(a) Lower limit established on the basis of dismantling the betterment and selling the salvageable materials.

(b) Upper limit which represents the maximum price which a purchaser would be warranted in paying, under the best or most profitable future off-site utilization.

(2) The final estimate is derived by

(a) Analysis of demand and supply under the various uses for which the property is suitable.

(b) Analysis of recent sales of similar properties until the range of plausible valuations is reduced to the extent the valuation data permit.

(3) The final estimate is then fixed within this narrowed range at an amount which the appraiser considers reasonable under the circumstances.

DETERMINATION OF UPSET PRICE

· 411. Objective. The upset price is established for the purpose of fixing an appropriate minimum sales price below which offers to purchase will be considered unacceptable. The upset price is the estimated net proceeds which could be recovered by dismantling the betterment and selling the salvageable materials and usable components in the open market.

412. Process of estimating upset price. An alternative to disposal by sale for removal at purchaser's expense is direct action by the Government to dismantle the betterment and sell the salvageable materials and usuable components at the best price obtainable in the open market. The upset price is the estimated net proceeds which could be recovered by disposal in this manner. The appraisal processes and data required for the making of an estimate of the net proceeds recoverable by disposal in this manner are set forth in the preceding section of this instruction. To derive the desired estimate, the appraiser:

a. Estimates the quantity and quality of the materials and components which can be obtained by dismantling the betterment in such a manner as to derive the greatest net return to the Government, the net return being the value of the materials and equipment when dismantled, less the cost of dismantling the betterments and removing and preparing the resulting materials and equipment for disposal.

b. Estimates the price obtainable for the recoverable materials and equipment. Prices 1. o. b. the site will reflect current market conditions and the costs of loading, hauling and unloading.

c. Estimates the cost of dismantling the betterment and cleaning and sorting the salvageable materials and equipment on the basis of a contract let after taking competitive bids. Estimates are to be made on the assumption that the scope of the contract (1) Would include dismantling all of the betterments classified "05" in the particular project;

(2) Would not include removal of concrete or similar floors or foundations;

(3) Would not include other work which would not produce salvageable materials or equipment having a value exceeding the cost of dismantlement.

d. Makes final estimate of upset price. The estimate of the net proceeds which could be recovered is determined by subtracting the estimated cost of dismantling from the estimated price obtainable for the salvageable materials and useable components.

e. Use simplified method for derivation of estimates. In projects involving large numbers of buildings of generally similar character, the appraiser will make detailed estimates of upset price for typical buildings and reduce such estimates to prices per square foot. The square foot factors so derived may then be used in estimating the upset price of similar buildings and structures.

Inasmuch as some Farm Credit Administration appraisers may not be familiar with the type of appraisals provided for in the Real Property Letter as quoted above, the chief reviewing appraiser should consider very carefully whether appraisers assigned to the job are properly qualified by training and experience. [Reg., Sept. 8, 1947, 12 F.R. 6251]

§ 5.405-02 Fair value of buildings and improvements to be removed. The fair value shall be considered to be the maximum price which a well informed buyer acting intelligently and voluntarily would be warranted in paying if he were acquiring the property for the purpose of devoting it to its highest and best use or for adopting it or the material therein to equally useful purposes, taking into account the fact that the building or improvement will have to be removed to a new location. In this connection, the appraiser will consider the most probable and economical method or methods of removal and the cost thereof, 1. e., whether the building can be moved intact, or in sections, or whether it may be necessary to dismantle it completely. This factor will require special consideration in rural areas where the cost of removal and reestablishment of the structures may be lower than in more industrialized areas. The estimate of fair value shall take into account only those rights in structures and facilities or equipment therein or attached thereto which would be of use to such a buyer and only to the degree to It shall be which they would be of use. recognized that the fair value of the property is not in excess of the prices at which other similar properties having a like utility' are actually selling on the market or which amount together with cost of removal to a new location will not exceed the total cost which would be required to erect and equip Neither the a similarly useful structure.

cost to the Government nor the characteristics nor readiness to buy of any particular prospective purchaser shall be taken into account.

CODIFICATION: § 5.405-02 was revoked by Order, Acting Governor, Sept. 8, 1947, 12 F.R. 6253.

§ 5.405-03 Current market value of buildings and improvements. "Current market value" as relating to improvements to be sold separate from the land is defined as the highest price the property will bring in terms of money if offered for sale in open market with reasonable time to find a purchaser. In establishing this value the appraiser should approach the problem from the viewpoint of the typical purchaser, taking into consideration those factors affecting the sale price of the particular property. Emphasis should be placed on the demand for the type of improvement or for salvageable material therein, with special consideration given to any unusual or enhanced local demand and the adaptability of the improvement or material to the current local needs. The probable method of removal of the building and the cost thereof are other factors to be considered by the appraiser. These factors are especially important in rural areas where a considerable portion of the buildings may be sold to farmers who could use family labor and comparatively low cost hired labor in the removal and reestablishment of the buildings. The appraiser should make a study of recent sales of similar buildings or improvements. If there are no available data on sales of similar improvements, comparative studies should prove helpful, e. g., buildings of entirely different types may have been constructed of similar materials and consequently the salvageable material may be similar or if not similar may have relative values which may be used as a guide in setting the current market value of the improvements or buildings to be sold.

CODIFICATION: § 5.405-03 was revoked by Order, Acting Governor, Sept. 8, 1947, 12 F.R. 6253.

