Transcript 2010 Condemnation Part 2 - Appraisal Institute

The Valuation of Billboards
Scott Mac Williams
USPAP Considerations
Competency
Competency requires:
1.
The ability to property identify the problem to be addressed
2.
The knowledge and experience to complete the assignment
competently
3.
Recognition of, and compliance with, laws and regulations that
apply to the appraiser or to the assignment.
Lack of Competency
If the assignment cannot be completed competently the appraiser must
decline or withdraw from the assignment
USPAP Considerations
Scope of Work Rule
For each appraisal, an appraiser must
 Indentify the problem to be solved
 Determine and perform the scope of work
necessary to develop credible assignment results
The expectations of the parties who are regular
intended users
 What an appraisers peer actions would be in
performing the same or similar assignment


Disclose the scope of work in the report
USPAP Considerations
Standard 1 Real Property Appraisal Development
Rule 1-4 In developing a real property appraisal, an appraiser must collect, verify, and analyze all
information necessary for a credible assignment result.
(a)
When a Sale Comparison Approach is necessary for a credible assignment results, an appraiser
must analyze such comparable sales data as are available to indicate a value conclusion
(a)
When a Cost Approach is necessary for a credible result an appraiser must:
(i)
(ii)
(iii)
When an Income approach is necessary for a credible assignment results, an appraiser must:
(c)
(i)
(ii)
(iii)
(iv)
(a)
Develop an opinion of site value by an appropriate technique
Analyze comparable cost data available to estimate the cost new
Analyze such comparable data as are available to estimate the difference
Analyze such comparable rental data as are available and/or potential earning capacity of the property
to estimate the gross income potential of the property
Analyze such comparable operating expense data as are available to estimate the operating expenses
of the property.
Analyze such comparable data as are available to estimate the capitalization and or rates of discount;
Base projections of future rent and/or income potential and expenses on reasonable clear and
appropriate evidence
When developing an opinion of the value of a leased fee estate or leasehold estate, an
appraiser must analyze the effect on value, if any, of the terms and conditions of the lease (s)
Problem to be solved
What is being Valued?

Sign Structure

Sign Site

Leased Fee Interest

An ownership held by a landlord with the rights of use and occupancy conveyed by lease to others. The
rights of the lessor (the leased fee owner) and the lessee are specified b the contract terms within the
lease

Leasehold Interest
The interest held by the lessee (the tenant or the renter) through a lease transferring the right of use and
occupancy for a stated term under certain conditions.

Leasehold Value

Difference between contract rent paid to the owner and market rent at the time of the appraisal

Leasehold Value Method

Leasehold interests are typically valued usi9ng the income capitalization approach. The income to the
position is the difference between the market rent and contract rent. The capitalization

Location

Location is of paramount importance

Valuation should include the value of the location
Recognition of, and compliance with, laws and regulations
that apply to the appraiser or to the assignment.
1.
2.
Just Compensation is to compensate only for the value of
the property taken.
Just Compensation does not include compensation for loss
of business profits, .
Accepted Valuation Methods

Nichols on Eminent Domain

23.04[4] As a general proposition, it can be said that
any professionally accepted appraisal methodology
or technique tat is adequately supported will be
admissible
Cost Approach 23.04 [4] 23-56 to 23-59
 Income Approach 23.04 [4] 23-59 to 23-62
 Market Approach; Gross Rent Multiplier Method 23.04
[4] 23-62 to 23-64

Accepted Valuation Methods Continued

The Valuation of Billboards (Appraisal Institute)
by Dwain R. Stoops MAI and Marvin L. Wolverton PhD, MAI



Chapter 4 Highest and Best Use and the Cost Approach Cost
Approach ;
Chapter 5 Sales Comparison Approach 126-139
Income Capitalization Approach 142-157

Discusses the use of two multiplier applications for valuing
interests in sites and structures separate from the business
operation- the potential gross income multiplier (PGIM) and
the effective gross income multiplier (EGIM)
Questions Regarding Compensation/Methodology

Compensability is a question of Law
 Change 2010 Jurisdictional Exception
 An assignment condition established by applicable law or regulation which
precludes an appraiser from complying with a part of USPAP.
 In an assignment involving a jurisdictional exception, an appraiser must
 Identify the law or regulation that precludes compliance with USPAP
 Clearly and conspicuously disclose in the report the part of USPAP that
is voided by that law or regulation; and
 Cite in the report the law or regulation requiring this exception to
USPAP compliance.
 Law includes constitutions, legislative and court made law, and administrative rules
and ordinances. Regulations include rules or orders having legal force, issued by
an administrative agency. Instructions from a client or attorney do not establish a
jurisdicational exception
 Consider the Use of an Extraordinary Assumption USPAP defines an
Extraordinary Assumption as: “an assumption, directly related to a specific assignment,
which, if found to be false, could alter the appraisers opinions or conclusions.”
 Get Supported Legal Instructions for any questionable damages or employed
methodologies
Conclusions





Do work that you are competent to complete
You the appraiser are ultimately responsible for
the scope of work decisions.
Instructions from a client or attorney do not
establish jurisdictional exception
Get Supported Legal Instructions for any
questionable damages
Use Extraordinary Assumptions where
applicable