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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

I. A Closer Look at Right of Way Appraisal Issues


Damages and benefits

Damages and Benefits

Charles F. Crider, MAI


I a closer look at right of way appraisal issues

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


I a closer look at right of way appraisal issues

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


I a closer look at right of way appraisal issues

  • 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


Identifying damages

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


I a closer look at right of way appraisal issues

Crider, Bouye, & Elliott, LLC


Consequential damages

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


I a closer look at right of way appraisal issues

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


Measuring damages visibility example

MEASURING DAMAGES - Visibility Example-

2011

75

2012

Crider, Bouye, & Elliott, LLC


I a closer look at right of way appraisal issues

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


I a closer look at right of way appraisal issues

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


Solution a comparable

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


Conclusion

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


Severance

-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


I a closer look at right of way appraisal issues

60 Acres

New

C/A

New Frontage Road

New

35 Acres

C/A

State Road 24

MEASURING DAMAGES

-Severance-

Crider, Bouye, & Elliott, LLC


Severance1

-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


Change in grade

-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


Change in grade1

-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


I a closer look at right of way appraisal issues

32

New 100’ R/W

Construction Slope

Present R/W

367 + 00

MEASURING DAMAGES

-Change in Grade-

Crider, Bouye, & Elliott, LLC


Solutions

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


Police power vs eminent domain

-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


Measuring damages police power vs eminent domain

Present R/W

Retail Building

New R/W

Concrete Median

New Raised

MEASURING DAMAGES-Police Power vs. Eminent Domain -

Crider, Bouye, & Elliott, LLC


I a closer look at right of way appraisal issues

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


Other damages to consider

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?


Benefits

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


Benefits1

BENEFITS

Specific General

  • Offset R/W costs ?

  • Offset Damages ?

  • Particular to the property

  • Non Compensable

  • Affects the whole community

Crider, Bouye, & Elliott, LLC


Benefits2

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


Benefits3

15

Abandoned Pendleton Street

Relocated PendletonStreet

15

BENEFITS

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Specific benefits

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


Specific benefits1

169

New R/W

State Road 28

New R/W

SPECIFIC BENEFITS

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General benefits

P/L

P/L

New R/W

Present R/W

GENERAL BENEFITS

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General benefits1

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


I a closer look at right of way appraisal issues

  • Competency Requirements

  • 1. Recognize changes – Social/Economic

  • 2. Recognize changes – Court Cases

  • 3. Recognize changes – Reporting Requirements


I a closer look at right of way appraisal issues

Charles F. Crider, MAIemail: [email protected], Bouye, & Elliott, LLC2 Ridgeway AveGreenville, SC 29609(864) 232-1788

Thank you so much,

Crider, Bouye, & Elliott, LLC


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