OHIO DEPARTMENT OF TRANSPORTATION OFFICE OF REAL ESTATE. Kevin O Grady, Manager Appraisal Unit. Changes and Updates to the Real Estate Manual

Transcription

1 OHIO DEPARTMENT OF TRANSPORTATION OFFICE OF REAL ESTATE DATE: May 01, 2014 TO: FROM: RE: Users of the Real Estate Manual Kevin O Grady, Manager Appraisal Unit Changes and Updates to the Real Estate Manual The only current and accurate source of ODOT s Real Estate Manual is on the Office of Real Estate s website. This site is located at: Desired information can be accessed by scrolling down the left column and selecting Manuals and Booklets. Specific information can be selected by clicking on the desired section. The Real Estate Manual is a living document as procedures will evolve and change. Individuals or firms providing various services to the Office of Real Estate (e.g. negotiations, titles, appraisal, appraisal review, relocation, relocation review, closing, property management, railroad coordination and utility relocation) must perform these services in compliance with current published policies and procedures. Individuals utilizing a hard copy version of the manual, without accessing the website for updates, risk providing non-compliant services to the Office of Real Estate. Therefore, all users must be aware of the changes as various sections of the manual are updated. ODOT will provide notice of manual changes on the Design Reference Resource Center (DRRC) web page. Users of the manual can access this page and subscribe to be made aware of manual changes via notification. Then, when changes to the manual occur, ODOT will provide direct notice to the subscriber. This page can be accessed at Scroll down to Real Estate Policies and Procedures Manual and select the desired section for updates, or enter your address to subscribe for changes. It is the user s responsibility to maintain their most current address on the DRRC notification system. The DRRC web site is updated four times a year. The Office of Real Estate may also provide additional guidance to its procedures by Inter-Office Communications (IOC s). These communications will be made a part of the Real Estate Manual. If Individuals having questions pertaining specifically to this Section, contact me at (614)

2 Table of Contents PAGE Definitions, Goals, and Regulations Influencing the FMVE Delivery Process... 2 A. FMVE defined:...2 B. Goals of FMVE delivery:...2 C. Regulations pertaining to FMVE Procedure to Deliver and Establish FMVE... 3 A. Parcel Impact Notes (PIN s)...3 B. Step 1 Developing the Project Workplan Parcel Cost Estimates Equal To Or Greater Than $1,000,000: Office of Real Estate Assistance:...5 C. Step 2 Determine, then Document the Valuation Problem by Creating PIN s Select the review appraiser: Update and/or Create Preliminary PIN s:...6 D. Step 3 - Determine the Amount of Time Needed for the Appraisal...7 E. Step 4 - Scope the Appraiser...8 F. Step 5 Engage the Appraiser The appraiser and review appraiser shall be pre-qualified by ODOT For fee contractors, money shall be programmed The appraiser is provided a copy of the completed Title Report Finalize the PIN s: The appraiser has been provided a copy of the final PIN s The appraiser is provided a final copy of the RE The appraiser shall be provided sufficient plans and legal descriptions G. Step 6 Monitor the Appraisal for Delivery H. Step 7 Review the Appraisal and Create the RE I. Step 8 The Act of Establishing FMVE District will Establish FMVE: The establishment of FMVE is a three step process: The responsibility and authority to establish FMVE for ODOT The responsibility and authority to establish FMVE for LPA Projects When FMVE is $500,000 or Greater...14 J. Step 9 Initiation of Negotiations with the Owner...15 CHART OF THE FMVE DELIVERY PROCESS Making Multidiscipline Assignments to Staff When Developing FMVE May 01,

