342 FW 1, Appraisal

1.2 Policy. U.S. Fish and Wildlife Service policy requires a system of appraisals and appraisal reviews that will ensure reliable estimates of value for management decisions. Additionally, the public at large is involved with Service activities and, as such, it is the obligation of the Service to protect the public's interest. Therefore, the policy of the Service is to protect both private and public interests by means of market value appraisals as a basis for all land transactions.

1.3 Authorities. The following authorities are applicable to the U.S. Fish and Wildlife Service appraisal program.

A. Constitution of the United States. The Fifth Amendment to the Constitution of the United States of America provides " . . . nor shall private property be taken for public use without just compensation." Under established law, the courts have ruled that the measure of just compensation is the market value of the interest to be acquired at the time of taking.

B. Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, P.L. 91-646, as ammended, 42 U.S.C. 4601, et seq. This act deals with uniformity and fairness in the treatment of property owners:

(1) It sets minimum qualifications for all Service appraisers involved in Federal or federally assisted programs. The Department of the Interior implements this part of the act under 49 CFR Part 24.103(d).

(2) It requires appraisals prior to negotiations. The Department of the Interior implements this part of the act under Part 114-5-50 of the Interior Property Management Regulations and 41 CFR Part 114-50.301-1.

(3) It requires a separation of appraisal and negotiation function. The Department of the Interior implements this part of the act under 49 CFR Part 24.103(e). This regulation no longer permits the same person to both appraise and negotiate an acquisition where the value of the acquisition is over $2,500.

C. Uniform Appraisal Standards For Federal Land Acquisitions (UAS). All appraisals are to conform to the UAS, as amended by the Interagency Land Acquisition Conference. The UAS takes absolute precedence over the generally more minimal standards in the USPAP discussed below in G.

D. Interior Procurement Regulations, IPR Part 14-4.52. This regulation considers appraisal services professional in nature and allows for competitive, negotiated procurement procedures wherein price or cost is considered along with other factors. It is recognized that selection of the most qualified appraiser for a given appraisal depends heavily on such intangible factors as integrity, reputation, skill, experience, and professional competence.

E. Revenue Sharing Act, 16 U.S.C. 715s, as amended. This act requires a market value appraisal every fifth year of all areas acquired in fee by the United States that are solely or primarily administered by the Service.

F. Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), P.L. 101-73, Title XI 1101 of August 9, 1989, 12 U.S.C. 3331. This act provides that Federal financial public policy interests in real estate related transactions will be protected by requiring that real estate appraisals utilized in connection with federally related transactions are performed in writing, in accordance with uniform standards, by individuals whose competency has been subject to effective supervision.

G. Uniform Standards of Professional Appraisal Practice (USPAP).

(1) The USPAP, promulgated by the Appraisal Standards Board of The Appraisal Foundation, as amended, is recognized throughout the United States by the appraisal industry as the generally accepted minimum standards of appraisal practice.

(2) Staff and contract appraisers working on federally related transactions are expected to abide by Standards 1, 2, and 3 as set forth in the USPAP.

(3) Limited exceptions to the Standards Rules are permitted when classified as guidelines rather than binding requirements. Binding requirements applicable to the Service appraisals and reviews, which departure is not permitted, include Standards Rules 1-1, 1-5, 2-1, 2-2, 2-3, 2-5, 3-1, and 3-2.

(4) Standard Rule 6, concerning the development, methodology, and credibility of mass appraisals, is applicable in some extent to the Service's easement, revenue sharing, and/or multiple ownership programs. If used, departure from Standard Rules 6-1, 6-3, 6-6, 6-7, and 6-8 are not permitted.

(5) Uniform Appraisal Standards for Federal Land Acquisitions (UAS) that are covered in item C above take absolute precedence over generally more minimum standards presented here in the USPAP.

H. Federal Real Property Appraisal Standards. These standards, as outlined in Office of Management and Budget (OMB) Bulletin No. 91-05, Appendix II, November 26, 1990, represent an effort to establish basic appraisal standards applicable to all real estate related transactions involving Federal agencies. These standards were developed in consultation with the Federal Interagency Real Property Appraisal Committee (FIRPAC).

I. Guidance on Real Estate Appraisal Standards and Practices. Guidance, as outlined in OMB Bulletin No. 92-06, Attachment A, March 16, 1992, directs compliance with the following policies for Federal and federally assisted real estate programs:

(1) Federal agencies should establish criteria for, and identify real estate transactions requiring the use of, State-licensed or certified real estate appraisers.

(2) Appraisers licensed or certified in States having laws, policies, and procedures in compliance with Title XI of FIRREA are qualified to prepare and review real estate appraisal reports for Federal agency programs.