§ 5.406-01 Appraisal of surplus easements. For the purpose of appraisal for disposal, easements will be considered from the standpoint of their expected future usefulness. It is anticipated that in some instances surplus easements to be disposed of will be of such nature or so located that they will have a commercial or resale value. In the evaluation of such easements the appraiser ordinarily will follow the same approach as outlined in §§ 5.402-01 to 5.402-04, inclusive. On the other hand there will be surplus easements which have no future use or commercial value as such. Ordinarily these easements will have only a "nuisance value" and will be disposed of to the owner of the land subject to the easement at a nominal consideration or without consideration. In

that event no appraisal will be required. However, those easements originally acquired at a substantial consideration including those involving severance damages may be disposed of only at a "reasonable" value. In the determination of the reasonable value the appraiser will consider any improvement in the utility value or enhancement in desirability or salability of the property subject to the easement, which may arise from the elimination of the easement. Unless otherwise designated the appraisal will be based on the assumption that no physical changes or improvement will be effected by the Government, however, consideration should be given to the fact that once the easement is eliminated the owner of the land can make such improvements as are prudent, though at his own expense. In effect the appraiser will use a "before and after" approach in which the enhancement in value is measured by determining the difference between the value of the property subject to the easement (as the value before) and the value of the property with the easement eliminated (as the value after). In making this estimate of reasonable value the appraiser must bear in mind the fact that ordinarily the owner of the property subject to the easement is the only prospective purchaser.

[Preceding section, in small type, superseded by following section during period covered by this Supplement]

§ 5.406-01 Appraisal of surplus easements. For the purpose of appraisal for disposal, easements will be considered from the standpoint of their expected future usefulness. It is anticipated that in some instances surplus easements to be disposed of will be of such nature or so located that they will have a commercial or resale value. In the evaluation of such easements the appraiser ordinarily will follow the same approach as outlined in §§ 5.402-01 to 5.402-04, inclusive. On the other hand, there will be surplus easements which have no future use or commercial value as such. Ordinarily these easements will have only a "nuisance value" and will be disposed of to the owner of the land subject to the easement at a nominal consideration or without consideration. However, WAA Regulation 5 (32 CFR, Supps. Part 8305) requires that those easements originally acquired at a substantial consideration including those involving severance damages may be disposed of only at a consideration that is fair and reasonable under all the circumstances. In the determination of the consideration that is fair and reasonable the appraiser will consider any improvement in the utility value or enhancement in desirability or salability

or

so advised in writing and given fifteen (15) days within which to make an offer. The offer of a Government agency shall be in the form of a written application in duplicate requesting that the property be held for disposal to it. Such application shall state the price applicant would be willing to pay (or that a transfer without reimbursement transfer of funds is authorized by law), the length of time, if any, needed to acquire funds to purchase the property, all pertinent facts pertaining to the needs of applicant for the property and that the property is being acquired for its own use and not for transfer or disposition. If the applicant shall require time to obtain funds, or authority to take the property without reimbursement or transfer of funds, it shall so state and indicate the length of time needed for that purpose. Upon receipt of such an application containing such a statement, the disposal agency will review the application and determine what time, if any, shall be allowed applicant to obtain such funds and conclude such purchase and will advise the applicant of such determination. During the time thus allowed, the property may not be disposed of except where the priority period has expired and applicant's price is less than the fair value and either a higher price has been offered by another person or another priority holder has offered the maximum price which he may be charged. [Reg., Sept. 8, 1947, 12 F.R. 6253]

§ 5.502-03 Time and method of exercise of State and local government priorities. State and local governments shall have a period of ten (10) days in which to exercise their priority after the date notice of availability is first published, as provided in § 5.307-02. Within such period the priority holder shall indicate an intention to exercise the priority by submitting to the disposal agency a written offer to purchase, accompanied by an appropriate deposit if funds are available at the time for this purpose, it being in the discretion of the district office to determine the amount and whether funds are available. When, however, an offer cannot be made because a disposal agency lacks necessary information on price, units, or other matters, it shall be sufficient if the State or local government files a written statement of its desire to acquire the property or one or more appropriate units thereof. As soon as the necessary information becomes available (whether during or after the priority period or any extension thereof), those who have filed such statements shall be so advised in

writing and given fifteen (15) days within which to make an offer. The offer of a State or local government shall be in the form of a written application in duplicate requesting that the property be held for disposal to it. Such application shall state the price applicant would be willing to pay for the property, and the length of time, if any, needed to acquire funds to purchase the property. The application shall show in detail the contemplated use of the property and set forth that the property is being acquired to fulfill, in the public interest, its legitimate needs. If the applicant shall require time to obtain funds, it shall so state and indicate the length of time needed for that purpose. Upon receipt of such application containing such a statement the disposal agency shall forward a copy of the same to the WAA. The Administrator will review the application and determine what time, if any, shall be allowed applicant to obtain such funds and conclude the purchase and will advise the disposal agency and the applicant of such determination. During the time thus allowed, the property may not be disposed of except when the priority period has expired and applicant's price is less than the current market value and a higher price has been offered by another person or another priority holder has offered the maximum price which he may be charged.

[Preceding section, in small type, superseded by following section during period covered by this Supplement]

§ 5.502-03 Time and method of exercise of State and local government priorities. State and local governments shall have a period of ten (10) days in which to exercise their priority after the date notice of availability is first published, as provided in § 5.307-02. Within such period the priority holder shall indicate an intention to exercise the priority by submitting to the disposal agency a written offer to purchase. When, however, an offer cannot be made because a disposal agency lacks necessary information on price, units, or other matters, it shall be sufficient if the State or local government files a written statement of its desire to acquire the property on one or more appropriate units thereof. As soon as the necessary information becomes available (whether during or after the priority period or any extension thereof), those who have filed such statements shall be so advised in writing and given fifteen (15) days within which to make an offer. The offer of a State or local government shall be in the form of a written application in duplicate requesting that the property be held for disposal to it. Such applica