:

None 0


New L/A line and Curbing


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Value of Residue Property - Without Any Consideration of a Cure

There were 40 parking spaces physically taken and tehre were 22 spaces on the residue rendered

nonfunctional. In all, 62 parking spaces are affected by the taking. The reidue retains 93 functional

parking spaes (155-62). The remaining parking is not considered adequate. The rental rate is affected and

drops to $10/SF.

PGI 56,000 SF x $10/SF = $560,000

V/C Loss @ 50% (-) $84,000

EGI $476,000

Operating Expenses

Management/

Administrative (3%EGI) $14,280

Reserves ($0.20/SF $11,200

Total $25,480

NOI $450,520

OAR ÷10%

Value Indicated by the Income Approash $4,505,200

Rounded: $4,505,000

Land Value: .

104,200 SF x $25/SF = $2,605,000

Statement of Total Damages Suffered by the Residue As If It Were Uncured

Value Before the Taking $6,815,000

Value of The Residue Uncured (4,505,000)

Difference $2,310,000

Part Taken (535,800)

Total Damages Uncured $1,774,200


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The Proposed Cure!


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There is no room on the residue to create additional surface parking spaces. Therefore, the only option is

to create a parking garage that can reestablish some or all of the parking that was affected by the taking.

ABC Corporation has designed and built several parking garages across the State of Ohio. This company

has determined the residue property can accommodate a 2.5 story parking garage. The garage will have

50 spaces on the first level, 50 spaces on the second level and 40 spaces on the half level. The garage

structure will contain a total of 140 spaces.

The structure will eliminate all existing surface parking to the southerly side of the building. Fifteen

surface spaces will remain along the easterly side of the building. The construction cost for the garage is

$30,000/space. The 93 surface spaces that are disrupted during the 9 month construction schedule will

have to park off site at a pay parking lot that is walking distance to the residue property. The rate at the

pay lot is $60/space/month.

The cost to cure is:

Construct the parking garage

$30,000/space x 140 spaces = $4,200,000

Temporary Displacement of 93 Parking

Spaces during Construction Period

93 x $60/mo. X 9 mo. = $ 50,220

Total Cost to Cure $4,250,220


From the Uniform Standards for Federal Land Acquisitions, pages 81 and 82:

It must be remembered that a cost to cure method of estimating a diminution in value is only

valid when the cost to cure is less than the diminution in value if the cure is not undertaken.

The “diminution in value if the cure is not undertaken” is also known as Total Damages Uncured.

Cost of the Cure Total Damages Uncured

$4,250,220 ≤ $1,774,200

As this cost of the Cure exceeds the total of all Damages As If Uncured, the cure is not economically

feasible.


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C) Difference
















P) ( - ) Improvements Cured, but Paid for in [ D ] [41]




+ Damages







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Case Study #4: Only a Partial Cure Is Feasible

Value of the Property Before the Taking

Highest and Best Use:

Property had been a horse tack and saddle shop, but was purchased 10 years ago by the current

owner and converted into a real estate sales office. The property is owned and operated by the

owner. The highest and best use is either office or retail.

The Sales Comparison Approach:


2,000 SF x $54.40/SF = $108,800


82 x 172 = 14,104 SF x $2.50/SF = $35,260


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The Part Taken

Land:

40 x172 = 6,880 SF X $2.50/SF $17,200

Site Improvements:

Asphalt Pavement 40 x 80 = 3,200 SF x $3.50/SF = $11,200

Structures:

None - 0

Total: $28,400


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Value of the Residue Uncured


The taking has rendered the remaining site unbuildable. The improvements on the property no

longer conform to setback regulations. The local zoning board has classified the residue property as

legal, but nonconforming. If the improvements are more than 50% destroyed, they can never be

replaced. All paved parking has been eliminated from the building by the take. There is a vacant

area along the easterly side of the building that is unpaved that can be utilized for parking, but it is

muddy due to its proximity to a nearby creek. Cars often get stuck in this area. The highest and best

use is still commercial, but the intensity of commercial use is much less than before the taking.

Typical users of the property could be contractors utilizing the property for office and storage.

