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© Copyright 2004 The Trust for Public Land

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© Copyright 2004 The Trust for Public Land

AppraisalsConservation Summit

Minnesota Landscape Arboretum

September 24, 2009

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© Copyright 2004 The Trust for Public Land

The Trust for Public Land conserves land for people

to enjoy as parks, gardens and other natural places,

ensuring livable communities for generations to come.

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© Copyright 2004 The Trust for Public Land

What is an appraisal?What is an appraisal?What is an appraisal?

An opinion of the nature, quality, value or

utility of specified interests in, or aspects

of, identified real estate”

- Dictionary of Real Estate Appraisal

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Why do you need an appraisal?Why do you need an appraisal?Why do you need an appraisal?

•To make sure you are paying fair value

•May be required for government acquisitions

•Nonprofits need to protect their 501c3 status

•Often required for grants or funding sources

•May be useful in negotiations

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Types of AppraisalsTypes of AppraisalsTypes of Appraisals

Formats•Consultation

•Opinion letter

•Preliminary or summary report

•Self contained, full narrative

Standards•USPAP

•DNR

•Yellow Book, UASFLA

•IRS

Consider purpose and end user in selecting

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When to Obtain an AppraisalWhen to Obtain an AppraisalWhen to Obtain an Appraisal

Not to early

•Cost and investment of time

•Scope of project

•Can get stale

Not to late

•Surprise can crater deal and all you’ve

invested

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Selecting an AppraiserSelecting an AppraiserSelecting an Appraiser

•Knowledge and experience with type of property

and interests being appraised (e.g., for conservation

easements)

•Knowledge of local conditions

•Licensed, certified general real property appraiser

•Professional associations, e.g., MAI

•Reputation, known and respected by acquiring unit

of government and grant makers

•Quality of work, get sample

•Availability

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The Engagement LetterThe Engagement LetterThe Engagement Letter

Define the job

•Standards

•Type of report

•Land and interests appraised

•Special instructions or hypothetical

conditions

•Intended users

•Deadlines

•Payment terms

•Review

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What does the Appraiser Actually Do?What does the Appraiser Actually Do?What does the Appraiser Actually Do?

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What does “Fair Market Value”

(FMV) mean?

What does “Fair Market Value”

(FMV) mean?

The “highest price estimated in terms of money that the

land would bring if exposed for sale in the open market,

with reasonable time allowed in which to find a purchaser,

buying with knowledge of all of the uses and purposes to

which it was adapted and for which it was capable of

being used.”

– Dictionary of Real Estate Appraisal

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What Does “Highest and Best Use” Mean?What Does “Highest and Best Use” Mean?What Does “Highest and Best Use” Mean?

The “reasonably probable and legal use of

vacant land or an improved property, which

is physically possible, appropriately

supported, financially feasible, and that

results in the highest value.”

– Dictionary of Real Estate Appraisal

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Approaches to Estimating Fair Market ValueApproaches to Estimating Fair Market ValueApproaches to Estimating Fair Market Value

• Sales Comparison

• Income

• Cost

• Discounted Cash Flow analysis (subdivision)

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Sales Comparison ApproachSales Comparison ApproachSales Comparison Approach

• Analysis of actual sales prices of similar pieces of

property

• Compare features

• Apply adjustments

• Challenge and art are in finding truly comparable sales

and determining how to make the adjustments

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Factors that impact the level of

comparability

Factors that impact the level of

comparability

• Availability and use of low interest or seller financing

• Motivations of buyer and seller

• Time elapsed since the sale

• Quality and desirability of location

• Physical differences and impact on price

• Type and condition of improvements

• Highest and Best Use

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The Review ProcessThe Review ProcessThe Review Process

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