3 4100 THE FMVE DELIVERY PROCESS Definitions, Goals, and Regulations Influencing the FMVE Delivery Process A. FMVE defined: FMVE is an acronym for Fair Market Value Estimate. It is the end product of a process whereby the acquiring agency establishes an amount believed to be fair compensation and offers this amount to the owner for the property rights required for the transportation project under eminent domain regulations in state law and funding requirements in federal law. B. Goals of FMVE delivery: The appraisal of the property and the review of that appraisal are integral to the process of FMVE. The delivery of FMVE is of critical importance so that negotiations with an owner can proceed and ultimately, a project can be delivered by the prescribed time. The goals of the FMVE delivery process are: 1. Ensure the owner of the property to be acquired is offered fair compensation. 2. Ensure the appraisal and appraisal review processes are managed in a manner so: a. there is adequate time to develop a good appraisal product, inclusive of identifying the appraisal problem and scoping the appraiser; b. there is adequate time to review the appraisal; c. negotiations with the owner occur under the same market conditions that influenced the appraisal so the compensation offered is fair and reasonable; d. there is adequate time for negotiations to occur and owners can be afforded all rights and privileges required by regulation; e. the rights of way required for the project can be cleared by an established date; and, f. so the project can enter into the construction phase by an established date. 3. Ensure federal/state laws and regulations and the implementing procedures of this Manual are adhered to during the FMVE delivery process. C. Regulations pertaining to FMVE CFR (d) Establishment and offer of just compensation CFR (j) State responsibilities; Approval of just compensation 3. The Ohio Constitution, Article 1, Section 19 Inviolability of private property 4. Ohio Revised Code, Section (D); Land acquisition policies 5. Ohio Administrative Code 5501:2-5-06(B)(4) Establishment and offer of just compensation May 01,

4 In 2007, eminent domain law in Ohio was amended. In part, these amendments recognize that any acquisition subject to the power of eminent domain is the same as an appropriation of the property [ORC ]. Also, Ohio law now mandates the owner receive a copy of the appraisal before or during the initial negotiation visit with an owner [ORC (C)] Procedure to Deliver and Establish FMVE Transportation projects requiring rights of way evolve through a series of processes resulting in the creation of right of way plans and a timetable to have the right of way cleared so the construction phase of the project is not adversely affected by lingering right of way issues. The process of delivering and establishing FMVE are critical to a project as no offer of compensation can be made to any owner until FMVE is established see 49 CFR (d); ORC (D) and OAC 5501:2-5-06(B)(4). The regulations governing the appraisal and the establishment of FMVE require the District to be actively involved in this process. These procedures break the FMVE delivery process into steps which are necessary to comply with these regulations. These steps are: Step 1 Developing the Project Workplan Step 2 Determine, then Document the Valuation Problem by Creating PIN s Step 3 Determine the Amount of Time Needed for the Appraisal Step 4 Scope the Appraiser Step 5 Engage the Appraiser Step 6 Monitor the Appraiser for Delivery Step 7 Review the Appraisal and Create the RE 22 Step 8 The Act of Establishing FMVE Step 9 Initiation of Negotiations with the Owner The following section provides the details for the steps of the FMVE process. These steps are designed to afford the District Offices flexibility in developing FMVE. The Districts may use a form called Checklists for the FMVE Delivery Process which is found on the Office of Real Estate web site. Much of this section is guidance to the District. However, certain parts of these steps are mandatory procedure; for example, Parcel Impact Notes (PIN s) must be part of every parcel file. To differentiate between guidance and required procedure in this section of the Real Estate Manual, required procedures are bolded. Integral to these steps is the development of the Parcel Impact Notes. Those developing Parcel Impact Notes must be knowledgeable of the appraisal problem. A. Parcel Impact Notes (PIN s) 1. PIN s are an ODOT form found on the Office of Real Estate web site. 2. PIN s ensure the District Office: May 01,