The Sales Comparison Approach


2,000 SF x $11.05/SF = $22,100


42 x 172 = 7,224 SF x $1.00/SF = $ 7,224


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Calculation of Total Damages Uncured


Value of the Residue Uncured (-) $ 22,100

Difference $86,700

Part Taken (-) $ 28,400

Total Damages Uncured $ 58,300

The Cost to Cure

All paved surface parking, consisting of 8 spaces, has been eliminated from the residue, but it can be

partially cured. Parking can be established to the east side of the property. This area will accommodate 3

paved spaces. The paved area will contain 1,500 SF inclusive of parking spaces and drive area. The cost

is a follows:

1,500 SF x $5.00/SF = $7,500

Feasibility of the cure

The Cost of the Cure Total Damages Uncured Feasible or Not Feasible

$7,500 ≤ $58,300 The cure is feasible


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Value of the Residue As Cured


The residue has increased utility when 3 paved parking spaces are established onto the property.

The parking still is not sufficient to allow a wide variety of commercial users. However, lower

intensity commercial users may now utilize the property such a beauty salon or smaller real estate

company or insurance company. Due to the limited parking, some of the 2,000 SF of the building

will be excess space.

The Sales Comparison Approach


2,000 SFx$37.90 = $75,800


7224 S x $1.00/SF = $ 7,224


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Determination If There Are Damages Remaining After The Residue is Cured

Value of the Residue As Cured $75,800

Value of the Residue Uncured (-) $22,100

Value of the Cure $53,700


Value of the Cure (-) $53,700

Remaining Damages That Are Uncured $ 4,600


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Determination If Any Items Cured Have Been Paid For In The Take


New Pavement

The Part Taken $28,400

Land, Pavement

Item(s) paid for in the take and also paid for in the cure

Pavement

Determination of cured items that were also paid for in the take:

The amount of pavement taken (3200 SF) was greater than the amount of pavement that could be replaced

(1,500 SF). Therefore this is a Limited (or partial) cure. As a result, it is inappropriate to deduct the entire

allocated value of the pavement taken from the total cost to cure as the result would be misleading. The

misleading result is shown:

Total Cost to Cure $ 7,500

Pavement taken and also paid for in the cure (-) $11,200

Difference -0-

This process indicates that no money is paid to the owner for a cost to cure and this conclusion is not

credible.

The proper analysis requires the appraiser to understand that only 3 spaces can be replaced and this

replacement required 1,500 SF of asphalt. The net cost to cure must focus on only 1,500 SF of pavement

in the take area. The allocation of value to the pavement in the take area was $3.50/SF. The amount paid

for in the take for pavement that is reflected in the cure is estimated as follows:

1,500 SF x $3.50/SF = $5,250

The determination of pavement cured that has been paid for in the take is calculated as follows:

Total Cost to Cure $7,500

Pavement taken and also paid for in the cure (-) $5,250



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The Temporary Easement

The T area taken: 10 x 30 = 300SF

The value of the residue land: $1.00/SF

Capitalization rate appropriate for residue land: 8%

Duration of the T parcel 1 year

Determination of land rent for the duration of the T

300 SF x $1.00 $300

Land Capitalization Rate x 8%

Annual land Rent $24

Duration of x l year

Compensation for T Parcel $24


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C) Difference
















P) ( - )Improvements Cured, but Paid for in [ D ] [41]




+ Damages







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Case Study #5: Cost to Cure Is Not Possible


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Highest and best Use

As vacant, the property is zoned R-1 which is a single family residential classification having a minimum

site size of 20,000 SF. The site is 130 feet wide x 300 deep and contains 39,000 SF. The property can

only be developed to one residential unit. The property is located adjacent to the urban fringe of this

community, is serviced with full utility availability including water and sewer. Many properties are being

rezoned from residential to commercial. Sales of residential-zoned sites from the same area as the subject

that occurred prior to being rezoned to commercial range from $1.10/SF to $1.30/SF. The highest and

best use of the site is residential development having good potential for being rezoned to commercial.

As improved, the property is developed with an older one-story single-family dwelling. The home

contains 1,800 SF, has 3 bedrooms, 1.5 baths, a single car attached garage and a covered front porch. The

improvements are in average condition. The property is located adjacent to the urban fringe of this

community and many homes are being rezoned from residential to commercial and are being converted

into small offices used for insurance, real estate and medical. Sales of residential homes from the same

area as the subject that occurred prior to being rezoned and converted into commercial uses range from

$100/SF to $120/SF of living area. The highest and best use of the property as improved is for single

family use having an excellent potential of being rezoned to a commercial use.

