| (a) General Provision.
(1) An appraisal prepared for the Department must conform
to the Uniform Standards of Professional Appraisal Practice (USPAP)
as adopted by the Appraisal Standards Board of the Appraisal Foundation.
The appraisal must be prepared by a general certified appraiser by
the Texas Appraisal Licensing and Certification Board. The appraisal
must include a statement that the report preparer has read and understood
the requirements of this section. The appraisal must include a statement
that the person or company preparing the appraisal, or reviewing the
appraisal, is a disinterested party and will not materially benefit
from the Development in any other way than receiving a fee for performing
the appraisal and that the fee is in no way contingent upon the outcome
of the appraisal.
(2) If an appraisal is required by the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970, the
appraisal must also meet the requirements of 49 CFR Part 24 and HUD
Handbook 1378. (b) Self-Contained. An appraisal prepared for the Department
must describe sufficient and adequate data and analyses to support
the final opinion of value. The final value(s) must be reasonable,
based on the information included. Any Third Party reports relied
upon by the appraiser must be verified by the appraiser as to the
validity of the data and the conclusions.
(b) Appraiser Qualifications. The appraiser must be
appropriately certified or licensed by the Texas Appraiser Licensing
and Certification Board.
(c) Appraisal Contents. An appraisal prepared for the
Department must be organized in a format that follows a logical progression.
In addition to the contents described in USPAP Standards Rule 2, the
appraisal must include items addressed in paragraphs (1) - (12) of
this subsection.
(1) Title Page. Include a statement identifying the
Department as the client, acknowledging that the Department is granted
full authority to rely on the findings of the report, and name and
address of person authorizing report. The title page must also include
the following statement, "any person signing this Report acknowledges
that the Department may publish the full report on the Department's
website, release the report in response to a request for public information
and make other use of the report as authorized by law."
(2) Letter of Transmittal. Include reference to accompanying
appraisal report, reference to all person(s) that provided significant
assistance in the preparation of the report, date of report, effective
date of appraisal, date of property inspection, name of person(s)
inspecting the property, tax assessor's parcel number(s) of the site,
estimate of marketing period, and signatures of all appraisers authorized
to work on the assignment including the appraiser who inspected the
property. Include a statement indicating the report preparer has read
and understood the requirements of this section.
(3) Table of Contents. Number the exhibits included
with the report for easy reference.
(4) Disclosure of Competency. Include appraiser's qualifications,
detailing education and experience.
(5) Statement of Ownership of the Subject Property.
Discuss all prior sales of the subject Property which occurred within
the past three years. Any pending agreements of sale, options to buy,
or listing of the subject Property must be disclosed in the appraisal
report.
(6) Property Rights Appraised. Include a statement
as to the property rights (e.g., fee simple interest, leased fee interest,
leasehold, etc.) being considered. The appropriate interest must be
defined in terms of current appraisal terminology with the source
cited.
(7) Site/Improvement Description. Discuss the site
characteristics including subparagraphs (A) - (E) of this paragraph.
(A) Physical Site Characteristics. Describe dimensions,
size (square footage, acreage, etc.), shape, topography, corner influence,
frontage, access, ingress-egress, etc. associated with the Development
Site. Include a plat map or survey.
(B) Floodplain. Discuss floodplain (including flood
map panel number) and include a floodplain map with the subject Property
clearly identified.
(C) Zoning. Report the current zoning and description
of the zoning restrictions and any deed restrictions, where applicable,
and type of Development permitted. Any probability of change in zoning
should be discussed. A statement as to whether or not the improvements
conform to the current zoning should be included. A statement addressing
whether or not the improvements could be rebuilt if damaged or destroyed,
should be included. If current zoning is not consistent with the highest
and best use, and zoning changes are reasonable to expect, time and
expense associated with the proposed zoning change should be considered
and documented. A zoning map should be included.
(D) Description of Improvements. Provide a thorough
description and analysis of the improvements including size (Net Rentable
Area, gross building area, etc.), use (whether vacant, occupied by
owner, or being rented), number of residents, number of stories, number
of buildings, type/quality of construction, condition, actual age,
effective age, exterior and interior amenities, items of deferred
maintenance, energy efficiency measures, etc. All applicable forms
of depreciation should be addressed along with the remaining economic
life.
(E) Environmental Hazards. It is recognized appraisers
are not experts in such matters and the impact of such deficiencies
may not be quantified; however, the report should disclose any potential
environmental hazards (such as discolored vegetation, oil residue,
asbestos-containing materials, lead- based paint etc.) noted during
the inspection.
(8) Highest and Best Use. Market Analysis and feasibility
study is required as part of the highest and best use. The highest
and best use analysis should consider paragraph (7)(A) - (E) of this
subsection as well as a supply and demand analysis.
(A) The appraisal must inform the reader of any positive
or negative market trends which could influence the value of the appraised
Property. Detailed data must be included to support the appraiser's
estimate of stabilized income, absorption, and occupancy.
(B) The highest and best use section must contain a
separate analysis "as if vacant" and "as improved" (or "as proposed
to be improved/renovated"). All four elements (legally permissible,
physically possible, feasible, and maximally productive) must be considered.
(9) Appraisal Process. It is mandatory that all three
approaches, Cost Approach, Sales Comparison Approach and Income Approach,
are considered in valuing the Property. If an approach is not applicable
to a particular property an adequate explanation must be provided.
A land value estimate must be provided if the Cost Approach is not
applicable.
(A) Cost Approach. This approach should give a clear
and concise estimate of the cost to construct the subject improvements.
The source(s) of the cost data should be reported.
(i) Cost comparables are desirable; however, alternative
cost information may be obtained from Marshall & Swift Valuation
Service or similar publications. The section, class, page, etc. should
be referenced. All soft costs and entrepreneurial profit must be addressed
and documented.
(ii) All applicable forms of depreciation must be discussed
and analyzed. Such discussion must be consistent with the description
of the improvements.
(iii) The land value estimate should include a sufficient
number of sales which are current, comparable, and similar to the
subject in terms of highest and best use. Comparable sales information
should include address, legal description, tax assessor's parcel number(s),
sales price, date of sale, grantor, grantee, three year sales history,
and adequate description of property transferred. The final value
estimate should fall within the adjusted and unadjusted value ranges.
Consideration and appropriate cash equivalent adjustments to the comparable
sales price for subclauses (I) - (VII) of this clause should be made
when applicable:
(I) Property rights conveyed;
(II) Financing terms;
(III) Conditions of sale;
(IV) Location;
(V) Highest and best use;
(VI) Physical characteristics (e.g., topography, size,
shape, etc.); and
(VII) Other characteristics (e.g., existing/proposed
entitlements, special assessments, etc.).
(B) Sales Comparison Approach. This section should
contain an adequate number of sales to provide the Underwriter with
a description of the current market conditions concerning this property
type. Sales data should be recent and specific for the property type
being appraised. The sales must be confirmed with buyer, seller, or
an individual knowledgeable of the transaction.
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