U.S. DEPARTMENT OF THE INTERIORBUREAU OF LAND MANAGEMENT
EMS TRANSMISSION 09/18/2006
Instruction Memorandum No. 2006-231
To: All Field Officials
From: Deputy Director
Subject: Management of Valuation Issues for Land Exchanges
Program Areas: Lands – Exchanges
Purpose: This Instruction Memorandum (IM) provides guidance on management of exchange processing and coordination with the Department of the Interior Appraisal Services Directorate.
Policy/Action: Management of the exchange process is critical to ensuring that the various processing tasks, including appraisals, are completed at the appropriate times. Because appraisals have a limited validity period that begins on the valuation date (not the DOIASD approval date), appropriate scheduling will help reduce the need for new appraisal caused by delays in the completion of other exchange processing tasks. Whenever possible, field offices are encouraged to schedule and request appraisals so they are one of the last tasks, if not the last task, to be completed prior to the decision. At the beginning of the exchange process, other DOIASD valuation services (e.g., consultation) should be considered instead of an appraisal. However, if it is determined an appraisal is necessary early in the exchange process, all exchange parties must understand the likelihood that new appraisals will be required near the end of the process. The initial appraisal along with anticipated new appraisals, and the costs associated with them, must be documented in the feasibility report and Agreement to Initiate a Land Exchange (ATI).
Because of the limited validity period of appraisals, field offices must coordinate closely with the DOIASD to ensure timely receipt of appraisals. To ensure the values are as current as possible during decision-making, field offices should be in a position to submit the decision review package immediately after DOIASD approval of the appraisals. Field offices should also schedule closings as soon as possible after the protest periods have ended on the Notice of Decision.
For land exchanges the standard validity period for most appraisals would be at least six months from the date of valuation. This should provide sufficient time for approval of the appraisals, agreement on the appraised values, final configuration of the exchange, completion of State and Washington Office reviews of the decision package, and completion of the protest period after the Notice of Decision is published. In those cases where an appraisal would be valid for less than six months then a competitive land sale is most likely a preferable choice for accomplishing the BLM’s land tenure objective. When a decision review package is submitted for review and approval so that the decision would be signed after the six-month validity period, then additional appraisal information must be submitted with the package. If the decision would be signed more than six months, but less than one year, after the valuation date, the appraisal information could be market analysis, documentation of consultation with the DOIASD, or similar evidence that indicates the values are still current and there is low or no risk in continuing to rely on them. If the decision cannot be signed within one year after the valuation dates or you have reason to believe the valuation no longer reflects current market conditions then a new appraisal would generally be required. However, in some non-volatile markets, market analysis or consultation with DOIASD may be sufficient, but only if it can be shown that the values are still current.
The appropriate time to agree to “lock” values is at the time of the decision on the exchange, and field offices must not agree to "lock" values prior to that time. Immediately after the decision would be signed, field offices are encouraged to enter into binding exchange agreements to identify the terms and conditions necessary to complete the exchange, including the agreement on the valuations of the lands and necessary cash equalization. Requests to enter into a binding exchange agreement at some later time would require market investigations, consultation with DOIASD, updates, or new appraisals, as appropriate.
It must be remembered that the DOIASD role is to manage the appraisal process, to ensure compliance with Federal appraisal standards and requirements, and to ensure conclusions of value are documented and supportable. It is BLM's responsibility to accept the appraised values for use by the agency and establish, through consultation with DOIASD, the period during which the appraisal would be valid.
Timeframe: This IM is effective immediately.
Background: The Department of the Interior appraisal function is now consolidated in the Appraisal Services Directorate (DOIASD). Valuation issues have been, and continue to be, a major component of the land exchange process. The BLM must manage the exchange process to address costs and workload issues and coordinate with the DOIASD on the delivery of valuation services and products in a way that reduces the number of appraisals needed for the completion of proposed land exchanges.
It is BLM policy that land exchange proposals avoid the inclusion of Federal lands that are more suited to use of a competitive sale approach (See BLM Land Exchange Handbook H-2200-1 Chapter 1 G. 1. b.). Competitive sale methods may be the preferred option for Federal lands in urbanizing areas, rapidly appreciating real estate markets, and when the lands have commercial, industrial, or residential development potential. Consultation with DOIASD concerning preliminary estimates of value and market trends and the determination of whether a sale or an exchange is the most appropriate method of disposal should be done early in the land exchange process. All feasibility reports must include a thorough discussion of the consideration given to competitive sale or other land disposal and acquisition tools as alternatives to the proposed land exchange (See BLM Land Exchange Handbook H-2200-1 Chapter 2 E.2.a.).
Budget Impact: None.
Manual/Handbook Sections Affected: This IM supplements guidance in BLM Manual Handbook H-2201-1.
Coordination: This IM was coordinated with the Division of Lands, Realty and Cadastral Survey (WO-350) and the DOIASD.
Contact: Bob Barbour, Team Leader, National Land Exchange Team, WO-300 at (202) 452-7784 or Tom Lonnie, Assistant Director, Minerals, Realty and Resource Protection at (202) 208-4201.