Right-of-Way Appraisals

July 21, 2021

2021 TRENDS TO WATCH

RIGHT-OF-WAY APPRAISALS

In recent years, the increased need for easement acquisition has given rise to an increasing need for Right-of-Way appraisals and analysis of property values. Right-of-Way, or ROW, is considered one of the most complex and intricate appraisal processes within the industry. Every individual project can be completely different than other projects before it. Today, we’d like to present some of the key lessons learned and operating principles we follow in these valuations to help guide you or your clients if and when an applicable scenario arises.

 

EASEMENTS, RIGHT-OF-WAY APPRAISALS, AND COMPLEX PROPERTY VALUATIONS

What makes ROW projects so complex is the variety of variables that directly impact the project and outcome. We often think of easements as only a tool of governments (e.g. transportation agencies, energy/pipeline companies, municipalities, counties, or federal/state governments) who need to acquire, access, or use property for a specific purpose such as road widening or placing of utility lines underground. However, individuals can and do purchase or acquire easements, and understanding the variables involved in the appraisal process can help all parties attain a mutually beneficial outcome.

 

THE RIGHT OF RIGHT-OF-WAY

In its most basic form, Right-of-Way valuation provides support for condemnation-related projects that involve an entity acquiring property rights from individual property owners. The ROW process can be extremely complex and emotional for property owners, especially when involving condemnation.

It is imperative to have appraisers who completely understand and comprehend the legalities of the ROW process to ensure that (1) the property owner is being properly compensated and (2) the compensation paid by the acquiring entity accurately reflects what is being taken.

In nearly every instance, “just compensation” is interpreted to mean fair market value, which must be determined by a qualified real estate appraiser. Because of the real and potential impacts to a property impacted by eminent domain, an appraiser must be highly skilled and attuned to the unique challenges of ROW work.

 

RIGHT BEFORE & RIGHT AFTER

The ROW process is based on a before-and-after methodology which is exactly as it sounds. An appraiser declares the value of a property before it is absolved (i.e. before the easement exists) and then declares the value of the property after it is absolved. The value that is declared before a property is absolved does not include the cost of taking the property or the project itself.

The value that is declared after a property is absolved considers the cost of the project and any hypothetical situations that may occur during the process. The difference between the before and after values is the amount of total just compensation that the government will offer for a property. Once an appraiser determines total compensation, that total is itemized into the following categories:

      • Value of the land taken
      • Value of the improvements taken
      • Residue damages
      • Other damages
      • The amount of benefits, if applicable

 

GETTING IT RIGHT

While the ROW process can be complex and overwhelming, our professionals at Valbridge can help all clients, whether individual or institutional, trust that the property is being valued appropriately and accurately.

These kinds of specialty projects can vary from individual tracts to large-scale projects that span municipalities or counties. No matter the scope or the scale of the project, we can provide local market expertise combined with the latest best practices and guidelines for valuation in these complex cases.

Please watch your inbox next month for our next quarterly newsletter which will bring you the latest trends and analysis on the fast-changing economy and market conditions we’re seeing in the Los Angeles-Inland Empire area.

Thank you for the opportunity to serve you, and as always, we are here to assist with any of your commercial property valuation needs, whether they involve right-of-way/eminent domain or any other valuation scenario (i.e. date of death appraisals, fair market rental value, etc.).

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Valbridge welcomes single-property assignments as well as portfolio, multi-market and other bulk-property engagements.

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