From the Sales Comparison Approach

Value of the Land

130 x 300 = 39,000 SF x $1.25/SF = $ 48,750


1,800 SF x $ 110/SF = $198,000

Conclusion — Value of the Property l3before the Taking ................................... $198,000

Allocation of the Before Value:

Land $48,750

Site Improvements $3,500

Structure $145,750

Total: $198,000


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The Taking

• 10 foot wide WL, having a 12 foot break at the current drive location. The take area is 1,300 SF.

• The WL acquisition extends into the residential structure causing a manifest injury to the remaining

structure.

• 120 SF of gravel drive is in the take.

• 25 SF concrete walk is in the take.

• T taking is 3,900 SF and is required to remove the remaining structure. Duration of T is 1.5 years

The Allocation to the Part Taken

Land

10 x 130 = 1,300 5E x $1.25/SF $1,625

Site Improvements

Gravel Drive 120 SF x $0.50/SF = $60

Concrete Walk 25 SF x $5.00/SF = $125

Structures

1,800 SF residential home $145,750

Total: $147,560

Note: The WL acquisition physically impacts a small portion of the covered porch area of the

residential structure. The entire structure is included in the WL acquisition because of the

“manifest injury provision” in Ohio eminent domain law (ORC 163.06(B). This law

requires the acquisition of the entire structure it the partial taking of the structure causes a

manifest injury to the remaining structure.


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The Residue As Uncured

Highest and Best Use

There are no structures on the residue. The only site improvement is a gravel drive having no

contributory value. Functionally, only land remains. The residue land is 130 feet wide x 290 feet

deep and contains 37,700 SF. The minimum site size under the R-1 zoning code is 20,000 SF. The

residue is encumbered by a limited access restriction only allowing an access break that is 12 foot

wide at the current location of the drive. This limited access effectively eliminates any commercial

development potential of the property. The highest and best use of the residue is single-family

residential development limited to 1 home site. Sales of residential sites having no commercial

potential range from $0.50/SF to $0.85/SF.

From the Sales Comparison Approach

Land

130 x 290 = 37,700 SF x $0.75/SF = $28,275

Conclusion —Value of the Residue Uncured....................................................................... $28,275

The Temporary Easement

3,900 SF x $0.75/SF x 8% x 1.5 = $351, rounded to $350

Notes:


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C) Difference
















P) ( - )Improvements Cured, but Paid for in [D] [41]




+ Damages







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Case Study #6: Limited Scope Appraisal (but still Complex)


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Rev. 01-2012

Parcel Impact Notes

This document is meant to be an aid for scoping and is absolutely not to be interpreted as steering

or directing an appraiser to an opinion that is not the appraiser’s. However, appraisers must comply with applicable appraiser standards, including USPAP as appropriate, and ODOT’s

policies and procedures regarding appraisals

Project C/R/S XXX

PID XXX Construction Plans XXX

Parcel 8 R/W Plans XXX

Owner/Tenants: XXX

Take: WD and T taking, WD is 6,000 SF; T is 4,000 SF

What is in Take? A small portion of the asphalt drive is in the WD and T takes, Nothing else was observed.

Appraisal Issues /

Significant Issues: The WD take is a small strip take that is currently adjacent to the road. The take is 15 ft. wide.

There is nothing noted that is complex. The functional utility of the residue remains the same

as before the taking.

The 10 foot wide T taking is needed for the ditch construction that will occur in the WD area.

The T does not permanently alter the residue in. any way.

The acquisitions create simplistic valuation issues. There are no apparent adverse effects to

the residue property as a result of the take. However, land values in this area are high and the

compensation amount is anticipated to exceed the VA and VP thresholds.

The valuation (appraisal) problem is: Simplistic Complex

Recommended

Appraisal Format:

Summary R/W Appraisal Report

Review Appraiser

Signature / Date

Typed Name

Signature of R/W review appraiser

Pointy Pencil, Review Appraiser / Date

Approved by

Signature / Date

Typed Name

Signature of person of authority in the District

I. Need it Yesterday, Agency Representative / Date

Appraiser

Acknowledgement

I have reviewed the right of way plans and other pertinent parts of the construction plans, have driven by

the subject, have reviewed these Parcel Impact Notes and I have independently performed my own

appraisal problem analysis. I am in agreement regarding the valuation (appraisal) problem, the

determination of the complexity of this problem, and I agree that the recommended format is appropriate

for use during the acquisition phase of this project.

