(217) NAR Comments on Uniform Relocation Act by CharlieThhomas


									                                                                                     REGULATORY & INDUSTRY
                                                                                      RELATIONS DEPARTMENT

                                                                                              Fax 202.383.7568

                                                                                             Joseph M. Ventrone
                                                                                              Managing Director

February 17, 2004

U.S. Department of Transportation
Dockets Management Facility
Room PL-401
400 Seventh Street, SW
Washington DC 20590


Dear Sir/Madame:

The NATIONAL ASSOCIATION OF REALTORS® (NAR), which represents over 972,000
real estate practitioners nationwide, of which 30,000 are appraiser members, submits the
following comments on the Notice of Proposed Rulemaking (NPRM) governing the Uniform
Relocation Assistance and Real Property Acquisition for Federal and Federally-Assisted
Programs [Docket No. FHWA-2003-14747, December 17, 2003]. The Uniform Relocation
Assistance and Real Property and Real Property Acquisition Policies Act govern the land
acquisition and displacement activities of all Federal Agencies. The Uniform Act also establishes
appraisal and appraisal review requirements for Federal and federally assisted programs.

NAR supports federal efforts to simplify and streamline transactions that involve real property
transfers so that the financial and economic impact on businesses and homeowners is minimized.
However, because our members' actively participate in all facets of the real estate industry, we
also have an interest in ensuring that the procedures for acquiring real property by the federal
government are conducted in such a manner as to guarantee the property rights of the owners
under the 5th Amendment, and that property owners are treated equitably during the relocation

While this NPRM describes the procedural issues associated with Federal Government
acquisition of real property, it does not address the issue of ensuring the seller is indeed a
"willing seller" of the property. Nor does the NPRM address the degree to which the federal
government may exert pressure on property owners, either deliberately or not, to sell the
property. While this sensitive topic may be beyond the scope of the NPRM, it is critical that all
federal agencies are aware of the influence they have in this area, and conduct these acquisition
procedures accordingly.

The following are NAR’s comments on pertinent Sections of the NPRM:

REALTOR® is a registered collective membership mark which may be used only by
real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS
and subscribe to its strict Code of Ethics.
Subpart B – Real Property Acquisition

The NPRM proposes to replace the term “fair market value” with “market value” to better reflect
current appraisal terminology. NAR concurs with this change and assumes that the definition
will remain the same.

Section 24.102 Basic acquisition policies, (c) Appraisal waiver thereof, and invitation to

The Uniform Act provides that an appraisal may be waived in cases where the owner is donating
the property and in cases involving the acquisition of property with a low market value. The
NPRM proposes to raise the appraisal waiver threshold from $2,500 to $10,000. In addition, you
will allow a Federal Agency to raise the threshold up to a maximum of $25,000, provided that
the Agency acquiring the real property offers the property owner the option of having an
appraisal performed.

NAR supports the waiver being applied to property that is donated, but the second set of criteria
is more problematic. The NPRM indicates that the determination that the acquisition will be
uncomplicated and the market value is estimated to be less than $10,000 is to be made by
someone with enough understanding of appraisal principles to be qualified to make such a
determination. As we interpret it, it does not matter whether a waiver valuation is done by a state
licensed or state certified appraiser or a non-appraiser.

Although the Federal Highway Administration (FHWA) is an agency, and can adopt rules and
regulations, which may come under the Jurisdictional Exception Rule of the Uniform Standards
of Professional Appraisal Practice (USPAP), this particular section of the NPRM creates more
problems in its attempt to simplify and expedite the process.

First, property owners may be deprived of fair compensation if the agency erroneously
determines the estimate of value is below the specified threshold. Secondly, individuals qualified
to provide such estimates of value are most likely appraisers, licensed and certified, and unlikely
or unwilling to provide a ‘seat of their pants’ opinion of value. It is a violation of standards likely
imposed upon them by their state, a violation of the code of ethics of most national appraisal
organizations and contrary to the standard of work and service expected of licensed

Third, although the Federal Highway Administration makes an attempt to relate their
requirements and procedure to the Jurisdictional Exception Rule, many state regulatory boards
may have a different view of the obligations imposed on appraisers by their state law and the
USPAP. As such, some licensed and certified appraisers may not be legally able to provide the
‘waiver valuation’ service described.

Finally, the Federal Highway Administration’s assumption that complexity is related to value is
erroneous. Many high value properties can be appraised with a minimum of effort. However, it
is not uncommon for a low value property to demand a lengthy and time-consuming appraisal. In

addition, what may appear to be a low value property may, after research, study and analysis,
have a value in excess of the arbitrary threshold established by the Federal Highway

Section 24.102 Basic acquisition policies, (f) Basic negotiation procedures.

