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I. A Closer Look at Right of Way Appraisal Issues

I. A Closer Look at Right of Way Appraisal Issues. Damages and Benefits . Charles F. Crider, MAI. EMINENT DOMAIN. The government’s right to condemn private property for public use for the benefit of the greater community.

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I. A Closer Look at Right of Way Appraisal Issues

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  1. I. A Closer Look at Right of Way Appraisal Issues

  2. Damages and Benefits Charles F. Crider, MAI

  3. EMINENT DOMAIN • The government’s right to condemn private property for public use for the benefit of the greater community. • Virtually every road is constructed on lands that were once private property. • Appraising real estate for condemnation purposes presents challenges that are not typical of other appraisal assignments. Crider, Bouye, & Elliott, LLC

  4. YELLOW BOOK The most common way to determine compensation in a partial taking is by using the “before and after” method. Yellow Book requires the appraiser to: “describe the principle differences in the property between the before and after situations, including any changes in highest and best use of the property.” Crider, Bouye, & Elliott, LLC

  5. The most significant aspect of valuing property before and after the acquisition is the estimate of damages and/or benefits to the remainder, if any, caused by the action. Crider, Bouye, & Elliott, LLC

  6. Identifying Damages • Damages may be assessed in the amount necessary to fix or remediatethe damage (cost to cure). • Depending on the circumstances, damages may instead be measured by the effect of the harm on the property's market value. • It is often necessary to utilize experts in these cases, and there are a wide variety of appraisers who can provide testimony as to the value of real or personal property, or damage to a business interest. Crider, Bouye, & Elliott, LLC

  7. Crider, Bouye, & Elliott, LLC

  8. CONSEQUENTIAL DAMAGES “Loses that do not flow directly and immediately from an injurious act but that result indirectly from the act.” • Inverse Condemnation (most common example) • Burden of proof with property owner • Different in kind (Not merely in degree) Crider, Bouye, & Elliott, LLC * Blacks Law Dictionary 8th Edition

  9. MEASURING DAMAGES -Visibility- Specific Damages: Damages that are alleged to have been sustained in the circumstance of a particular wrong To be awardable, special damages must be specifically claimed and proven. * Blacks Law Dictionary 8th Edition Crider, Bouye, & Elliott, LLC

  10. MEASURING DAMAGES - Visibility Example- 2011 75 2012 Crider, Bouye, & Elliott, LLC

  11. MEASURING DAMAGES-Visibility- 9’ 6’ 75’ 50’ Pres. R/W 45’ Before: 6’/75’ = 8% slope After : 9’/50’ = 18% slope Bldg. Setback New R/W 70’ Crider, Bouye, & Elliott, LLC

  12. MEASURING DAMAGES – Paired Sales Analysis • Increased Grade • Increased Proximity • What is being lost or diminished? - Visibility • What is the effect on highest and best use? – Change? Crider, Bouye, & Elliott, LLC

  13. SOLUTION: *A Comparable* * The total adjustment attributed to loss of visibility should reflect the value of both properties before the acquisition. ** The average grade is calculated by dividing the number of feet above or below grade by the number of feet the building is set back from the road or R/W. Crider, Bouye, & Elliott, LLC

  14. CONCLUSION: • The change in grade increases from 8% before the acquisition to 18% in the after. • This is a change of 10%. • Further analysis concludes that for every 5% change in grade there is an approximate 8% reduction in value attributed to diminished visibility. Crider, Bouye, & Elliott, LLC

  15. -Severance- • Subject Property is a 100-acre agricultural tract with direct access from State Road 24 prior to the acquisition. • The new controlled access highway will bisect the property leaving 60 acres to the north of the road and 35 acres to the south. • New frontage road will provide access to the northern portion Crider, Bouye, & Elliott, LLC

  16. 60 Acres New C/A New Frontage Road New 35 Acres C/A State Road 24 MEASURING DAMAGES -Severance- Crider, Bouye, & Elliott, LLC

  17. -Severance- • The appraiser should consider and address such issues as: • A possible change in highest and best use • Change in access • Change in the value per acre Crider, Bouye, & Elliott, LLC

  18. -Change in Grade- • Tract 32 is improved with an auto body repair shop. • Prior to acquisition the building is located approximately eight feet below grade and 90 feet from the present roadway at survey station 367+00. Crider, Bouye, & Elliott, LLC