5 a. contributes to the appraisal process; b. contributes to the process of defining the valuation problem; and, c. contributes to the process of developing the scope of work. The District may use staff or prequalified consultants to develop the PIN s, but ultimately, the District must concur with any conclusion in the PIN s. The District s roles in these processes is required by 49 CFR (a)(1) and Ohio Administrative Code, Section 5501:2-5-06(C)(1)(a). 3. PIN s evolve as the FMVE process evolves. Preliminary PIN s are created early on as right of way plans develop, cost estimates are completed and Project Workplans are created. When right of way plans are sufficiently finalized, PIN s can also be finalized. 4. The review appraiser is to be engaged by the District prior to the appraiser. The review appraiser can be a District staff person or a consultant. The review appraiser can then assist the District to understand valuation issues caused by the taking. This process is the appraisal problem analysis and can be documented on a form called the Appraisal Problem Analysis or APA. An adequate understanding of the appraisal problem is critical in developing the PIN s. With the review appraiser s assistance and with the preliminary PIN s completed and in hand, the District can scope the appraiser. 5. As the appraiser is scoped and an exchange of information occurs, the District can update/amend the preliminary PIN s as necessary. Once the appraiser adequately understands the District s expectations and adequately understands the project, the taking, the effect of the taking on the residue, and the valuation format needed to be completed, the appraiser can quote the fee. At this point in time the PIN s are finalized and signed by the appraiser, the review appraiser and the District Real Estate Administrator. These finalized PIN s will be included as part of every appraisal report delivered to the District. 6. As part of the appraisal review process, the review appraiser will re-read the PIN s and determine if the appraiser addressed the District s concerns in the appraisal report. An appraisal may be rejected by the reviewer because an appraiser did not address the District s concerns regarding the valuation problem caused by the taking which is documented in the PIN s. 7. PIN s document the District s understanding of the valuation problem by specific comment in the form. The PIN s document the valuation format to be used by the appraiser and document the people involved in determining the valuation problem. Signatures of these people are required on the final PIN s. The selection of the proper valuation format after consideration of the complexity of the valuation problem and the anticipated amount of compensation is the District s scope of work determination to comply with Federal and State regulations. May 01,

6 8. PIN s are required on all parcels. With an understanding of Parcel Impact Notes (PIN s), the steps in the FMVE process are now discussed. B. Step 1 Developing the Project Workplan As right of plans are being developed and evolve from preliminary plans into final right of way plans, the District may start to estimate right of way costs inclusive of compensation paid to owners so adequate funds can be encumbered when acquisition of right of way is authorized to proceed. Project Workplans are the final step in the R/W Cost Estimating process which is outlined in section 2300 of the Real Estate Manual. The two primary purposes of R/W cost estimating and the project workplan is to allow the District to establish a project budget and to get a final detailed idea of the resources and work forces that will be necessary to complete the R/W acquisition competently and compliant with laws and regulations. As part of this process, the District may want to start the process of determining the valuation issues caused by takings of property rights detailed in the right of way plans and pertinent parts of the construction plans (i.e. the cross sections, drive profiles, et cetera). The issues identified by the District as affecting the value of an owner s property are detailed in the Parcel Impact Notes (PIN s). At this time in the project, these PIN s are considered preliminary and developing PIN s will assist the District in cost estimates, in determining if staff or fee consultants should be used in the appraisal and appraisal review process and what valuation formats should be used. Based on the complexity of the valuation problem, the District can determine if consultants may be needed to assist in the appraisal/appraisal review processes. With this information, the District should develop a better sense for the timetable needed for acquisition of rights of way. Depending on how early the District starts this process and/or as plans evolve and change, the District can update the Project Workplan and PIN s as needed. 1. Parcel Cost Estimates Equal To Or Greater Than $1,000,000: If during this Project Workplan process, the cost estimate of an individual parcel indicates that FMVE may be equal to or greater than $1,000,000, the District is required to notify the Office of Real Estate in Central Office for assistance. Notification shall be by correspondence to the Administrator of the Office of Real Estate. 2. Office of Real Estate Assistance: For these high dollar parcels, the Office of Real Estate will assist in assessing valuation issues, developing preliminary PIN s and will offer guidance to the District early-on regarding the appraisal and appraisal review process. This Office will also assist the District when scoping the appraiser and review appraiser. May 01,