(3) Federal employees who choose to become State-licensed or certified real estate appraisers need only be licensed or certified in one State or Territory to perform real estate appraisal duties as Federal employees in all States and Territories.

(4) Agencies should prepare real estate appraisal and appraisal review reports in accordance with written and approved agency standards consistent with the USPAP Standards 1, 2 and 3, as developed by the Appraisal Standards Board of the Appraisal Foundation.

1.4 Responsibilities.

A. Assistant Director - Refuges and Wildlife. The Assistant Director has oversight responsibilities and the lead role for implementing the Service's appraisal program and is authorized to approve and promulgate a handbook for Service appraisers involved with the program. (See paragraph 1.6.)

B. Chief Appraiser. The Chief Appraiser located in the Division of Realty, is responsible for guiding the development of the Service's land appraisal program. This includes the implementation, evaluation, technical guidance, and final review of the Service's land appraisal program throughout the Service's jurisdiction. The Chief Appraiser's functions and responsibilities are outlined as follows:

(1) Renders special assistance and guidance to Regional Supervisory Appraisers (supervisory appraisers) and Regional Review Appraisers (review appraisers). Moreover, acts as an advisor to Regional Supervisors in Realty (Regional Realty Chiefs) concerning land appraisal matters.

(2) Provides guidelines for the training and development of staff appraisers and Regional training programs, promotes attendance at professional appraisal seminars, and promotes and monitors the use and application of computerized appraisal programs and services.

(3) Keeps abreast of, and informs Regional appraisers of new and revised appraisal procedures and methodology as developed in governmental and private agencies as well as current court decisions affecting real estate valuation and the appraisal profession.

(4) Conducts studies of land appraisal projects and formulates detailed plans for expediting the appraisal phase of the land acquisition program.

(5) Coordinates Service and State appraisal review policies in the federal aid programs, as necessary.

(6) As the Service's appraisal appellant authority, resolves disagreements among Regional management, reviewers, and/or appraisers. As such, resolves any disputes based on the facts and findings presented by each party concerned or through his/her own investigation.

(7) Supervises the conduct of annual inspections in each Region.

(8) Represents the Service in appraisal matters with other organizations within the Department of the Interior, other Federal agencies, and professional appraisal societies and organizations. In this regard, represents the Service as follows:

(a) Member of the Appraisal Standards Advisory Council (ASAC) of the Appraisal Foundation.

(b) Committee member of the Federal Interagency Real Property Appraisal Committee (FIRPAC).

C. Regional Review Appraiser. Each Regional office must have a Regional Review Appraiser (Reviewer) responsible for approving a reliable estimate of value upon which management depend. Regional Review Appraiser's specific responsibilities are detailed in 342 FW 2.4C.

D. Regional Supervisory Appraiser. Each Regional office must have a Regional Supervisory Appraiser responsible for administering the appraisal program in that Region. In addition to technical competence in appraisal practice, the employee must possess supervisory and administrative skills. Regional Supervisory Appraiser responsibilities are detailed as follows:

(1) Scheduling and management. The Supervisory Appraiser in the Regional office is responsible for establishing a Regional system of appraisal scheduling and workflow management to develop the greatest efficiency in quality production. He/she must:

(a) Coordinate all staff and contract appraisal work loads corresponding with the long term goals of the Realty program. Together with Realty Management, he/she provides staff and contract appraisers with the scope of appraisal problems; e.g., descriptions in before and after conditions; title; maps; outstanding rights; possible pollution problems; access to; etc.

(b) Monitor progress of staff and contract appraisals in production to assure that the appraiser has the necessary resources to complete the appraisal; that the appraisal problem is understood; and that sound appraisal techniques, approaches, and reporting procedures are followed. This may include access to environmental consulting specialists or other professionals properly versed in Federal and State environmental requirements and who are qualified to assess and measure the materials and/or methods appropriate for remediation or compliance.

(c) Respond to changes and new priorities in the work schedule.

(d) Recognize the need for and initiate action to secure the initial appraisal, second appraisals, reappraisals, and/or updated appraisals.

(e) Assume ultimate responsibility for having staff and contract reports available for review and subsequent use in a timely manner.

(f) When possible and as needed, make appraisals, usually of the more complex properties.

(2) Training. The Regional Supervisory Appraiser is responsible for developing the Regional appraisal training program.

(3) Contracting. The Regional Supervisory Appraiser will typically be designated as the Contracting Officer's Technical Representative (COTR) in Realty to monitor real property appraisal contracts in accordance with appraisal contract procedures.

(4) Compliance. The Regional Supervisory Appraiser is responsible for ensuring that appraisers comply with this chapter and all cited authorities. Additionally, it is his/her responsibility to keep the appraisal staff informed of all subsequent updates and/or changes in the manual dealing with real property and submit any recommended changes or improvements to the Chief Appraiser.

