Conservation Easement Appraisal FAQ's
Colorado State | Dept. of Regulatory Agencies | Div. of Real Estate | Conservation Easement Information
Types of Appraisals
1. Review Appraisals: Does HB-1353 require an appraiser who conducts a review of a conservation easement appraisal to submit a copy of the review and the prescribed fee?
Answer: If the review does not contain an opinion of value then submission is not required. However, all appraisers conducting a review must take note of section 12-61-710(10), which states: “any certified person having direct knowledge that any person has violated any of the provisions of this part 7 shall report such knowledge to the board.” If a review does reveal an opinion of value then it must be submitted to the Division with the fully prescribed fee.
2. Draft Appraisals: Are initial draft appraisals for planning purposes considered a complete appraisal and therefore needs to be submitted to DRE with a prescribed fee?
Answer: Appraisal drafts that are labeled as such and are NOT signed would not need to be submitted because the Division does not consider them to be appraisals. (See USPAP FAQ 263 and BOARD Rule 16.2).
3. Updated Appraisals: If after an appraisal has been submitted to the DRE an updated appraisal is completed and results in a new value estimate, (for example, acreage may have changed) and the “update” incorporates the prior submitted appraisal by reference, will the “updated” appraisal need to be submitted to the Division?
Answer: Regardless of the description used, when a client seeks a more current value or analysis of the property that was the subject of a prior assignment this would be a new assignment and would need to be submitted to the Division of Real Estate with the fully prescribed fee.
4. Appraisals without a tax credit component: If a taxpayer will not claim a tax credit, or if an appraisal has been done for a conservation easement that does not have a donation component, does the appraisal have to be submitted to the Division along with the fee?
Answer: Yes, According to HB-1353 all appraisals for a conservation easement must be submitted to the Division of Real Estate. This would, for example, include situations where the easement has been purchased for its “full” or appraised market value.
5. One easement has different intended users or different scopes: If an assignment requires two different appraisals for two different scopes of work or intended users (e.g. Yellow book and Treasury Regulation appraisals) but the intended use is the same does each appraisal need to be submitted separately to the division with a prescribed fee for each one?
Answer: If a conservation easement assignment requires two different scopes of work and/or has two different intended users but has the SAME effective date on both appraisals then both have to be submitted. However, only one fully prescribed fee will be required.
6. A pre-existing easement: Does an appraisal for an estate valuation or a refinance on a property encumbered with a pre-existing conservation easement need to be submitted to the Division?
Answer: No. An appraisal which is undertaken to appraise the value of a property on which an easement already exists has a different intended use than one which is undertaken to appraise the easement value itself. With the former, the appraiser will be appraising the fee interest of the property encumbered by the easement. In the latter case, the appraiser will be appraising the before and after value of the subject property in order to determine the value of the easement.
7. Minor correction pages: What if, after an appraisal has been submitted, my client requests changes to the appraisal that do not result in a value change. Does the Division of Real Estate want me to submit the changed pages? Will that require an additional fee?
Answer: All correction pages, or amendments, to a previously submitted appraisal need to be sent to the Division of Real Estate. There is no additional fee.
Submission and Review Process
9. Question on Appraisals being submitted in Electronic format: Can the appraiser submit the appraisal in electronic format?
Answer: Yes. Division of Real Estate encourages submission of the appraisal in electronic format.
10. Notification to the appraiser: Will the Division notify an appraiser that a conservation easement appraisal is deemed non compliant, or will the appraiser’s only feedback be through the Department of Revenue in the form of a denial of the taxpayer’s claim for a tax credit? If the Division will provide feedback to the appraiser, what timeframe will there be for notifying the appraiser?
Answer: Due to the provisions of Title 12, Article 61, Part 7, Colorado Revised Statutes and the Board Rules, the Division will only notify the appraiser if and when a complaint is filed and when investigation has been completed.
11. Review Process: Will the Division of Real Estate publish a flow chart showing the path and processes that an appraisal undergoes once it is submitted to the State? This would include activities undertaken by the Division as well as the Department of Revenue and any cooperative activities.
Answer: After receiving the appraisal, the Division will review the appraisal and the affidavit to ensure the information is complete. Based on the review of the compliance investigator, the Board may open an investigation. The appraiser will be notified if a complaint and subsequent investigation has occurred. If the Board determines material violation of USPAP or a substantial misstatement of value has occurred, the board must notify the Department of Revenue.
12. Red flags: Is there a threshold conservation easement dollar value or percent diminution that automatically initiates an in-depth review of a conservation easement appraisal report?
Answer: The Division does not have a dollar value threshold or percent diminution that triggers an in-depth review of the appraisal.
13. Delivery of and Appraisal: What constitutes delivery of a conservation easement appraisal to the client? May an appraiser send an unsigned draft to a client for purposes of review without invoking the 30 day requirement for submission to the State?
Answer: The thirty (30) days is calculated from the date that a certified appraisal has been signed and delivered to the client. It may be prudent for the appraiser to retain some form of proof of delivery such as a receipt signed by the client or a postal service receipt from the US Post Office.
14. Division approval: Does the Division’s decision not to refer an appraisal to the Board amount to an “approval” of the appraisal?
Answer: The Division does not approve or endorse appraisals. The Division and the Board are mandated to ensure appraiser compliance with the relevant laws, standard and regulations. The mere fact that an appraisal has not been referred to the Board or the Department of Revenue may not under any circumstances be construed by the appraiser as “approval” of the appraisals.
Other FAQs
15. Hypothetical condition: For an appraisal to be completed a qualified conservation easement is needed, and since the conservation easement does not exist until it has been recorded how would appraisers deal with this dichotomy?
Answer: Every conservation easement appraisal will contain at least one hypothetical condition. If the easement is not recorded at the time of the appraisal, there will be a hypothetical condition that the easement is recorded in the “after value” scenario. If the easement is recorded, there will be a hypothetical condition that the easement is not recorded in the “before” scenario. This would be appropriate in terms of USPAP, as hypothetical conditions are intended to allow appraisers to assume something contrary to the known facts.
16. Standard 3 review: Does the Division conduct a formal Standard 3 review of appraisals submitted under the Act?
Answer: No. The Division is not required nor is it able to conduct Standard 3 reviews. The Division will in terms of the act: review the affidavit submitted pursuant to Section 3; and review the appraisal to determine whether the information submitted is complete
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