7 C. Step 2 Determine, then Document the Valuation Problem by Creating PIN s When the District Office has a high confidence level that right-of-way plans will not change and construction plans are sufficiently complete that an accurate determination can be made regarding the effect of the taking on the residue property, the District should update PIN s that were developed earlier in the project development process. At this point in time, the District should be close to or have Federal authorization to proceed. To adequately complete this step the District needs: 1. Select the review appraiser: The review appraiser is to be selected before the appraiser. The review appraiser is the most seasoned veteran of eminent domain valuation and is the best person to assess the impact of partial takings on residue properties. The District is required to select a pre-approved review appraiser to assist in determining the valuation problem. The review appraiser may be pre-qualified District staff or a pre-qualified consultant. 2. Update and/or Create Preliminary PIN s: a. The reviewer will assist the District to create updated, preliminary PIN s and will be used to assist the District to scope the appraiser. To fulfill the District s needs, the review appraiser must have an adequate understanding of issues influencing value such as zoning of a parcel, including possibilities of rezoning, availability of utilities, probable expansion of utilities into the parcel s area and distance of the parcel to the utility, parking, site size requirements, setback requirements, health code requirements (especially involving septic tank and drinking wells), case law (so there is an adequate understanding of what is and is not compensable), regulations affecting signage, knowledge of property values for the parcel type, knowledge of new developments anticipated for the area and anything else pertinent that is to be considered in determining the valuation problem. The reviewer must be knowledgeable of the property before the taking, must understand the taking (what is physically taken and what is legally taken) and, must understand the impact of the taking to the residue. To accomplish this, the reviewer must understand the plans (inclusive of the right of way component and pertinent parts of the construction plans such as cross sections). The reviewer must understand the property type and what influences value for the property. b. The Appraisal Problem Analysis form (APA) may be used by the review appraiser when the Right of Way Appraisal Report is the recommended valuation format documented in the PIN. May 01,

8 The APA form documents the reviewer s understanding of the issues affecting the determination of the value problem. The use of the APA form by the reviewer is elective. c. The District may want to use Project Data Books to assist in developing PIN s. These books may also be used by the appraiser to speed the appraisal process. Project Data Books may include information regarding zoning, land use, population demographics, soil conditions, health code regulation and other pertinent information useful to understand valuation issues. Much of this information is to be considered by the appraiser in the analysis of the property before and after the taking. Developing this information is time intensive. It is possible to speed the appraisal process by delivering this information to the appraiser earlier in the process. Procedures for proper development of Project Data books are found in section 2300 of the Real Estate Manual. Project Data Books also compile information of properties that have sold. This information can be custom-tailored for the project, for a property or groups of properties, periods of time, property type and so on. The information lists facts regarding sale price and other pertinent data specific to the sale property. The information can be verified or not. This information can be used in developing cost estimates, developing PIN s, and can be provided to appraisers to speed their data research. This may assist the District in speeding the FMVE process. Later in the acquisition process, after the offer is made, the District may use these sales in administrative settlements. d. The reviewer will document his determination of the valuation problem in the PIN s as well as his recommendation of the valuation format appropriate for the complexity of the valuation problem and dollar amount of compensation. It is appropriate for the reviewer to date and sign these preliminary PIN s which may be updated later on in this process. No other signatures are required at this point. The creation of these preliminary PIN s document the District s perception of the valuation problem and based on this understanding, the District can determine the appraiser needed for the assignment and, can communicate to the appraiser, the District s expectations including the valuation issues to be addressed in the appraisal report. This is known as scoping. D. Step 3 - Determine the Amount of Time Needed for the Appraisal The District should be aware of the clear date for the right of way, the current date, the date the appraiser will be engaged, and the time needed for negotiations. The District can then factor in the complexity of the valuation problem and the valuation format to be used and can make a determination about how long the appraisal should take before it is delivered to the District. The District must assure that adequate time is allotted to the May 01,