E. Staff Appraisers. The following staff appraisal responsibilities are identified and prescribed to support an appraisal management system that considers appraisal costs and output together with the goal of assuring objectivity in the appraisal product:

(1) Reports must conform to established and recognized professional appraisal practices and procedures.

(2) Reports generally must follow the sequence and adhere to the format presented in the "Uniform Appraisal Standards for Federal Land Acquisitions" (UAS) which are available in all Realty offices.

(3) Appraisal preparation, documentation, and reporting shall be in conformity with the current "Uniform Standards of Professional Appraisal Practice" (USPAP) which are available in all Realty offices.

(4) All Department of the Interior rules of conduct must be observed and the appraiser's performance shall always be in accordance with professional ethics.

1.5 Appraisal Requirements.

A. Appraisal Qualifications. Service appraisals are to be made by qualified, competent appraisers and reviewed and approved by qualified reviewers before the respective value estimates are used by the Service at large.

B. Appraisal Preparation. Service appraisals will be conducted and reports prepared in accordance with the guidelines set forth in this chapter, the generally accepted techniques and practices advocated by the appraisal profession, and in conformity with the UAS and the USPAP. (See Exhibit 5 - U.S. Fish and Wildlife Service Appraisal Report Specifications.) In developing a Service appraisal, the appraiser must follow specific guidelines to communicate each analysis, opinion, and conclusion of value. Specific items of policy applicable to the preparation of Service appraisals require that:

(1) The report must be prepared in a manner that is not misleading.

(2) The report must clearly and accurately disclose any extraordinary assumptions or limiting conditions that would affect the estimate of value.

(3) The report must identify and describe the real estate being appraised.

(4) The report must identify the real property interest being appraised.

(5) The report must state the purpose of the appraisal with a definition of the value to be estimated and the effective date of the report.

(6) The report must include sufficient information to enable the user and/or reviewer, unfamiliar with the property, to understand the appraisal problem and follow the appraiser's analyses, opinions, and conclusions through to a logical estimate of value.

(7) The report must include sufficient information to enable the user and/or reviewer, unfamiliar with the property, to geographically and documentarily locate the appraised property and related market data with only a minimum of difficulty.

(8) A written appraisal report will always be used to communicate value estimates.

(9) The length and detail of an appraisal report should depend on the scope of the appraisal problem.

(10) The report must be typewritten, dated, and signed by the appraiser(s) making the appraisal before submittal to the review appraiser. Under rare circumstances, appraisals may be submitted in draft. In order to respond to an unusual emergency situation, the reviewer may review the draft of an appraisal report as long as it is a complete document and dated and signed by the appraiser.

(11) The report must conform to governing legal premises.

(12) The report must reflect current market value and/or be updated accordingly.

C. Updating Appraisals. When appraisals have been made significantly in advance of beginning negotiations, the appraisals must be updated to reflect current market value.

(1) Consideration must be given to updating any appraisal over 6 months old as well as any appraisal that may be outdated due to extraordinary market conditions.

(2) An updating may be performed without rewriting the whole report. It is possible that long delays in negotiations, radical changes in the marketplace, or a change in highest and best use of the property will require a full reappraisal. This is a matter of appraisal judgment.

(3) When an updating is made, by the same appraiser, or another appraiser as the situation warrants, its function is to cover in narrative the changes that have taken place in the market. Any changes in the physical property must also be reflected.

(4) The updating is a supplemental document to the original appraisal report. If the changes are minor, it may be presented in a form similar to a memorandum of value. If the changes are significant it may be presented as an appendage to the original document in the following format:

(a) Title Page.

(b) Summary Page.

(c) Statement of Limiting Conditions.

(d) Statement of Co-authorship.

(e) Date of Inspection.

(f) Narrative description of changes that have taken place in the interim. A paragraph or statement regarding other elements of value that have or have not changed.

(g) Analyses and conclusions based on trends and recent sales. Individual ownership analyses and conclusions are needed.

(h) Certificate Statement.

(i) Addenda Additions.

(j) Reviewer's Signature and Date of Review.

(k) Reviewer's Additional Comments. If necessary.

(5) For trial purposes, in order for the testimony to be accorded maximum weight, it is important that the updated appraisal reflect the value as of the date of taking and the precise estate described in the complaint and any amendment thereof.

(6) Updated and/or supplemented appraisals must be reviewed before their estimates are used for Service purposes.

D. Appraisal Objectivity.

(1) The appraisal program must maintain high standards of integrity and objectivity so that management may confidently rely on receiving recommendations that are consistently fair to the public and Government alike.

