The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Appraisal Procedure

Reference Number: MTAS-1326
Tennessee Code Annotated
Reviewed Date: September 12, 2017
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Before the acquisition of any tract of property by a public agency subject to the federal and/or state relocation acts, a full appraisal of the tract must be made. The regulations generally require that:

  • The property be appraised before the initiation of any negotiations with the property owner;
  • The owner or his designated representative be given an opportunity to accompany the appraiser during his inspection of the property;
  • The acquiring agency establish the amount it believes to be just compensation before initiating any negotiations with the property owner; and
  • The acquiring agency make a written offer to the property owner for the full amount believed to be the just compensation. The written offer must be accompanied by a written summary statement of the offer explaining the amount of the offer, the description of the property being acquired, and an identification of any improvements being acquired. [11]

The agency must make reasonable efforts to contact the owner to discuss the offer and explain the basis for the offer and the acquisition policies of the agency. The owner must be given a reasonable opportunity to consider the offer and present material the owner believes is relevant to determining the amount of just compensation to which the owner is entitled. The agency must consider the owner’s presentation and must update its appraisal if the owner’s information or any material change in the character or the condition of the property indicates the need for a new appraisal or if there has been a significant delay since the time the appraisal was completed. The agency cannot advance the time of condemnation or take any other coercive action to induce a settlement by the owner. [12]

The type of appraisal that must be obtained by the agency is determined by the complexity of the appraisal problem. [13] The appraisal must conform to minimum standards set by each agency and with commonly accepted appraisal practice if the appraisal does not require an in-depth analysis. [14] If an in-depth analysis is required, a detailed appraisal must be performed that conforms to nationally recognized appraisal standards, including, if appropriate, the Uniform Acquisition Standards for Federal Land Acquisition. [15] At a minimum a detailed appraisal must include: [16]

  • The purpose and/or function of the appraisal, a description of the estate being appraised, and a statement of the assumptions and limiting conditions affecting the appraisal;
  • An accurate description of the physical characteristics of the property (and any remainder if a partial taking will occur), a statement of 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;
  • A description of all relevant and reliable approaches to value used consistent with commonly accepted appraisal practice (market data, income, or replacement cost). If more than one approach is used, there must be an analysis and reconciliation of approaches to value;
  • A description of comparable sales, including the parties to the transaction, source and method of financing, and verification by the parties involved;
  • A statement of the value of the real property to be acquired, and if a partial taking is proposed, a statement of the damages and benefits, if any, to the remainder; and
  • The effective date of the appraisal, signature, and certification of the appraiser.

The appraiser is required, to the extent permitted by applicable law, to disregard any decrease or increase in the fair market value of the property caused by the project for which the property is being acquired or by the likelihood that the property would be acquired for the project, other than due to physical deterioration within the reasonable control of the owner. [17]

Once the appraisal is completed, the agency must have the appraisal reviewed by a review appraiser. [18] The review appraiser must examine the appraisal to assure that it meets all applicable requirements, and must seek any necessary corrections. The review appraiser then either approves the appraisal or develops a new appraisal consistent with the above requirements.

Before the agency can require the owner to surrender possession of the real property, the owner must be paid the agreed upon purchase price, or if no agreement has been reached, deposit with the court an amount not less than the approved appraisal for the fair market value of the property or the amount of the court’s award of compensation in the condemnation action. In exceptional circumstances the agency can obtain a right-of-entry for construction purposes prior to making the payment available to the owner. [19]

Although the public agency may not pay less than the approved purchase price, as determined by its review appraiser, it may, under certain circumstances, make an offer of settlement in excess of that amount. In arriving at a determination to make an administrative settlement, the agency should take the following factors into consideration: [20]

  • The appraiser’s opinion of value;
  • Any recent court awards for similar type property;
  • The estimated trial costs; and
  • Valuation problems with the property in question.

The agency is required to reimburse property owners for recording fees, transfer taxes, and similar costs incidental to conveying real property; penalty costs for pre-payment of any pre-existing recorded mortgage, entered into in good faith, encumbering the property; and the pro rata portion of real property taxes paid by the owner that are allocable to a period subsequent to the date of title vesting with the agency or the effective date of possession of the property by the agency, whichever is earlier. [21]

The owner is also entitled to be reimbursed for his reasonable expenses, including attorney, appraisal, and engineering fees actually incurred because of a condemnation proceeding if:

  • The court determines that the agency cannot acquire the property in question;
  • The condemnation case is abandoned by the agency other than under an agreed upon settlement; or
  • The court having jurisdiction renders a judgment in favor of the owner in an inverse condemnation case or the agency settles such a case. [22]

 


Notes:
[11] 49 CFR § 24.102.

[12] 49 CFR § 24.102.

[13] 49 CFR § 24.103.

[14] 49 CFR § 24.103.

[15] 49 CFR § 24.103.

[16] 49 CFR § 24.103.

[17] 49 CFR § 24.103.

[18] 49 CFR § 24.104.

[19] 49 CFR § 24.102.

[20] 49 CFR § 24.102.

[21] 49 CFR § 24.106.

[22] 49 CFR § 24.107. See T.C.A. §§ 29-16-123(b) and 29-17-812(b) for similar provisions under Tennessee law.

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