9 appraiser so a proper appraisal can be created and an offer for fair market value can be made to the property owner for the acquisition. E. Step 4 - Scope the Appraiser 49 CFR (a) and OAC 5501:2-5-06(C) require the District to contribute in developing the scope of work needed for the appraisal assignment. The last part of developing the scope of work is communicating with the appraiser which is discussed in this step. 1. Definition of Scoping the Appraiser Scoping is a word having multiple meanings such as contract scope associated with ODOT contracts or scope discussed in the Uniform Standards of Professional Appraisal Practice (USPAP). For these procedures, scope is explained as follows: a. Scoping is the process of communicating for the purpose of dramatically improving communication between the District, the review appraiser and the appraiser. This scoping process shall: i) define the appraisal problem for each assignment including the legal ownership of the property (title report), and the realty vs. personalty issues (RE 95 process) as well as any tenant owned real estate as it relates to the appraisal assignment; ii) note the date the District will need the appraisal report; iii) discuss the number of parcels to be assigned; iv) discuss the degree of appraisal complexity on a parcel by parcel basis; v) discuss the type of appraisal report necessary to meet the needs of the District; vi) discuss the concept of larger parcel on each parcel to be valued; vii) discuss issues relevant to each parcel such as parking or non-compliance to zoning; viii) ix) discuss the potential highest and best use of each parcel; discuss the plans, right of way and construction components pertinent to the parcel and the valuation issues; x) discuss the legal right rights taken (provide legal descriptions and property rights acquired for each parcel to the appraiser) and discuss what is physically taken; xi) xii) discuss each residue property and the pertinent issues of difference between the larger parcel before the taking and what remains of the property (called the residue) after the taking; and, discuss the information in the preliminary PIN s. b. The appraiser needs to ask questions and seek clarification so he clearly understands the District s requirements and expectations. An appraiser s lack of understanding of right of way plans, project scheduling, appraisal procedures or, a lack of understanding of the impact of the taking on the residue not only can May 01,

10 adversely affect the compensation offer to an owner, but can destroy any hope for successful negotiations, can increase appropriation rates and may impact the delivery of the project. The District s upfront effort to increase the appraiser s understanding of pertinent issues is critical to alleviate appraisal problems. c. During scoping, the plans are opened and each parcel is discussed. Discussions are to include the valuation format and the effect of the taking on the residue. Specific procedures in the Manual can be pointed out that address unique valuation issues. A field inspection of the project and the parcels to be acquired may be warranted as part of the scoping process. d. There is no real limit to what is discussed during the scope process. For example, relocation parcels may require a unique appraisal scoping process because the results of the appraisal may be used to determine if an occupant is displaced, or, an improvement may be classified as personal property and will be moved as a relocation benefit and the appraiser will need to be scoped not to value that improvement. Ultimately, enough information is to be communicated between the parties so the result is an appraisal that meets the Districts expectation as required in regulation see 49 CFR 103(a)(2) and OAC 5501: (C)(1)(b). e. All parties must agree about the scope of work. It must be clearly understood by all that scoping is not directing or steering value. Under no circumstance may the District Office ever steer or direct the appraiser or the reviewer regarding value. The value conclusion is to be the appraiser s unbiased, supported opinion of value under no influence from the acquiring agency. f. If the appraiser and the District cannot agree about the scope of work, the issues must be resolved. Disagreements are to be mutually discussed. It is not a one way discussion. Issues must be identified, worked out and resolved. All parties need to hear one another. Under no condition can an appraiser be engaged without agreement to the scope of work. g. Once the appraiser understands the District s perspectives, needs and expectations, an adequately considered professional fee can be quoted. h. For unique issues, guidance should be obtained from Central Office Real Estate or the Ohio Attorney General s Office. 2. Based on the preliminary PIN s developed thus far, the District should have enough understanding of the property type and impact of the taking on the residue to understand the valuation format needed and the appraiser needed for the assignment. Based on this knowledge the District should be selecting the appraiser and starting the scoping process. 3. 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) May 01,