(2) Service appraisers must have the maturity and independence to use factual real estate data and make analytical judgements without distortion by either personal feelings and prejudices or others' biases. They should be provided the latitude to form their own opinions, assisted, if need be, by a supervisor other than the reviewer, and given the opportunity to present these opinions in their own appraisal report.

(3) In order to achieve this objective, it is essential to maintain technical independence between the appraisal, appraisal review, and utilization functions. The appraisal organization must be structured so that no reviewer or user of the report guides or influences the appraiser in arriving at his/her conclusions. (See paragraph 1.7.)

E. Appraisal Security.

(1) Appraisal reports are confidential in nature and are produced for the benefit of the Service. It is unethical for the appraiser to divulge his/her findings and opinions to anyone except as authorized. Appraisals made by or for the Service are considered confidential and general policy prohibits public release of appraisal data.

(2) Examination of parts of an appraisal report by a landowner and/or indirect disclosure of some or all of the report content during the negotiation period may sometimes expedite the acquisition. In these instances, the negotiator may provide portions of the report such as sales sheets and final allocation of the value estimates, but should never provide a complete copy of the report. Release of this information to a landowner is at the discretion of the Regional Chief of Realty.

F. Securing Second Appraisals.

(1) A second appraisal will be prepared by a qualified contract appraiser or an appraiser from a different Region under the following circumstances.

(a) For unique, controversial, complex, and relatively high valued property.

(b) For judicial proceedings unless otherwise instructed by the Department of Justice after they have initiated actions.

(c) When an individual property value estimate exceeds $750,000.

(d) When the estimated value of the larger parcel exceeds $750,000 in the before condition; i.e., in those instances when a full before and after appraisal is deemed necessary and appropriate.

(2) This requirement may be waived by the Chief Appraiser. In all the above situations, second appraisals will be required unless the Regional Review Appraiser or Regional Supervisory Appraiser submits adequate justification to the contrary to the Chief Appraiser for approval. Requests for waiver should be coordinated through the Regional reviewing authority before submittal.

(3) An integral part of the Region's annual work planning should include an identification of ownerships requiring second appraisals and whether staff and/or contractors will be used. The supervisory and review appraisers should have considerable input in scheduling the appraisal workload and finalizing the Annual Work Plan. Early communication with the Chief Appraiser on recommended waivers can also keep program delays to a minimum. However, even these precautions cannot always contravene the ultimate necessity of obtaining another appraisal.

G. Appraisals Contracted by Property Owners. The Service will consider property owner's appraisals provided they meet Service standards. Contracted appraisals must be completed by qualified appraisers and appraisals must be in full compliance with the UAS and the USPAP. Additionally the appraisal must comply with the policy as outlined under Appraiser Qualifications and Appraisal Preparation in 1.5 A and B above. Appraisals prepared for property owners for Service use will be subject to the review policy as outlined in 342 FW 2, Appraisal Review. The full cost of such appraisals will be borne by the property owner, excluding special circumstances involving nonprofit organizations.

H. Contracts for Judicial Proceedings. If negotiations based on staff appraisals have proven unsuccessful, it is Service policy to contract for private appraisals prior to condemnation requests.

I. Hazardous Materials Contamination. An appraiser is a trained observer of real estate, but the typical appraiser is definitely not qualified to recognize, detect, or measure a contamination problem. If the appraiser becomes aware of contamination through disclosure by the owner or known facts prior to the appraisal assignment or through the normal observation and research conducted during an appraisal assignment, the "competency provision" of the USPAP outlines the responsibilities of the appraiser.

(1) The appraiser should rely on the findings and opinions of qualified specialists in environmental remediation and compliance cost estimation. The Service will usually request an appraiser to appraise real estate that is or may be contaminated under the hypothetical condition that the real estate is free of contamination. An appraiser may appraise interests in real estate that is or is believed to be contaminated based on the hypothetical condition that the real estate is free of contamination when the resulting appraisal is not misleading, the Service has been advised of the limitation, and the Ethics Provision of the USPAP is satisfied. To avoid confusion, the Ethics Provision requires a clear and accurate disclosure of the factual contamination problem as well as a statement of the validity of and useful purpose for the extraordinary assumption that the real estate is not affected.

(2) As communicated by the Appraisal Standards Board of the Appraisal Foundation, to determine the presence or absence of a contamination problem, an appraiser should rely on the findings and opinions of environmental consulting specialists qualified to inspect and test for toxic or hazardous substances. An appraiser that professes or implies such expertise but lacks the requisite qualifications is misleading the client, users of the appraisal report and the public. Such misleading conduct is prohibited by the Ethics Provision of the USPAP.