Signature / Date

Typed Name Signature of the appraiser

Mr. Pre-Approved Appraiser, MAI, ASA, SRA, CCIM or agency staff appraiser / Date


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January 31, 2012

Mr. Thomas Appraiser

1800 Main Street

Anywhere, Ohio 12345

Re: Limited Scope Appraisal for the ABC Property

IND 43-12.31

PID XXXXX

Parcel 8 Series

Dear Mr. Appraiser:

Based on discussions with you and the review appraiser, Frank Appleton, the Ohio Department of

Transportation has authorized you to utilize a limited scope appraisal to estimate compensation for the

partial taking from the ABC property.

The larger parcel has preliminarily been determined by you to consist of the entire ABC property which is

developed with a commercial building situated on a site containing 200,000 SF (4.591 acres). ODOT does

not disagree with your determination. The acquisition is a small strip take from the front of the property

that ¡s adjacent to the existing state route. The valuation problem Is acknowledged by you arid the review

appraiser to be simplistic and there are no apparent damages to the residue property. The estimate of

compensation using a full scope appraisal, that values the whole property before the taking (land,

structure and site improvements) and then values the residue ¡n its uncured condition to determine total

damages uncured, would not be any more meaningful than the results of a limited scope appraisal.

Therefore, a full scope appraisal that considers all improvements outside the take area before arid after the

taking would be a waste of tax payer money.

For these reasons, you (the appraiser) shall limit the scope of the appraisal to the land component of the

larger parcel before the taking and shall consider any site improvements in the take area. You shall not

value the building(s) and site improvements outside the take area and shall not value the residue property.

You are required to estimate compensation for the part taken, any nominal costs to cure (if any), and

temporary easements. You shall utilize the Summary R/W Report template (RE 25-17) and will complete

all pertinent parts of the template that are applicable to this valuation assignment.

You are required to:

• disclose the limited scope of this assignment In the conditions and assumptions section of the report

and in the scope of work section of the report, and

• include this letter in the Addenda section of the report.

During the development of the appraisal report, if facts, conditions or information arise that cause you to

determine that damages to the residue may be evident other than a nominaI cost to cure, you are required

to communicate this information to the District Real Estate Administration arid it will be determined if

this appraisal assignment requires a new scope of work.

Respectfully,

Peter D. Istrict

Real Estate Administrator, District 13

Ohio Department of Transportation


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Land Value

400 x 500 = 230,000 SF x $20/SF $4,000,000

The Part Taken

Land

6,000 SF x $20/SF $120,000

Site Improvements

360 SF asphalt drive x $3.50/SF $1,260

Structures

None $ 0

Total Part Taken $121,260

Compensation of the Temporary Taking

Duration of T take is 1 year

Fee Value of Land Encumbered by T 4,000 SF x $20/SF = $80,000

Overall rate appropriate for the land x 10%

Annual income for Land Encumbered by the T $8,000

Duration of the T (1 year) x 1

Compensation Estimate for T $8,000


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C) Difference
















P) ( - )Improvements Cured, but Paid for in [D] [41]




+ Damages







of 136


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Wrap Up

This was an awful lot of material to cover in one day just to learn how to properly prepare an ODOT, RE

25-17, the Right-of-Way Appraisal Report(aka the Before and After format) used in “Complex” ODOT

Eminent Domain/Acquisition real estate appraisal assignments.

So, does this seem to you to be an awful lot of work to get the job done right? well, YES!

Most of the R/W Real Estate procedures are either mandated or highly influenced by laws and regulations

that were put in place to correct past abuses by government officials, or at least the impression that

government was abusive (see Blatnik article in addenda).

Every week we are being asked to find ways to work faster and cheaper. Are you familiar with the

project decision triangle? Pick two! The general idea here is that you can have any two of the three items

you want but only two. When you select the two that are most important to your project the third item is

sacrificed for the benefit of the other two. Think about it!

“If you don't have time to do it right, when will you have time to do it over?” John Wooden

If you have to do something over, are you really saving time or money? ……….NO!

ODOT cares about QUALITY

http://www.brainyquote.com/quotes/authors/j/john_wooden.html


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VI. Addenda

ODOT PRIMARY EMINENT DOMAIN APPRAISAL FORMS:

ODOT uses three (3) different appraisal forms/formats to first estimate Market Value then

Compensation thereafter at the end, and these forms/formats are:

1. The “Value Analysis” aka the “VA”, aka the “Waiver of Appraisal”

2. The “Value Finding Appraisal Report”, aka the “VF”, the ODOT form number of RE 90

3. The “Right of Way Appraisal Report”, aka the “Before and After” report with the ODOT

form number of RE 25-17.