11 and 49CFR (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: Prequalified agency staff are listed by the Office of Real Estate on the following website: 4. To ensure project consistency and expedient work processes the District should use the review appraiser who assisted in developing the preliminary PIN s to assist in scoping the appraiser. 5. Appropriate District managers, the review appraiser and the appraiser should meet and review the plans and review the preliminary PIN s. A free exchange of information should occur with all sides listening to one another. The District can explain delivery due dates for the appraisal and explain its perspective of the valuation problem. The appraiser may also comment and add information and the appraisers perspective. Based on this exchange of information, the PIN s may need to be amended to reflect new information and perspectives. This scoping process should include a trip to the project area to review the interrelationship of what is on the plan to what physically exists on the parcels along the project. This should help all parties to better understand valuation issues and what is needed in the appraisal report. Based on this scoping meeting, the appraiser can quote an appropriate fee. 6. After the scope meeting, the preliminary PIN s are updated into the final PIN s. Final PIN s include signatures by the appraiser, review appraiser and District Real Estate Administrator. These PIN s are provided to the appraiser and are to be in the appraisal report. These PIN s are also kept in the parcel file. Note: After the appraiser s inspection is completed, the appraiser may have discovered information which may warrant a change in the scope of work. ODOT does not preclude a change in the scope of work at this time but the appraiser must communicate this desire to the client with full justification and reasoning for the change. If the review appraiser and the client agree with the justification then a modification of the scope may occur. At no time may the appraiser modify the scope of work without the knowledge and agreement of the review appraiser and the client. F. Step 5 Engage the Appraiser The appraiser should be engaged to actually start working on the appraisal once the District is assured that Federal authorization has been granted (if reimbursement is required) and all contracting requirements have been met. The District needs to adequately communicate the due date for the appraisal and to provide names and phone May 01,

12 numbers of District officials should questions arise during the appraisal process. At the time of engaging the appraiser, the following is to occur or has already occurred: 1. The appraiser and review appraiser shall be pre-qualified by ODOT. 2. For fee contractors, money shall be programmed. 3. The appraiser is provided a copy of the completed Title Report. The Title Report identifies the aggregate ownership of the property to be acquired and provides useful information to the appraiser for larger parcel determination, tax information, easement and encumbrance information and recorded lease information. The Title Report does not have to be made a part of the appraisal report. 4. Finalize the PIN s: The PIN s have been finalized and the appraiser has been scoped by the District and review appraiser. 5. The appraiser has been provided a copy of the final PIN s. 6. The appraiser is provided a final copy of the RE 95. 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 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 of the Real Estate Manual. 7. The appraiser shall be provided sufficient 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. With this knowledge, the appraiser can 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. G. Step 6 Monitor the Appraisal for Delivery. The District should keep in touch with the appraiser as he develops the appraisal product to ensure questions that may arise are quickly addressed and to assure the appraisal is progressing and will be delivered to the District by the assigned date. May 01,

13 USPAP and the contract between the District and the appraiser require the appraiser to alert the District as issues arise that impact the appraisal or the delivery of the appraisal. The District must also assure the appraiser is provided adequate time to competently develop a proper appraisal. Appraisers must not wait until the last moment to alert the District of issues affecting appraisal quality or date of delivery. Project schedules must be based upon the delivery of good quality appraisal reports that meet standards and that are delivered by the prescribed date agreed to by all parties. H. Step 7 Review the Appraisal and Create the RE All appraisals shall be reviewed per regulation OAC 5501:2-5-06(D) and 49 CFR Detailed procedure for appraisal review is in section 4300 of the Manual. 2. To ensure project consistency and expedient work processes, once the appraisal is delivered to the District it is to be assigned to the same review appraiser who assisted with the development of the Parcel Impact Notes (PIN s) and the scoping of the appraiser. The District may use another review appraiser if the original review appraiser is no longer available. The review appraiser is given a reasonable amount of time to competently complete the task of appraisal review. 3. The review appraiser reviews the appraisal for compliance to the scope of work, laws, regulations and the procedures of this Manual. The review appraiser also considers if the appraisal meets standards of professional appraisal practice, methodologies and techniques appropriate for the property and assignment. 4. If the review appraiser determines the appraisal requires clarification or correction, the review appraiser is required by regulation to seek clarification or correction from the appraiser. Once the review appraiser determines the appraisal meets standards, fairly estimates compensation and should be used as the basis to make an offer to the owner, the review appraiser can recommend the appraisal, in writing, to the District. The written recommendation by the review appraiser is communicated on form RE 22. An RE 22 is not required for the Value Analysis Report. 5. Once the reviewer completes the RE 22, the appraisal and the review documentation (which includes the RE 22) is forwarded to the District for an authorized District official to review and sign the RE 22. If a Value Analysis Report was used, the report is forwarded to the District for review and signature by the authorized District official. I. Step 8 The Act of Establishing FMVE 1. District will Establish FMVE: FMVE is established by the act of a person of authority within the District signing form RE 22 or if the waiver of appraisal provision was exercised, signing the Value Analysis Report. Regulation mandates the District may not delegate its authority May 01,