(3) When qualified specialists, either sub-contracted, approved and/or provided by the Service, have documented the existence of contamination and estimated the costs of remediation or compliance, an appraiser is in a position to estimate "as is" value and should be aware of, understand, and correctly employ those recognized methods and techniques necessary to produce a credible appraisal. The value of an interest in impacted real estate may not be measurable by simply deducting the remediation or compliance cost estimate from the estimated value as if unaffected. Other factors may influence value, including any impact on marketability (stigma) and the possibility of change in highest and best use.

(4) With or without findings from a qualified specialist, an appraiser informed that an actual or suspected contamination problem is involved must promptly disclose his or her lack of expertise to detect and measure toxic or hazardous substances and take the additional steps required by the Competency Provision of the USPAP.

J. Metric Conversion. The Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418, Section 5164), as promulgated in Part 758 of the Departmental Manual, states that it is the policy of the United States " . . . to require that each Federal agency, by a date certain and to the extent economically feasible by the end of the fiscal year 1992, use the metric system of measurement in its procurements, grants, and other business-related activities, except to the extent that such use is impractical or is likely to cause significant inefficiencies . . ." (Emphasis added). (See Exhibit 1 - Metric Conversion Table) (Reference 860 FW 1.)

1.6 Appraisal Handbook. The Appraisal Handbook provides in one document the current policies, standards, techniques, and procedures regarding the preparation of appraisal reports by Service and non-Service appraisal professionals. The handbook:

A. Is designed to insure Service-wide uniformity in all appraisal activities.

B. Includes this chapter (342 FW 1)identified as Chapter 1 - Policies and Procedures, together with subsequent chapters dealing with fact gathering, market analysis, and the ultimate preparation and documentation of appraisals in support of reliable estimates of value.

C. Outlines the processes of preparing appraisal reports, giving court testimony, and contracting for appraisal services.

D. Is not meant to be a substitute for accepted textbooks on real estate appraisal, but to complement such and serve as a procedural guide and requirements handbook.

E. While the handbook is designed to encourage uniform approaches, procedures, and techniques used in the preparation of market value estimates, it is emphasized that the scope of the appraisal assignment should determine the complexity of the appraisal investigation, supporting data, and final conclusion of value.

1.7 Organizational Requirements. Care should be taken to avoid direct line authority from the reviewer to appraisal and/or realty management personnel or vice versa. This would jeopardize the objectivity of the respective appraisal, appraisal review, and utilization functions in Realty. To assure technical independence between appraiser, appraisal reviewers, and utilizers of reports, certain organizational requirements are essential:

A. Supervision and Evaluation of Appraisers and Realty Management Personnel. The respective Regional Supervisory Appraiser (supervisory appraiser) or Realty Officer in a field station (realty officer) is directly responsible for supervising and evaluating the performance of appraisal and realty management personnel. A Regional Review Appraiser (Regional reviewer or reviewer) must never supervise or evaluate the performance of staff appraisal or realty management personnel. Under no circumstances should there be direct line authority from the Regional Review Appraiser to appraisal and realty management personnel or vice versa. This must be handled by the respective Regional Chief of Realty.

B. Supervision and Evaluation of Reviewer. The Regional Reviewer shall not be supervised nor have his/her performance evaluated by anyone who prepares appraisals or primarily functions as a negotiator. The Regional Chief of Realty should be directly responsible for supervision and evaluation of Review Appraisers.

C. Administrative and Contracting Functions. The Regional Supervisory Appraiser shall be responsible for administrative and contracting functions relative to the appraisal program. The reviewer shall only participate in administrative and contracting functions in a limited capacity. A reviewer shall act only in an advisory capacity to senior staff realty officers or above on matters regarding realty management, administration and appraisal contracting.

D. Participation and Involvement in Report Preparation. The Regional Supervisory Appraiser, senior staff appraisers, and/or realty management staff may provide appropriate recommendations, proposals, and technical guidance in the preparation of appraisals - provided the guidance is general in nature and the final analysis and conclusion is that of the appraiser. To assure objectivity in the appraisal product:

(1) The Regional Reviewer is not to participate with appraisers or be involved with appraisal reports prior to completion and submittal of the finished and final document for review. Functions that a reviewer should avoid are:

(a) Recommendations relating to approaches, highest and best use premise, etc.

(b) Participation in field work with appraiser.

(c) Reviewing reports in rough draft, except as outlined in 1.4B(10).

(d) Establishing appraisal procedures for the appraisal staff and/or determining the scope of an appraisal assignment.

(2) Any recommendations, proposals, guidance, or instructions from the reviewer to the appraisal staff should be directed to the Regional Supervisory Appraiser and/or Regional Chief of Realty. It is the responsibility of the supervisory appraiser to convey relevant information.