1. The “Value Analysis” report (commonly referred to as the “VA”), was last revised 09-2012.

The VA was created by ODOT to comply with the “Waiver of Appraisal” provisions in both

the Federal and State regulations for the waiver valuation. This report is by definition not a

real property appraisal report. It is used by ODOT to estimate compensation for partial

acquisitions of property where the acquisition problem is considered “Simplistic”, clearly

having no damages to the remaining/residue property, and the amount of the compensation

estimate is $10,000 or less.

2. The “Value Finding Appraisal Report” (commonly called the “VF” and given the form

number RE 90), was last revised 01-2014. This report is a real property appraisal report and is

required to comply with USPAP and Federal and State regulations. It is used by ODOT to

estimate compensation for partial acquisitions of property where the valuation problem is

considered “Simplistic”, and the amount of the compensation estimate is less than $65,000.

While the valuation problem is required to be simplistic, minor/nominal damages in the form

of a cost-to-cure are permitted with supporting documentation for the cure. The compensation

may not exceed $65,000 (including the damage items).

3. The “Right-of-Way Appraisal Report” (commonly referred to as the “Before and After”

narrative style report and given form number RE 25-17), was last revised 01-2014. These

reports are reserved for situations where the valuation problem is “Complex” with no dollar

limit for the compensation estimate. These are often high dollar, significant, damaged residue

situations with a potential change in property use common in these appraisals

Note: These are some scenarios that come about in addition to the normal appraisal process

when estimating compensation to be paid to the property owners:


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Note: See VI. Addenda for the “Types of Real Estate APPRAISAL REPORTS” and for the “USPAP

Reporting Requirements and ODOT Appraisal Reports” printed pages

Note: These are some scenarios that come about in addition to the normal appraisal process when

estimating compensation to be paid to the property owners:

a.) Estimating the value for (T)Temporary Takings

b.) Distinguishing and accounting for “non-compensable items”

c.) ODOT cannot have any “misleading reports”, see the UDF example case study

d.) Other, see ODOT’s Real Estate Appraisal Manual-all Sections

Complexity of

Valuation

Problem

Potential for

Damages

Range of Value of

part taken

ODOT’s

Applicable Format

I Simplistic

When it is blatantly

obvious that there are no

damages

Value of part taken is

$1.00 to $10,000

Value Analysis (VA)

this is a “Waiver of

Appraisal”

I Simplistic

Likely no damages, but

may be some nominal

/curable damages

Value of part taken is

$1 to $65,000

Value Finding (VF)

the ODOT RE-90

form.

I Complex Likely some damages,

could be significant

damages

No dollar limits on

value of part taken,

but commonly has

significant value

R/W Appraisal Report

(aka Before & After)

the ODOT RE 25-17


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Outline of the Appraisal Valuation Process

This Appraisal Valuation Process is always followed in all three(3) of the above ODOT appraisal

assignments.


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General Assumptions and Limiting Conditions or Scope?

Consider whether some of the items typically included as Assumptions and Limiting Conditions are

actually scope of work matters.

Review some of the statements that are commonly included as Assumptions and Limiting Conditions

statements.

Assumptions and Limiting Conditions

This appraisal report has been made with the following assumptions and limiting conditions:

This is a summary appraisal report, which is intended to comply with the reporting requirements

set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal

Practices for a summary appraisal report. As such, it presents only summary discussions of the

data, reasoning, and analyses that were used in the appraisal process to develop the appraiser’s

opinion of value. Supporting documentation that is not provided with the report concerning the

data, reasoning and analyses is retained in the appraiser’s file. The depth of discussion contained

in this report is specific to the needs of the client and for the intended use stated in the report. The

appraiser is not responsible for unauthorized use of this report.