14 for establishment of FMVE to any fee consultant see OAC 5501: (B)(4) and 49 CFR (d). FMVE shall be the offer made to the owner(s) of the real property being acquired. The person establishing FMVE must wisely consider this act of establishing value as it is a major responsibility of the acquiring agency. 2. The establishment of FMVE is a three step process: a. The appraiser delivers a signed appraisal report to the District. b. The review appraiser reviews the report, and if the review appraiser agrees the report has been completed in compliance with the procedures in this Manual, and if the estimated compensation is fair and reasonable, the review appraiser prepares and signs the RE 22. The review appraiser s signature signifies recommendation of the appraisal as the basis for the District to establish FMVE. c. A person of authority within the District establishes FMVE by signing the RE 22. No one person can assume the role of two or more people involved in this process. 3. The responsibility and authority to establish FMVE for ODOT a. The District Real Estate Administrator (DREA) has responsibility and authority to establish FMVE up to $1,500,000. If the DREA is not available to establish FMVE, authority in the District shall be the Planning and Engineering Administrator or the District Deputy Director. b. The DREA may delegate this authority to a subordinate manager when the award is less than $500,000. The delegation of authority to subordinate managers and the limits of the authority must be clearly stated in writing prior to establishing FMVE. A copy of the written delegation of authority must be maintained within the District files and a courtesy copy of this letter must be forwarded to the Administrator, Office of Real Estate. Delegation of authority may never be made to a consultant c. Any FMVE that is $500,000 or greater requires a second appraisal review. d. Any FMVE equal to or greater than $1,500,000 shall be established by the Administrator of the Office of Real Estate or the Deputy Director of the Division of Engineering. FMVE may also be established by the Director, any Assistant Director(s) or Chief Legal Counsel. 4. The responsibility and authority to establish FMVE for LPA Projects a. The authority to establish FMVE within any LPA project subject to ODOT authority is the head of the LPA, for example: the Mayor, the City Manager, City Engineer, the County Engineer, or the District Real Estate Administrator. May 01,

15 b. Should the head of the LPA wish to delegate their authority to a subordinate manager, the delegation of authority and the limits of the authority must be clearly stated in writing and a copy must be maintained within the LPA s files. A courtesy copy of this letter delegating the authority to establish FMVE must be forwarded to the District Real Estate Administrator. c. In those instances when the appropriate LPA official is unavailable to establish FMVE, the authority will revert upward through the LPA s chain of command. 5. When FMVE is $500,000 or Greater A high dollar parcel is defined as any acquisition parcel having an FMVE recommended by the reviewer that is $500,000 or greater. ODOT considers these dollar amounts as unusual, thereby requiring a higher level of review scrutiny. The procedure for high dollar parcels is as follows: a. The appraisal review process for high dollar parcels requires two review appraisers performing two independent, but concurrent reviews. Both review appraisers must recommend the appraisal and both must sign a single RE 22 prior to the establishment of FMVE by the person of authority within the District. There may be times when the need for a second review appraiser cannot be predicted before the appraisal report is completed and delivered to the District office. In those circumstances, the second review appraiser may be engaged after the appraisal report is delivered to the District. b. The review procedure is: i. The second reviewer must be a State-Certified General Real Estate Appraiser (agency staff or consultant) who is pre-approved by ODOT to perform the appraisal review function. ii. The person performing the second review cannot be from the same business office as the person who did the initial review. This procedure applies to Districts, LPA s and consultants. iii. The appraisal shall be reviewed by both review appraisers before the appraisal is determined as recommended, accepted but not recommended, or not accepted. If the appraisal is determined not acceptable or in need of clarification, both reviewers are required to seek clarification, or, seek correction with a single Review Letter. Both reviewers are to agree as to a course of action the appraiser may take to bring the appraisal into compliance. If the second review appraiser disagrees with the initial review appraiser, then both reviewers are to attempt to work out a course of action that will either recommend the appraisal or seek clarification or corrections of the appraisal. May 01,