E. Physical Separation of Work Space. The reviewer should not be located in close proximity or adjacent to the appraisal staff in the realty office. In view of the fact that work areas may not allow for complete physical separation of the review appraiser from the appraisal staff, at a minimum, the review appraiser shall not be situated in an adjoining office or work station. Such close proximity can easily diminish the integrity and objectivity of an appraisal.

1.8 Management Records, Reports and Inspections.

A. Records. The Washington Office and/or Regional Office occasionally require information concerning appraisal activities for management and/or administrative purposes. Therefore, each Region or appraiser should maintain the following respective records. Such records may be submitted in formats contained in Exhibits 2 and 3 or reasonable facsimile:

(1) Regional Office Appraisal Log. A log of appraisal reports shall be maintained in each Regional office (or operating sub-office thereof) on a fiscal year basis. (See Exhibit 2 - Sample Regional Office Appraisal Logs.) This log will be used to record appraisal reports prepared by either staff or contract appraisers. At a minimum, the following data must be logged for appraisal record purposes:

(a) Project.

(b) State.

(c) County, Parish and/or School District.

(d) Name of appraiser.

(e) Owner's name(s).

(f) Tract number(s).

(g) Acreage(s).

(h) Appraised value(s).

(i) Effective date of appraisal.

(j) Review date.

(k) Other data such as completion date, contract price, purpose and/or function of appraisal, per acre value, etc., may also be included if desired.

(2) Individual Appraisal Log. From time to time appraisers need a chronological list of their appraisal assignments. (See Exhibit 3 - Sample Individual Appraisal Log.) Such a list provides the background for summarizing professional experience. It is desirable that each appraiser maintain a log recording the following:

(a) Project.

(b) State.

(c) County, Parrish and/or School District.

(d) Name of appraiser.

(e) Owner's name(s).

(f) Tract number(s).

(g) Acreage(s).

(h) Appraised value(s).

(i) Effective date of appraisal.

(j) Date(s) of field work.

(k) If the appraisal involved a before and after valuation, data regarding both appraisals should be identified. Most professional appraisal organizations require a complete log of appraisal assignments when applying for experience credit.

(3) Regional Office appraisal file(s). Each Regional Office will develop a system and ensure adequate space is available for the retention of all Service appraisals. They serve as an invaluable tool to appraisers during the appraisal process in a project area and as an historical and factual file for updating Revenue Sharing appraisals. Service appraisal reports are retained in one or more of the following files:

(a) Permanent Regional file. It is imperative that all Service appraisal (rejected, accepted and/or approved) reports completed for acquisition purposes and/or use by the Realty Management Branch, accompanied by the review, be physically retained in a permanent Regional Office file in juxtaposition with the appraisal and/or realty management staff.

(b) Appraiser's file. One copy of each appraisal report prepared by an appraiser will be maintained by that appraiser. This copy, along with any records, must be retained for a period of at least five (5) years after preparation or at least two (2) years after final disposition of any judicial proceedings in which testimony was given, whichever periods expires last.

(c) Realty management file. One copy of all appraisals completed for acquisition purposes and/or use by the Realty Management Branch, with the review, must be maintained in the Realty Management file until such time as the file is closed. However, disposal of Realty Management copies upon closure does not negate the requirement to retain permanent Regional file copies of all appraisals in juxtaposition to the Appraisal Branch. (See 1.8A(3)(a) above.) The Realty Management copy may also serve as the reviewer's copy.

(d) Revenue Sharing file. All appraisals for Revenue Sharing purposes will be physically maintained in a permanent Regional file. Revenue Sharing appraisals will be maintained for a period of at least five (5) years after preparation. Since subsequent appraisals may be updates of the original Revenue Sharing appraisal, the original report that established the basis for ensuing updates will be retained until such time the report is invalidated. These appraisals serve as historical files useful in subsequent updates. Therefore, it is imperative that adequate data on each appraisal project be retained in the permanent file and sufficiently documented.

B. Reports.

(1) Anytime the Washington Office requests an appraisal, it is mandatory that the original be sent. Subsequently, a copy will be maintained in the permanent Regional file by the Regional office until such time the Washington Office returns the original. All original appraisals submitted to the Washington Office will be returned to the respective Regional Office three (3) years after the effective date of the report for appropriate disposition by the Region.

(2) Demonstration reports. Service appraisal reports may be used by Service appraisers as demonstration appraisals to meet the qualification requirements of applicants for professional designations and/or State certification. A copy of each appraisal may be retained by the appraiser for demonstration purposes upon case closure.

(3) Appraisal reports to Washington Office for general purposes. From time to time the Washington Office may request certain reports or a sample of reports for its files, library, or inspection purposes. As stated, it is mandatory that original appraisal reports be sent, accompanied by the review.

