Indian Trust land appraisal

[VolcanoLvr]

This is one for those who appraise on Indian Trust Land:

Potential assignment is a dwelling (MFH or site-built? - client was not really clear about this) located on Indian allotment land awarded to an American Indian prior to the establishment of the Indian Reservation which now has jurisdiction. Over the years, the Indian family has 'installed' various residences, outbuildings, etc. on this land. This is the only allotment land I'm aware of in this rural part of our county.

A local title company has told me that a portion of this property does have a 'legal description' which applies to an improvement that is under a possible mortgage, but I'm not yet positive that this portion is the property to be appraised. (The client is not fully understanding all the issues and implications.)

Title company also says the BIA must approve any mortgage or property transfer...and no, I have not even begun the data gathering process with the BIA at this stage!

I don't know if the property can only be transferred to another Indian, or if in the case of a foreclosure on a mortgage, the land and improvement will be encumbered together.

So the basic question is 'what am I appraising?' What would I use for comps? And ... are there specific issues with this type of assignment that I should be aware of?

This is not really a leasehold situation from what I know now. I do work on subdivision properties in a Reservation under leasehold ownership, but this appears to be very different.

 

[Webbed Feet]

Confusing. You don't post an intended use or generally what the purpose of the appraisal services would be. But regardless, this strikes at the very heart of appraising. That would be identification of the type of estate and property rights involved before any type of SOW matters could be resolved. As there are implications regarding rights that predate even the establishment of the Reservation, which very well might get one into tribal law.

Off the top of my head, I don't see how anyone could proceed without involvement of what would essentially be a tribal real estate attorney with chain of title work. With no clear understanding of the estate and rights involved, no HC or EA would be credible for use.

After you read what this link goes to, and your head is swimming, you'll better understand why...

http://www.tribal-institute.org/lists/probate.htm

 

[VolcanoLvr]

Thanks Webbed........and the link provided is interesting reading. (Where do you find this stuff, anyway!!??)

Purpose is 'refi', which I should have noted.

Very few appraisers do this type of work, but I did talk with one up here in the wild northwest who has. She carefully noted that the BIA must be involved in signing off on any new loan documents. And the improved property has to be legally defined, not just plunked in part of an overall larger parcel that is part of the allotment.

Chain of title is important, because without a proper legal description and being able to sell the property 'to anyone' it's a difficult situation. If selling to anyone is possible, then 'regular' comps can be used.

I'm just in the initial stages of this evaluation process so that I can help the client (small bank) and myself understand the issues before accepting the assignment.

If anyone else has other suggestions/comments/etc. it will be appreciated.

[One thing I should add..........I do lots of 'hairball' assignments in my area. I'm not afraid to dive into these, since it adds to my skills and makes me a better technical appraiser than some of the 'form fill' junk reports done by so-called appraisers I've been reviewing lately.]

 

[CANative]

Some comments from an appraisal I completed in Hopland

Essentially what is happening is that you will need to do a cost approach without land. Sales of tribal allotment land properties will probably be non-existent because a) they don't happen and b) even if the did happen the tribal members do not discuss tribal business with non-tribal persons. You also need to make sure and document that the client waives the traditional definition of market value. In addition to the cost approach I used off-reservation sale comps with similar lot sizes and improvements and backed out the land value. This reconciled well with the cost approach data.

Approaches to value:
The income approach was not applicable due to lack of data. The sales comparison approach was also not applicable due to lack of data of similar sales on tribal lands. The appraiser has used sales of manufactured homes on similar size parcels in Hopland and the nearby community of Redwood Valley with fee simple ownership and has used an adjustment to back-out the raw land value of these sales. Because the subject's market is restricted to members of the Hopland Band of Pomo Indians, this should not be considered a sales comparison approach, per se, but can be considered as data supporting the cost approach method which has been given most weight. The appraiser has used the Marshall & Swift Residential Cost Handbook as a guide in estimating replacement costs and depreciation. The appraiser has extensive experience in the appraisal of manufactured housing in Mendocino and Lake County and has specialized training including courses from the Appraisal Institute and the Lincoln Graduate Center. Based on reviews of manufacturer invoices, dealer invoices and interviews with local contractors and developers, it is the appraisers opinion that both the Marshall & Swift handbook and the NADA Manufactured Housing Appraisal Guide indicate pricing lower than that actually observed in this region. For that reason, appraiser has changed the local multiplier of 1.05 cited on page F-10 of the M&S cost manual to 1.15. Additionally, local building costs have been used for the site built bedroom addition, detached garage, decking and patio, and miscellaneous yard improvements.