Assignment Conditions

In addition to common or usual “general assumptions and limiting conditions,” appraisers also may

need to deal with three (3) “special assignment conditions”

Special Assignment Conditions

1.) Extraordinary Assumptions

2.) Hypothetical Conditions

3.) Jurisdictional Exceptions

EXTRAORDINARY ASSUMPTION: an assumption, directly related to a specific assignment, as

of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s

opinions or conclusions. (USPAP 2012-2013, Def. Page U-3)

HYPOTHETICAL CONDITION: a condition, directly related to a specific assignment, which is

contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is

used for the purpose of analysis. (USPAP 2012-2013, Def. Page U-3)

JURISDICTIONAL EXCEPTION: an assignment condition established by applicable law or

regulation, which precludes an appraiser from complying with a part of USPAP. (USPAP 2012-

2013, Def. Page U-3)


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ODOT PRE APPRAISAL FORMS:

The Appraisal Pre-Assignment Checklist


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APA – Appraisal Problem Analysis:


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PIN – Parcel Impact Notes:


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Blatnik Findings


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Sample Scope of work

An acceptable sample of a “Scope of Work in a Condemnation Assignment” discussion is found

below in the Appendix addenda.

Sample Scope of Work Discussions

The pages that follow show excerpts of scope of work discussions from written appraisal reports. These

are not perfect examples, but they are acceptable (of scope of work discussions). They are intended to

give some idea as to what to say and how to say it and should be viewed as starting only. You will

probably find ways to improve upon them.

Scope of Work in a Condemnation Assignment -

The scope of work in this assignment included a personal inspection of the subject property, reviewing

public record information concerning the subject and other properties in its immediate neighborhood,

reviewing ODOT R/W maps and construction plans associated with this road widening project, and

searching the sales of vacant and improved properties similar to the subject in both the “before” and

“after” situations. Due to the large number of sales (both vacant and improved in the Place Name Shore

subdivision, this search for comparable sales was concentrated in but, limited to, this subdivision. The

search extended retroactively two years for interior sales and five years for sales with frontage along XX

River Boulevard. All sales used in comparison to the subject were personally inspected (exterior only,

unless otherwise noted) by the appraiser and were photographed by either the appraiser or someone under

his direction. To asset in determining that effect, if any, the proposed acquisition may have on the

remainder, the scope of this assignment also included searching other neighbors for sales of properties

that may have been affected by similar acquisitions.

The scope of work for this assignment also included developing opinions of value of the subject in both

the before and after situations using the cost approach. Cost new is based on information obtained from

Marshall & Swift Residential Cost Handbook as well as information obtained from local builders.

Depreciation is estimated based on abstraction form sales of similar sales in the Place Name Shore

subdivision.

Sources used in obtaining sale information included: public records (deed recording, City if XYZ data,

tax assessment records), real estate sales data published by First American Real Estate Services, IRIS,

MLS data, other appraisers, local real estate sales agents, and field inspections and verifications of

comparable properties. Market data gathered include sales and listing of properties with single-family

residential use potential. All of the sales data used in this appraisal were verified by contacting and

interviewing the property owners, principals to transactions, or public officials. All sales applied in the

analyses are described in detail on Sale Summary Sheets included as part of each sale write-up.

The scope of this assignment does not include apportioning the value of the acquisition between any

parties that may have an interest.

Credibility and Goals

The objective of every ODOT appraisal is to be provided with a “Credible Result” (report).


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CREDIBLE means “Worthy of Belief” and this means, essentially, that it must be credible to the public.

Credible assignment results require support, by relevant evidence and logic, to the degree necessary for

the intended use. The appraisal result(s) must be reliable to the intended user. Correctness of the data

and analysis applied must be accurate.

Credibility and Goals

The first sentence in USPAP’S appraisal and appraisal consulting development standards (Standards

Rules 1, 4, 7, and D) states that an appraiser “must identify the problem to be solved, determine the scope

of work necessary to solve the problem, and correctly complete the research and analyses necessary to

produce credible results’ The objective is to always a credible result. Not “the right number.” Not “an

irrefutable conclusion.”

The term credible is a key concept in USPAP. A definition of credible was added with the 2006

edition. Credible means worthy of belief. The definition’s apparent simplicity disguises its true

complexity. Worthy of belief by whom? The definition doesn’t specify. It’s open ended, which

means, essentially, that it must be credible to the public. Whereas USPAP’s requirement for

reporting (stated in Standards Rule 2-1(b)) is that the report must be understandable to the

intended users, USPAP requires that the assignment results be credible to any and all who may be

in a position to judge.

The comment to the definition states that “credible assignment results require support, by relevant

evidence and logic, to the degree necessary for the intended use.” Thus, credibility relates directly

to—and is measured in light of–intended use. The objective of any assignment can be restated,

then, as a credible opinion that is useful in solving the client’s problem.