16 When the review appraisers are deadlocked, the ODOT Appraisal Unit Manager shall make the final decision as to a course of action. If the appraisal was not accepted by the initial review appraiser and a Review Letter was created by this reviewer, the second review appraiser shall still perform a secondary review and may add comments to the Review Letter beyond those made by the initial reviewer. In order to expedite this review process, the review appraisers should jointly craft the Review Letter. The appraiser should not be subjected to multiple Review Letters that potentially can be contradictory. iv. Eventually, when an appraisal is recommended by the reviewers, the RE 22 is created and the District Real Estate Administrator (DREA) shall establish FMVE. J. Step 9 Initiation of Negotiations with the Owner Once FMVE has been established by the District Office, it may initiate negotiations with the owner. See OAC 5501:2-5-06(B)(4); 49 CFR (d); and, ORC (D). May 01,

17 CHART OF THE FMVE DELIVERY PROCESS STEP 1 DEVELOP/COMPLETE PROJECT WORKPLAN AND/OR COST ESTIMATES Consider use of Project Data Books to improve estimates and speed acquisition Involve Office of Real Estate to assist with PIN s and scoping when the cost estimate of any parcel is $1,000,000 or greater - Office of Real Estate assists in assessing the valuation problem, developing preliminary PIN s, offers guidance and assists with scoping the review appraiser and the appraiser Update the work plan, cost estimate and PIN s as needed, but when the District has a high confidence level the R/W plans are final (or near final and will not change, proceed to Step 2). STEP 2 DETERMINE, AND THEN DOCUMENT THE VALUATION PROBLEM BY CREATING PIN S Select the review appraiser who assists in developing PIN s Update preliminary PIN s (if previously completed) APA form may be used at the discretion of the Review appraiser Document the determination of the valuation problem in the PIN s and recommend valuation format to be used STEP 3 DETERMINE THE AMOUNT OF TIME NEEDED FOR THE APPRAISAL STEP 4 SCOPE THE APPRAISER Ensure appraiser and review appraiser are prequalified with ODOT Use the review appraiser to assist with scoping the appraiser Appraiser to quote fee based on scope; finalize PIN s with signatures STEP 5 ENGAGE THE APPRAISER Money must be programmed if using a consultant Provide the appraiser a copy of the title report and completed RE 95 PIN s must be finalized and provided to appraiser Appraiser provided sufficient plans and legal descriptions STEP 6 MONITOR THE APPRAISAL FOR DELIVERY STEP 7 REVIEW THE APPRAISAL AND CREATE THE RE 22 Two reviews needed when FMVE is $500,000 or greater STEP 8 ESTABLISH FMVE DREA has authority up to $1,500,000 STEP 9 INITIATE NEGOTIATIONS ONCE FMVE IS ESTABLISHED May 01,

18 Making Multidiscipline Assignments to Staff When Developing FMVE Federal and State regulations allow the District to make multiple assignments in multiple disciplines concurrently to staff during the FMVE process so long as the anticipated compensation on a parcel is $10,000 or less see Conflict of Interest, 49 CFR (n). By making multiple assignments, it is possible for the District to accelerate the process to acquire rights of way. For example, the District Real Estate Administrator (DREA) may assign the same person to perform a project workplan which includes a cost estimate of a parcel, the title report, the RE 95, the Value Analysis Report for each parcel on the project and this same person could also be the negotiator and perform the closings for every parcel on the project. This scenario would meet the exception to the conflict of interest provision in the regulations as long as the compensation estimate did not exceed $10,000. The DREA would need to utilize another person as the review appraiser. May 01,