Discussion of the leasehold ownership position of tribal property:
The subject property is a leasehold estate whereby the current owner (lesee) has possessory interest rights in the property for as long as that person and/or their heirs are qualified, or until the lessee sells or otherwise relinquishes their rights to that property. Approval by the Hopland Tribal Council (the governing body of the Hopland Band of Pomo Indians) would be required. Land that is part of a designated Native American reservation is typially held by a different form of ownership that the typical land held in fee simple and encountered on a more regular basis off the reservation. After some basic research the following is what appears to be the legal structure of typical reservation land. The land which has been designated as reservation property is held in trust by the U.S. Government and administered by the Bureau of Indian Affairs (BIA) representing the United States Department of the Interior for the appropriate tribe. The BIA for the U.S. Department of the Interior then, through the appropriate means, authorizes the tribe (in this case the Hopland Band of Pomo Indians) to transfer this land or, in this case, assign a portion of land as deemed appropriate to the various parties who are qualified to be land holders on their reservation property.

Land is transferred via a Resolution and Certification document issued by the Tribal Council. It appears the matter is voted on by Tribal officers. This possessory interest is a lease form of ownership whereby only members of the tribe can actually hold title from the appropriate land agency or tribal real estate office and appears that tribal members and governing bodies view the property as being held basically in a "fee simple" form of ownership as far as their qualified members are concerned. However, even though reservation property can be freely transferred among qualified member it is not available to the public-at-large and therefore, there is a difference in the market for which this property is subject to. As a result, the appraiser must address what effects, if any, that the difference in land ownership has when comparing properties on the reservation to properties off the reservation.

Traditionally, property has rarely been exchanged on the reservation with the exception of it being passed between family members or in the more commercially conducive areas where it is leased and sub-leased multiple times. Therefore, as a result, comparable sales of similar ownership type properties have been far and few between and of those, most were between family members and can not be considered true arms-length transactions, further eliminating possible comparables. The appraiser could find no sales or transfers of similar properties that can be considered arms length transactions and data gathering has been further hampered by privacy issues within the tribal community. A traditional and strict interpretation of market value would have to be waived by the client, lender and HUD, as outlined in the HUD Handbook 4150.2, Section A-2, paragraph A-2.4. The cost approach, as reported on the attached 1007B form and supported by sales of fee simple estates outside the reservation and adjusted for site value, has been given most weight in determining an opinion of value of the subject property.

Extraordinary assumptions:
The site built addition appears to be completed in a workmanlike manner but the appraiser is not an expert in construction or structural modifications to manufactured housing. The extraordinary assumption is made that this room addition has been built in compliance with applicable codes and health and safety requirements.

 

[PropertyEconomics]

Dave ... I would contact your local or regional BIA (Bureau of Indian Affairs) office and have a conversation with their appraiser. They can be of tremendous benefit in these instances and can often steer you in the right direction as to how properly reflect value on lands held in trust by tribes.

Good luck.

 

[VolcanoLvr]

Greg...Thanks very much for your detailed post. It should help others as well. I've actually received an AMC order in the past for a similar situation on another tribal land area, but turned it down. Your info helps understand the process.

One question.....did you do the report on a standard Fannie form? Or on the GP form, or perhaps narrative?

By the way.....I decided to invest in the foreclosed phantom lake view lots in your area. (OK...kidding of course!)

PE.....once I hear back from the client, that's a call I intend to make. Thanks for the advice.

 

[CANative]

If you're going to talk to indians make sure you know whether or not they're sensitive to the term "reservation" as opposed to "rancheria."