Reliability is a related, but quite different, concept. It is the ability of the intended user to rely on

the assignment results. Reliability is also relative to the intended use of the assignment. The

results of an assignment could be reliable for one intended use, but not for another.

Accuracy is the correctness of the data and analysis applied. An appraisal must always be

accurate. Reducing the scope of work applied never gives the appraiser license to be inaccurate,

whatever the degree of data and analysis applied, it must be factually and technically correct.

Question #1; What are the three(3) ODOT Real Estate Appraisal forms that are expected to be accurately completed

and brought to the on-site field scoping meeting?

Answer:

(1.) The APPRAISAL PRE-ASSIGNMENT CHECKLIST

(2.) The Appraisal Problem Analysis (APA)

(3.) The Parcel Impact Notes (PIN’s)

Question #2: Also, what is not required but is a helpful scoping checklist now available for your use?

Answer: “THE ISSUES” See the copy just below

Note: Also, See the Addenda for other helpful Scoping tools, especially the December 19, 2012

APA’s/PIN’s Scoping” explanation addendum


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Section 8. Research & Data-What and How Much:

Standards Rule 2-1 (USPAP 2012-2013, Page U-22)

627 Standards Rule 2-1

628 Each written or oral real property appraisal report must:

629 (a) clearly and accurately set forth the appraisal in a manner that will not be misleading;

630 (b) contain sufficient information to enable the intended users of the appraisal to understand

the report property, and

632 (c) clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical

633 conditions, and limiting conditions used in the assignment.

THE ODOT APPRAISAL OPERATING MANUAL

The Sales Data Sheet

1. The use of sale data sheets detailing each comparable sale used in the appraisal report is

mandatory when the sales comparison approach is utilized.

2. Comparable Sales Data Sheet requirements:

All valuation formats utilizing the sales comparison approach shall base value on sales which are

most similar to the subject property. Ohio Administrative Code 5501:2-5-06 (C)(1)(b)(iii)

requires “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.”

These procedures require the following information to be in any data sheet. It is recommended the

following template be used. It is acknowledged that appraisers may have data sheets that are

different and these sheets may be used so long as they meet the requirements of these procedures.

The minimum standards for data sheets are:

1. County

2. City or Village

3. Township

4. School District(if appropriate)

5. Recording Data: Deed Volume and Page or Official record Number

6. Grantor:

7. Grantee:

8. Date of Transaction(Sale):

9. Date Viewed:

10. Dimensions:

11. Size(state if net or gross, acres or square feet):

12. Topography:

13. Cash Equivalent Sale Price::


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14. Unit Price:

15. Type of Instrument (warranty deed, etc.):

16. Location (address or brief legal or physical location description sufficient to direct someone

from out of town to the site.):

17. Zoning (include a brief definition of the zone; discuss the land use plan if appropriate):

18. Present Use:

19. Highest and Best Use at Time of Transaction:

20. Type of financing (source and method of financing):

21. Encumbrances (discuss the encumbrance, if any, and how it limits the highest and best use

and how it affected the price paid for the comparable sale):

22. Type of improvements (discuss site and building improvements, water/sewerage , paving,

number of parking spaces, units, rooms, age, condition. For Sales Data Books, in most

situations, use vacant land sales only):

23. Various On-site and off-site utilities (discuss distance to available utilities, particularly water

and sewer.

24. Sale Verification:

Name:

Relationship to Sale:

Date Verified

Telephone Number

Person Who Verified Sale

Conditions of Sale (was this an Arm’s length transaction?)

25. Motivation of Parties (Why did grantor sell and grantee buy?):

26. Analysis of Pertinent Information (to include the cash equivalency analysis)

27. Remarks(include tax identifying number, flood zone, map/panel/date, and appropriate

topographical features):

28. Property Sketch (sketch does not have to be to scale, but it must be neat, clean, legible, and to

proportion. Reproduction from a tax map or Right-of-way map is acceptable as long as it is

legible. All sketches must show a reasonable representation of the site with dimensions and

appropriate improvements that contribute significantly to the property value (i.e. buildings,

parking areas). Comparable properties used for support of factors such as proximity, access

and so on, are to specifically reference the point which is analyzed in the report (i.e. distance

from R/W, access location and width):

29. Photograph (the photo must be representative of the comparable sale property). There must

be at least one color photograph. The original Project Data Book should have color

photographs; however, large properties may be shown by large black and white aerial photos.