(4) Appraisal reports to Washington Office for the Migratory Bird Conservation Commission. The Washington Office will be furnished the original of each appraisal prepared for submittal to the Migratory Bird Conservation Commission (MBCC). The original appraisal should be accompanied by the review and the Individual Tract Appraisal Summary Form.

(5) Appraisal reports to Washington Office for condemnation action. The Washington Office will be furnished one original of each appraisal prepared in support of a condemnation action accompanied by the review.

(6) Appraisal reports to the Department of Justice for condemnation action. The Region will furnish the Department of Justice with two copies of an appraisal as a part of the package signed by the Regional Field Solicitor. Review comments are to accompany each copy of the appraisal.

(7) Appraisal reports to U. S. Attorney. The Region should furnish the U. S. Attorney handling a condemnation action one copy of an appraisal as a part of the package signed by the Regional Field Solicitor. Review comments are to accompany the copy of the appraisal.

C. Inspections. The Chief Appraiser supervises the conduct of annual appraisal inspections in each Region:

(1) All aspects of the appraisal program will be inspected at that time.

(2) Appraisal problems and methods of solution will be discussed with appropriate Regional office staff to achieve meaningful improvement and understanding.

(3) A sampling of appraisal reports will be desk and/or field reviewed to critique work quality and to ensure compliance with Service standards and procedures. Spot field checks of representative projects may be made to verify the accuracy, soundness, and consistency of the market value estimates in appraisal reports.

1.9 Appraiser Qualifications.

A. Training. Appraiser training requirements are covered in 232 FW 5.

B. Qualifications. Each appraiser should maintain a current Appraiser's Qualifications form. (See Exhibit 4 - Sample Appraiser Qualification Form.) The form, at a minimum, should contain the following information:

(1) Educational Background and Training. List schools, appraisal training courses, and seminars attended. Also list degrees and year received.

(2) Professional Affiliation and Experience. List number of years of appraisal experience, types of real property appraised, States in which properties appraised are located, and court experience, if any, by judicial district.

C. Professionalism. To provide greater confidence in the public's opinion of Service appraisals, all Service appraisers are encouraged to join, attain accreditation, and actively participate in professional appraisal societies. Additionally, all appraisers are encouraged to become State-licensed or State-certified in at least one state within their respective Region.

D. Contract Appraisers. In accordance with regulations implementing Title XI of FIRREA, all contract appraisers providing appraisal services will be State-licensed or State-certified according to the laws of the State in which they perform the appraisal services.

1.10 Definitions. The following general appraisal terms are defined and discussed here for introductory purposes. Other appraisal terms are defined and developed within their respective sections of the Appraisal Handbook.

A. Appraisal/Appraisal Report.

(1) The Service has adopted for its purposes the definition of an appraisal as - A written statement independently and impartially prepared by a qualified appraiser setting forth an opinion of defined value of an adequately described property as of a specific date, supported by the presentation and analysis of relevant market information. Inherent in this definition is that the appraisal must be in full compliance with the UAS and the USPAP.

(2) Appraisal as defined by the USPAP is: (noun) the act or process of estimating value; an estimate of value. (adjective) of or pertaining to appraising and related functions, e.g., appraisal practice, appraisal services.

B. Appraisal Practice. The work or services performed by appraisers, defined by three terms in the USPAP: appraisal, review, and consulting.

C. Appraised Value. The estimate of a defined value as supported and prepared by a competent and qualified appraiser based upon an interpretation of market information as of a stated date. The value most commonly sought is market value, although there are other types of value depending on the use for which the appraisal is required.

D. Appraiser. An individual who is qualified under applicable requirements to prepare or review appraisals in conjunction with real estate related transactions. One who possesses the necessary qualifications, through education and experience, to execute or direct the appraisal of real or personal property.

E. Cost Approach. Approach through which an appraiser derives a value indication of the fee simple interest in a property by estimating the current cost to construct a reproduction of (or replacement for) the existing structure, deducting for all evidence of accrued depreciation from the "cost new" of the reproduction (or replacement) structure, and adding the estimated land value plus an entrepreneurial profit. Adjustments may be made to the indicated fee simple value of the property interest being appraised.

F. Direct Cost. Expenditures for the labor and materials necessary to construct a new improvement.

G. Entrepreneurial Profit. A market-derived figure that represents the amount an entrepreneur expects to receive in addition to costs; the difference between total cost and market value.

H. Exposure Time. Precedes the effective date of the appraisal; always presumed to occur prior to the effective date and substantiated by related facts in the appraisal process; an integral part of the analyses conducted during the appraisal process; reasonable exposure time is different for different types of real estate and under various market conditions.

