UP Standards

1.2.7.3.6. Benefits. Broadly, benefits are positive effects on market value that result from the public project for which the property was acquired. There are two categories of benefits for federal acquisition purposes: direct (special) benefits, which must be offset against total compensation, and general (indirect) benefits, which must be ignored. As with damages, whether a benefit is general or direct is a mixed fact/law question that requires a legal instruction.   

1.2.7.3.5. Damages. Because damage to the remainder is automatically included in the before and after valuation, damages are not separately appraised in federal acquisitions. However, to properly estimate the value of the remainder after the acquisition, appraisers must understand the concept of damages for federal acquisition purposes. The legal terminology associated with damages is confusing, perhaps because the same terms have been applied to different concepts under federal and state laws. Under federal law, damage to a property’s market value is either compensable and must be considered, or non-compensable and must be disregarded.33 The term severance damages has been used to describe those damages for which the United States must pay compensation. The term consequential damages has been used to…

1.2.7.3.4. Before and After Rule. In partial acquisitions, these Standards require application of the before and after rule, also known as the federal rule, in which the appraiser estimates both the market value of the larger parcel before the government’s acquisition and the market value of the remainder property after the government’s acquisition.32 Requiring this method of valuation allows acquiring agencies, the Department of Justice, and the courts to calculate a reasonable measure of compensation by deducting the appraiser’s estimated remainder or after value from the appraiser’s estimate of the larger parcel’s before value. The result of this procedure is a figure that includes the value of the property acquired as well as any compensable damages and/or special benefits to…

1.2.7.3.3. Government Project Influence and the “Scope of the Project” Rule. Any increase or decrease in the market value of real property prior to the date of valuation caused by the government project for which the property is being acquired must be disregarded in developing the appraisal. Under federal law, valuations for just compensation purposes must disregard any government project influence on a property’s market value once it is within the scope of the government’s project. The resulting scope of the project rule, when properly applied, ensures fair results for both landowners and the public, as discussed in Section 4.5.  Proper application of the scope of the project rule is complex, and virtually always requires a legal instruction. Simply directing…

1.2.7.3.2. Unit Rule. There are several aspects of the unit rule that are important for appraisers to understand in developing appraisals under these Standards. The unit rule requires valuing property as a whole rather than by the sum of the values of the various interests into which it has been carved—such as lessor and lessee, or life tenant and the holder of the remainder. This requirement holds true in circumstances where the physical components of the property are held under different ownership such as the surface estate, mineral rights, water rights, or timber. Even when the physical components of a property are under the same ownership, it is improper to separately value the various components (improvements, minerals, standing timber, crops,…

1.2.7.3.1. Larger Parcel. Essential to the appraiser’s conclusion of highest and best use is the determination of the larger parcel.27 The appraiser must make a larger parcel determination in every appraisal conducted under these Standards, even in minor partial acquisitions in which the appraiser is instructed not to do a complete before and after appraisal.   

1.2.7.3. Special Rules and Methods. An important aspect of assignment conditions under these Standards is compliance with the special rules and methods that apply to the development of  Uniform Appraisal Standards for Federal Land Acquisitions / Appraisal Development  appraisals of market value for federal acquisition purposes. These special rules and methods are summarized briefly below, and explained in greater detail throughout these Standards. The legal foundations for these rules are found in the appropriate sections of Section 4 (Legal Foundations).  

1.2.7.1. Instructions, Hypothetical Conditions, Extraordinary Assumptions. Application of these Standards may require instructions from the acquiring agency. For example, agency instructions can provide clarification about the legal description of the property to be appraised and/or the property rights being acquired. Agency instructions that result in assumptions, hypothetical conditions, or extraordinary assumptions that impact the appraisal process or the appraisal results should be carefully considered before being issued. An appraiser cannot make an assumption or accept an instruction that is unreasonable or misleading, nor can an appraiser make an assumption that corrupts the credibility of the opinion of market value18 or alters the scope of work required by the appraiser’s contract. For example, it is improper (unless specifically instructed otherwise) for…

1.2.7. Assignment Conditions. In developing an appraisal under these Standards, appraisers must understand the special assignment conditions associated with the valuation of property being acquired by federal agencies. These special assignment conditions include the use of instructions, hypothetical conditions, extraordinary assumptions, and jurisdictional exceptions from USPAP as well as the special rules and methods required in these appraisals.