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On-Line Resources:

Here are some popular economic informational Website Locator Suggestions for Ohio:

1. Google: “CAAO” then do a “search”

Then click on web site line, usually the bottom line of Auditor’s info

Then go from there to the topic that you desire

2. Google: “Ohio Department of Development County Profiles”

3. Google: “Ohio Economic Development Agencies”

4. Google: “Ohio Demographic County Profiles”

5. Aerial Image of subject property is now ODOT required to be included in written appraisal reports

Note: County Auditor GIS is Preferred Choice to get this (it shows property lines, etc.)


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THE ISSUES

The Real Estate Appraisal Scoping Issues Checklist

I. The significant Seven (7):

1. Client (usually ODOT) 5. Effective Date (Date of Take)

2. Intended User(s) 6. Subject’s Characteristics (See AI POC)

3. Intended Use 7. Assignment Conditions

4. Opinion Type /Definition of Value (1) General Assumptions and Limiting

Conditions

(2) Special Assignment Conditions

a. Extraordinary Assumptions

b. Hypothetical Conditions c. Jurisdictional Exceptions

II. The Scope of Work-Issues:

1. Complexity - Report Format (decide at end)….(Simplistic or Complex)

2. Title Report/Deed/Easements/Land Contract/RE-95

3. Zoning: Classification Written Code

Before After

a. Building Setback:

b. Min Land Size:

c. Access(es):

d. Compliant:

e. Regulations Waived:

f. Other Restricts: (eg Pkg)

Q: Is the Appraisal Problem Analysis (APA) form completed?

Q: Is the Preliminary Parcel Impact Notes (PIN’s) form completed?

4. Utility Services:

Public: W S G E Ph Ca Tr

Private: W S G E Ph Ca Tr

Explanations/Other/Tap Fees/Etc.:

Existing Infrastructure Improvements:

Curbs: Storm Drains: Street Lights:

Sidewalks: Curb Cut(s): Other:

5. Larger Parcel: Unity of Ownership/Use/Contiguous?

Before After

6. Existing Use of Property:

Expected Use of Residue:

Is Before and After Use the same:

Estimated Highest & Best Use:


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THE ISSUES (Cont’d)

7. Structure(s) in the Take area: None

Site Improvements in Take area:

Underground or Overhead Issues:

Signs or other RE-95 issues:

Other:

8. Access – Any changes:

a. Driveway/Mailbox Issues:

9. Landlocked Parcels: None

10. Grade Changes/Elevation Differences:

11. Proximity Issues:

12. Permanent Impacts from Temporaries:

13. Financial Impacts – Income, Rents, Royalties, etc.:

14. Displaced People and/or Business(es):

15. Does ODOT need a “Special” Study/Appraisal/Expertise of any kind: No

16. Is a “Cost to Cure” scenario apparent: None

17. Flood Zone Issues: 100 Year 500 Year None

18. Drainage Issues:

19. Hazardous Material/EPA Issues: None

20. Parking Issues: None

21. Other Economic Issues:

22. Analysis Need to do: Sale Comparison: Cost: Income:

23. If RE-101 Cost Estimate for Parcel is $1 Million and up, then Central Office must be invited to

Scoping Process.

24. Finalized PIN’s are to be included in report and Sent to Appraiser on: , 20

25. Finalized RE-95 is to be included in report and sent to Appraiser on: , 20

Make certain that these “Appraisal Pre-Assignment Checklist” steps (27 &28) are done:

26. The appraiser shall be provided sufficient plans:

a. Final R/W plans and legal descriptions in accordance with R/W Plan Manual sections 3100

and 3300

b. Cross Sections

c. Driveway profiles

d. Plan and profile sheets including the

Pertinent parts of the construction plans to enable the appraiser to understand the impacts of both

the taking and the project to the residue property, as they relate to the subject property plus

any other pertinent information relating to the property that is the subject of the appraisal

assignment are necessary.

27. The appraiser shall be provided the latest and accurate legal descriptions of the take areas:

28. Are the Appraiser and Reviewer both ODOT Prequalified?

Q: Type of report: VA VF RE25-17 The 1 Original plus Copies

Q: Estimated date of completion? , 20

Q: Estimated fee for Appraisal? $ , .00

r/w appraisal report · damnum absque injuria: damage without a violation of a legal right (in some...

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