The first sentence of this provision states “ The Agency shall make reasonable efforts to contact
the owner or owner’s representative and discuss its offer to purchase the property, including the
basis for the offer of just compensation and explain its acquisition policies and procedures,
including its payment of incidental expenses in accordance with 24.106.” This provision should
be changed to read, " The Agency shall make all reasonable efforts..." This change would place
the onus on the agency to exhaust all alternatives to ensure face-to-face contact is made with the
owner to explain the offer and begin the negotiation process. Such a meeting will allow the
owner to put a "face to an agency" during the negotiation process, instead of just a name on a
letter or voice over the phone.

In the explanation of intent, the Federal Highway Administration indicates that if the owner
expresses intent to provide an appraisal report, Agencies are encouraged to provide the owner
and/or his/her appraiser a copy of the Agency appraisal requirements and inform them that their
appraisal should be based on those requirements.

NAR believes that this is a reasonable requirement, however, the Federal Highway
Administration should recognize that all licensed and certified appraisers are required to adhere
to their state law, which most likely mandates compliance with the USPAP. Although the
Jurisdictional Exception Rule may be invoked, this is likely to complicate matters unnecessarily.

The Federal Government, taxpayers and property owners should be assured that the appraisal and
appraisal report comply with certain minimum standards. NAR would recommend that you use
Standards 1, 2 and 3 of USPAP, which are already in place rather than re-inventing the wheel.
Also, NAR believes that it is sensible for the Federal Highway Administration to adopt
Supplemental Standards for appraisal reports obtained on their behalf or submitted to them for
consideration by property owners.

Section 24.102 Basic acquisition policies, (h) Coercive action.

This section encourages that, to the extent possible, the Agency ensures the seller is a “willing”
seller, and that no coercive action has been taken on the part of the Agency to force the owner to
sell the property. NAR would recommend that this provision be changed to "...or take any other
coercive action, including regulatory action on the property in question or adjacent and
contiguous properties, in order to induce an agreement...” This provision gets to the heart of the
issue of coercion on the part of the Federal Government to obtain property. The Federal
Government has the ability to enact regulatory restrictions on the owner's property or
neighboring property that could diminish the property's value, thereby placing pressure on the
owner to sell. The language change, as suggested, would prohibit Federal Agencies from
engaging in superfluous regulatory activity that could impose pressure on the seller.

Section 24.102 Basic acquisition policies, (i) Administrative settlement.

This section provides guidance on administrative settlement as an alternative to judicial
resolution of a difference of opinion on the value of a property, in order to avoid unnecessary
litigation and congestion in the courts. All relevant facts and circumstances should be
considered by an Agency official delegated this authority. Appraisers, including review
appraisers, must not be pressured to adjust their estimate of value for the purpose of justifying
such settlements. Such action would invalidate the appraisal process.

NAR applauds the Federal Highway Administration for recognizing the importance of appraiser
independence and including a section specifically prohibiting pressure on appraisers or

Section 24.102 Basic acquisition policies, (l) Inverse condemnation.

This section addresses the issue of inverse condemnations in the context of Federal Government
acquisitions. The provision on inverse condemnation, another term for regulatory takings, needs
additional clarification and elaboration to be useful in the context of this proposed revision.
Inverse condemnation occurs when a government entity deprives an owner use of the property,
without just compensation. It is the right of the owner under the Fifth Amendment to litigate to
obtain just compensation. NAR believes that a fuller description of the phrase "...and not
intentionally make it necessary for the owner to institute legal proceedings..." is needed here to
determine whether or not the regulation seems to be encouraging the owner not to proceed to

Section 24.103 Criteria for appraisals, (a) Appraisal requirements.

The NPRM proposes to add a sentence indicating that these regulations set forth the
requirements for real property acquisition appraisals for Federal and federally assisted programs.
This would make it clear that other performance standards, such as USPAP and those issued by
professional appraisal societies, do not govern programs covered by the Uniform Act.

In the explanation of intent, the Department indicates that these are the basic appraisal
requirements for Federal and federally assisted programs. However, Agencies may enhance and
expand on them, and there may be specific project or program legislation that references other
appraisal requirements.