I. Fair Market Value. This is an antiquated appraisal term that should be understood but not used by Service appraisers. It is a nonsense "legal" term synonymous with market value. The adjective "fair" adds nothing and implies there is such a thing as unfair value. Market value is the preferred term.

J. Fair Value. An accountant's term defined in several authoritative accounting pronouncements; the amount reasonably expected in a current sale between a willing buyer and a willing seller, other than in a forced or liquidation sale. It may or may not be synonymous with market value. Accountants consider it to be a net realizable value. Fair value is a term to be understood but not used by Service appraisers.

K. Highest and Best Use. The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.

L. Income Capitalization Approach. Approach through which an appraiser derives a value indication for income-producing property by converting anticipated benefits; i.e., cash flows and reversions, into property value. This conversion can be accomplished in two ways: One year's income expectancy or an annual average of several years' income expectancies may be capitalized at a market-derived capitalization rate or a capitalization rate that reflects a specified income pattern, return on investment, and change in the value of the investment; secondly, the annual cash flows may be discounted for the holding period and the reversion at a specified yield rate.

M. Indirect Cost. In construction, expenditures for items other than labor and materials; e.g., administrative costs; professional fees; financing costs and interest paid on permanent and construction loans; taxes and builder's or developer's all-risk insurance during construction; and marketing, sales, and lease-up costs incurred in achieving occupancy or sale.

N. Larger Parcel. In condemnation, that portion of a property that has unity of ownership, contiguity, and unity of use, the three conditions that establish the larger parcel for the consideration of severance damage in most States.

O. Market Value. The amount in cash, or on terms reasonably equivalent to cash, for which in all probability the property would be sold by a knowledgeable owner willing but not obligated to sell to a knowledgeable purchaser who desired but is not obligated to buy. In ascertaining that figure, consideration should be given to all matters that might be brought forward and reasonably be given substantial weight in bargaining by persons of ordinary prudence, but no consideration should be given to matters not affecting market value. Implicit in this definition are the USPAP conditions:

(1) Buyer and seller are typically motivated;

(2) Both parties are well informed or well advised, and acting in what they consider their best interest;

(3) A reasonable time is allowed for exposure in the open market;

(4) Payment is made in terms of cash in United States dollars on in terms of financial arrangements comparable thereto; and

(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

P. Marketing Time. Real estate consultants term; occurs after the effective date of appraisal; reasonable estimate of the amount of time at the estimated market value level during the period immediately after the effective date of an appraisal; based on current supply/demand conditions in the market contrasted with information gathered through the sales verification process and may be expressed as a range in time; not usually applicable to Service appraisals.

Q. Professionally Designated Real Estate Appraiser. An individual who is regularly engaged in the business of providing real estate valuation services for a fee or salary, and who is deemed qualified by a nationally recognized real estate appraisal organization on the basis of extensive practical appraisal experience, including the writing of real estate valuation reports, as well as the passing of written examinations concerning valuation practice and theory, and who by virtue of membership in such organizations is required to subscribe and adhere to certain standards of professional practice and ethics as such organizations prescribe.

R. Proposed Acquisition. Synonymous with (Government) "take" or "the taking"; i.e., that part of an ownership that the Government is acquiring.

S. Public Interest Value. Hypothetical value placed on property to reflect public interest in the resource; i.e., wildlife fauna and flora, scenery, geology, etc. Such values may or may not be synonymous with market value. Service appraisals must conform to established and recognized professional appraisal practices and procedures whereby all lands, and interests therein, will be appraised at market value and resource (public interest) values considered and taken into account only to the extent that they are recognized in the market.

T. Replacement Cost. The cost of construction, at current prices, of a building having utility equivalent to the building being appraised but built with modern materials and according to current standards, design, and layout.

U. Reproduction Cost. The cost of construction, at current prices, of an exact duplicate, or replica, using the same materials, construction standards, design, layout, and quality of workmanship, and embodying all of the deficiencies, superadequacies, and obsolescence of the subject building.

V. Review Appraiser. A qualified appraiser or technically qualified individual designated to independently examine and evaluate an appraisal report for the purpose of recommending, preparing, or approving an estimate of value.

W. Sales Comparison Approach. Approach through which an appraiser derives a value indication by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison and making adjustments, based on the elements of comparison, to the sale prices of the comparables.

X. State Certified Appraiser. Any individual who has satisfied the requirements for State certification or equivalent requirements in a State or Territory whose criteria for a real estate appraiser currently meets the minimum criteria for certification issued by the Appraiser Qualification Board of the Appraisal Foundation.

Y. State Licensed Appraiser. An individual who has satisfied the requirements for State licensing or equivalent requirements in a State or territory.