Government Overpaid for Land Relying on Unauthorized Appraisal
by Tony Sevelka, MAI, SREA, FRICS, AACI, P.App., AI-GRS
Appraisals are prepared for a host of reasons, but, in every instance, an appraisal is intended to support a decision-making process that involves the appraised property. A party commissioning an appraisal will either rely on the appraisal or attempt to induce another party (e.g., an expropriating or condemning authority, investor, etc.) to rely on the appraisal. Even parties that are frequent users of appraisals often lack the necessary skills to understand when and under what conditions they can or should rely on an appraisal report. A decision made on the basis of an appraisal report, to which there is no lawful entitlement, can lead to financial losses and unintended consequences, as occurred when the Saskatchewan government negotiated a deal to purchase additional land for the Global Transportation Hub (GTH) through the Global Transportation Hub Authority (GTH Authority). A sequence of events (and questionable conduct), commencing in November 2011, culminated in the December 2013 decision of the GTH Authority to acquire 204 acres at a grossly inflated price,1 while relying on an unauthorized appraisal report “using a cash flow-subdivision development analysis” to value raw land in agricultural use. An appraisal report prepared by a member of the Appraisal Institute of Canada or the Appraisal Institute (US) must contain a ‘Mandatory Certification,’ including a statement to the following effect:
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