In the explanation of intent, it states that the term “scope of work” defines the general parameters
of the appraisal. It reflects the needs of the Agency and the requirements of Federal and federally
assisted program appraisal practice. It should be developed cooperatively by the assigned
appraiser and an Agency official who is competent to both represent the Agency's needs and
respect valid appraisal practice. The scope of work statement should include the purpose and/or
function of the appraisal, a definition of the estate being appraised, and if it is market value, it’s
applicable definition, and the assumptions and limiting conditions affecting the appraisal. It may
include parameters for the data search and identification of the technology, including approaches
to value, to be used to analyze the data. All relevant and reliable approaches to value are to be

used. However, where an Agency determines that the sales comparison approach will be
adequate by itself because of the type of property being appraised and the availability of sales
data, it may limit the appraisal assignment to the sales comparison approach. This should be
reflected in the scope of work.

NAR does not object to agencies expanding on the basic USPAP Standards because USPAP
envisions this and refers to them as Supplemental Standards. A Scope of Work determination
and statement is a USPAP requirement, and NAR believes that this just reinforces our suggestion
that Standards 1, 2 and 3 of USPAP should be the minimum standards for appraisals utilized by
the Federal agencies.

NAR recommends that the suggestion that the sales comparison approach ‘will be adequate’ for
some of these assignments be changed. The appraiser should decide the Scope of Work, and
even if the client believes the sales comparison approach ‘will be adequate’ this is something that
the appraiser should decide perhaps in consultation with the client. By leaving the Scope of
Work decision (sales comparison approach only) to the client’s discretion could, in some
instances, be considered a means of pressuring the appraiser and controlling the direction of the
value opinion. Clearly, the Federal Highway Administration wants to avoid that perception.
Again, we recommend that the decision to limit the Scope of Work should be made in
consultation with the appraiser.

Section 24.103 Criteria for appraisals, (d) Qualifications of appraisers and review

The Federal Highway Administration proposes to specifically add “review appraisers” to clarify
that they are included in the section that addresses appraiser qualifications. The NPRM also
emphasizes the need for appraisers and review appraisers to be qualified and competent, and that
state licensing or certification can help provide an indication of an appraiser's abilities. If the
appraisal assignment requires the preparation of a detailed appraisal and the Agency uses a
contract (fee) appraiser to perform the appraisal, such appraiser shall be certified in accordance
with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989

NAR believes that the proposed rule should state that it is an absolute requirement that appraisers
and reviewers be state licensed or state certified. It is important that appraisers meet the same
qualifications required by Federally Regulated Lending Institutions.

Sec. 24.104 Review of appraisals.

The NPRM states that if the review appraiser is unable to approve an appraisal as an adequate
basis for the establishment of the offer of just compensation, and it is determined by the
acquiring Agency that it is not practical to obtain an additional appraisal, the review appraiser
may develop appraisal documentation to support an approved or recommended value.

NAR believes the reviewer should be required to develop an opinion on whether or not the report
complies with Standards 1, 2 and 3 of USPAP as well as an opinion of market value - Concur or

non concur. If the reviewer does not concur with the opinion of value or the methodology, the
reviewer would be expected to provide and opinion of value. Such review must comply with
Standard 3 of the USPAP, which permits the reviewer to incorporate all, or part of the appraisal
under review in the development of the reviewer’s opinion.

Subpart C General Relocation Requirements

Overall, NAR is supportive of federal efforts that minimize the hardships that businesses
encounter when being relocated.

Section 24.205 Relocation planning, advisory services and coordination.

This section of the NPRM lays out rules by which the Federal Government must provide
logistical assistance to residences and businesses that are being relocated. It describes the criteria
that a Federal Agency must consider when providing relocation assistance advisory services to
businesses. Under this section, the Federal Government must consider the following when
conducting a business relocation interview:

       Business’s replacement site requirements, current lease terms and other contractual
       obligations and financial capacity of the business to accomplish the move.
       Determination of the need for outside specialists that will be required to assist with the
       For tenant businesses, an identification and resolution of personality / realty issues.
       An estimate of the time required for the business to relocate.
       An estimate of the searching expense payments required based on the anticipated
       difficulty in locating replacement property.
       An identification of any advance relocation payments required for the move.

The six criteria that Federal Agencies must use in a relocation interview will provide a good
indicator of a business’s overall well being and should help the Federal Agency ensure that
businesses experience minimal hardship when relocating. NAR supports these efforts to take
into account each business’s unique characteristics so that financial, economic and logistical
hardships associated with relocation are minimized.

The NATIONAL ASSOCIATION OF REALTORS® appreciates the opportunity to provide
these comments and looks forward to working with the Federal Highway Administration in
developing the proposed rule amending several sections of the Uniform Act. If we can provide
further information please contact me at 202-383-1095.


Joseph M. Ventrone
Managing Director


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