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Appraising the Value of Indian Trust Land

Appraisals are used to determine the fair market value for Indian trust land and resources. While requirements may vary from region to region, appraisals are generally required for land sales, land exchanges, land consolidations, gift deeds, rights of way and leases. It should be noted, however, that an appraisal of value, does not necessarily determine the actual price. In a land sale or lease, for example, a landowner may choose to negotiate for more than the appraised value. However, in most cases, especially when the tribe is the buyer, the landowner sells for the appraised value.

For allotments held in undivided interests, an appraisal is completed based on the value of the entire allotment and then divided by the percentage of interest held. For example, if the value of an entire 160 acre allotment is $10,000 and an individual’s ownership interest is 1/10, the appraised value of his or her land would be $1,000.

In general, an appraisal is considered valid for one year, though this depends on how fast the land values are changing. As such, if an appraisal is requested on behalf of multiple co-owners of an allotment within a year’s time, only one appraisal would be required to determine the value of that allotment. This allows the BIA to cut down on the number of appraisals it pays for.

Steps in the Process
To request an appraisal, the appropriate BIA realty office or tribal land office will send a request for appraisal services to the Office of the Special Trustee for American Indians (OST). The appraisal request identifies specific items to be addressed in the appraisal, such as: the transaction type (lease, sale exchange, right of way, etc.), property type (agricultural, residential, commercial, industrial, recreational, etc.), and whether there are utilities present and which kind. If there are no problems with the request, OST will forward the request either to an in-house appraiser or to a contract appraiser. When a contractor receives an appraisal request, he or she must prepare a statement of work and submit it to OST for consideration. Once a contract for the appraisal is awarded, the appraiser can begin the appraisal process, which he or she is required to complete within 90 days. When the appraisal is complete, the appraiser submits it to the Office of Appraisal Services (OAS) which is overseen by OST, for review and final approval.

What to Expect
Appraisals of Indian land must comply with certain standards, but because every piece of property is unique, there is no one form or format used by all appraisers. All appraisers working or contracting for OST are required to follow the Uniform Standards of Professional Appraisal Practice (USPAP) and are required to be certified general appraisers. However, the content of each appraisal varies, sometimes dramatically, based on multiple factors, such as whether the land or property is residential, commercial or agricultural, where it is located, the condition of existing structures, and the determined valued of comparable properties in the area. In some regions, such as the Great Plains, the BIA realty office or tribal land office does not automatically send the landowner a copy of the full appraisal when it is completed. Instead, a letter is sent to the landowner with the estimation of value that was determined. In other regions and area offices, such as the Minnesota Agency in the Midwest Region, the entire appraisal is sent to the landowner upon completion. Either way, the landowner always has the right to review the full appraisal upon request.

Length of Time
Depending on whether the appraisal is completed by an in-house appraiser or outsourced to a contractor, it can take anywhere from 160 to 190 days to receive an appraisal once the request has been made. There are several factors that can affect this timeline, such as geographic isolation of the property or a unique natural resource, that require the appraiser to spend more time acquiring data or information to support an opinion of value. Other factors can decrease the timeline. For example, in some areas (such as the Great Plains) multi-year appraisal contracts are used. These reduce the amount of time it takes to get an appraisal completed by eliminating the need to advertise and award a separate contract for each appraisal. This also eliminates the need to develop a statement of work for each contract and have it reviewed.

Who Pays for an Appraisal?
The BIA is required to pay for all appraisals of Indian trust land, even if the cost of the appraisal is greater than the value of the land. The only exception is in the case of a right of way, when the person or company seeking the right of way has to foot the bill.