  19. -Change in Grade- • The construction slopes were converted to right of way bringing the right corner of the improvements to within six feet of the new right of way. • New grade will raise an additional four feet, placing the drive on a 2:1 slope Crider, Bouye, & Elliott, LLC

  20. 32 New 100’ R/W Construction Slope Present R/W 367 + 00 MEASURING DAMAGES -Change in Grade- Crider, Bouye, & Elliott, LLC

  21. Solutions: • Cost to cure • Changes in HBU- Keep existing improvement? • Demolition & Redevelopment • Business Enterprise Value (BEV) is treated differently depending on the jurisdiction. Crider, Bouye, & Elliott, LLC

  22. -Police Power vs. Eminent Domain - Police Power is defined as, “the right of government through which property is regulated to protect public safety, health, morals, and general welfare.” Eminent Domain is defined as “the right of government to take private property for public use upon the payment of just compensation.” • The intersection is being improved to provide additional turn lanes. • A new concrete median along the street abutting the acquired area will restrict ingress and egress to right-in/right-out only. Crider, Bouye, & Elliott, LLC

  23. Present R/W Retail Building New R/W Concrete Median New Raised MEASURING DAMAGES-Police Power vs. Eminent Domain - Crider, Bouye, & Elliott, LLC

  24. Ratio Before After Land : Bldg 9.89 9.30 Parking: Bldg 258.33 193.75 Internal Movement 5,750 5,405 Primary Frontage 188.0 200.0 Total Frontage 106.98 103.44 Line of Sight 0 10% COMMON INDICATORS OF POSSIBLE DAMAGES Crider, Bouye, & Elliott, LLC

  25. OTHER DAMAGES TO CONSIDER • 1. Temporary Construction Easements • 2. Utility Easements • 3. Noise • 4. Proximity to Residential • A. HBU ? • B. Interim Use? • C. Cost to Cure?

  26. BENEFITS Defined as the advantageous factors, which arise from a public improvement for which private property has been taken in condemnation. (The Dictionary of Real Estate Appraisers – 5th Edition) Crider, Bouye, & Elliott, LLC

  27. BENEFITS Specific General • Offset R/W costs ? • Offset Damages ? • Particular to the property • Non Compensable • Affects the whole community Crider, Bouye, & Elliott, LLC

  28. BENEFITS • The corner portion of Tract 15 sold prior to construction however, the grantor and grantee had prior knowledge of the new road design. The sales price reflected the new corner location at a signalized intersection. • In spite of the sales price, the appraised value of the site before the acquisition should not reflect the new corner influence. • The sales price of the corner site should only be considered in the “after” condition. Crider, Bouye, & Elliott, LLC

  29. 15 Abandoned Pendleton Street Relocated PendletonStreet 15 BENEFITS Crider, Bouye, & Elliott, LLC

  30. SPECIFIC BENEFITS • Tract 169 is located on a finger of the lake but was not allowed a dock permit before the acquisition due to the height of the existing bridge. • The bridge was raised as a result of the project allowing access underneath State Road 28 to the main body of water, thereby making the site suitable for a boat dock and enhancing the value of this specific property. • Specific benefits to a property as a result of a road improvement may offset acquisition costs and/or damages, in some states. Crider, Bouye, & Elliott, LLC

  31. 169 New R/W State Road 28 New R/W SPECIFIC BENEFITS Crider, Bouye, & Elliott, LLC

  32. P/L P/L New R/W Present R/W GENERAL BENEFITS Crider, Bouye, & Elliott, LLC

  33. GENERAL BENEFITS • Before announcement of the project, new commercial growth was evident along the highway nearest the city limits, but development grew sparse farther south. • Using these comparables as a basis for establishing a “before” value would result in an overpayment to property owners situated along the new roadway. • Using these sales as a basis for the “after” value would result in an underpayment to the owners. Crider, Bouye, & Elliott, LLC

  34. Competency Requirements • 1. Recognize changes – Social/Economic • 2. Recognize changes – Court Cases • 3. Recognize changes – Reporting Requirements

  35. Charles F. Crider, MAIemail: chuck@criderappraisals.comCrider, Bouye, & Elliott, LLC 2 Ridgeway Ave Greenville, SC 29609 (864) 232-1788 Thank you so much, Crider, Bouye, & Elliott, LLC

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