Attention should be called to particular aspects of one or the other of these bills, however, wherein pending language is in need of clarification or correction in one way or another. Specifically, I would recommend changes in the following respects:

(1) Section 108(b) of S. 1201, providing for the coordination of relocation activities with other pertinent governmental activities at the community level, where practicable, needs to be amplified in order to make more controlling the methods of organization by which this coordination can be achieved. Recent research into this matter clearly indicates that there are particular approaches which yield the most efficacious results. These ought to be made requisite upon pertinent units of local government, particularly, where federally assisted activities are involved.

(2) Section 108(b) (2) makes reference to "decent, safe, and sanitary housing" but does not define the term for relocatees. In federally assisted urban renewal and public housing activities, where relocation of site occupants is involved, this terminology for a long time had a variable meaning. Although such variations in meaning are probably less extreme than previously in this area, such standardization as exists has been effected largely by administrative means. Extending this "decent, safe, and sanitary" requirement to many other federally assisted activities where relocation is pertinent suggests the need for statutory guidelines or definitions, as the case may be, to remove possible dissimilarities of meaning of interpretation. Section 108 (b) (2) or section 110 or section 115 should be rewritten with these considerations in mind, including the prerogative to withhold relocation payments of the various kind authorized by this bill. (3) Closely related to the above is the absence of any provision by which displacing agencies shall proceed with ascertaining the needs of relocatees in federally assisted activities, including the steps proved most suited to interviewing and working with families on their rehousing needs, developing an adequate and decent off-site housing supply, and acquiring adequately trained personnel for such interviewing and counseling of relocatees. There is also lacking in this respect any emphasis on criteria or procedures for the evaluation of results experienced by relocatees in terms of off-site housing acquired, the adequacy of advisory procedures utilized by displacing authorities to get relocatees satisfactorily resettled, and so on. Payments of compensatory funds to businesses or residents uprooted by Federal or federally assisted activities should have evalnative criteria, or requirements for them, attached mandatorily, and stipulating the compliance and superintending responsibilities of recipient and benefacting levels of government, respectivelv.

(4) Section 8(a) (D) of S. 1681 makes provision for temporary relocations. This section of the bill ought to be rewritten to clarify the meaning of the term, and arrange for clearer specifications relative to what "temporary" entails in terms of housing quality and its duration. The tendency of many displacing authorities to place and list relocated families in "temporary" residences, and carry them indeterminately in such a classification without much regard for their right to decent, safe, and sanitary shelter as soon as practicable, needs to be obviated. Stricter definition and administration of what is "temporary" is sorely needed.

Senator MUSKIE. Our next witness is Mr. Robert W. Hendricks, vice president and chairman of the public affairs committee of the Society of Real Estate Appraisers.

STATEMENT OF ROBERT W. HENDRICKS, VICE PRESIDENT AND CHAIRMAN, PUBLIC AFFAIRS COMMITTEE, SOCIETY OF REAL ESTATE APPRAISERS; ACCOMPANIED BY JAMES V. MORGAN, EXECUTIVE VICE PRESIDENT; AND JERRY C. DAVIS, STAFF VICE PRESIDENT, AND DIRECTOR OF PUBLIC AFFAIRS

Mr. HENDRICKS. Mr. Chairman and committee members, I am Robert Hendricks of East Orange, N.J., an international vice president of the Society of Real Estate Appraisers, and chairman, for the last 2 years, of the society's public affairs committee. My associates are James Morgan, executive vice president of the society, from Chicago,

and Jerry Davis, staff vice president and director of public affairs for the society here in Washington.

The organization that I represent has a membership of 16,000 with chapters in 180 cities and individual members in every State. The Society of Real Estate Appraisers is 30 years old this year, and it is the largest, in terms of membership, of the appraisal professional

societies.

From the start of the study conducted by the Select Subcommittee on Real Property Acquisition, we have been closely following the research that has helped to form the basis of the Senate bills that we consider here today.

Our international president testified before the Select Subcommittee on Real Property Acquisition in 1963, and individual members of the Society of Real Estate Appraisers also were heard by that subcommittee.

I might say that our membership and leadership have been greatly impressed by the conscientiousness and depth of the study that has been made of acquisition practices in eminent domain. One would be at a loss to say what important factor was not considered by the study, and the evidence of that thoroughness is available to us in the detail and documentation that support the select subcommittee's recommendations, as embodied in S. 1201.

Mr. Chairman, it is our intention this morning to present a few modest recommendations that we believe will strengthen the proposed legislation, but first we would like to express our emphatic endorsement of the provision that the approved appraisal should be the basis of the offer to a property owner in a public taking.

The significant word in this provision is "approved" because this word secures for the agency that flexibility that some have believed would be infringed upon by this legislation. An administrator who feels that his appraisal is not truly representative of the value of the property can always order another appraisal, and it might be added that this appraisal can be performed either by a staff appraiser or a fee appraiser.

When an appraisal finally is approved, then it is understood that this is the agency's fair estimate of the value of that property, the price it is willing to pay for the acquisition. At that point, the intent of the principle of just compensation is clear, the agency should offer the figure that it has accepted as fair market value, and no less than that figure. Anything else becomes a contradiction to the meaning of just compensation because anything less than just is unjust.

Senator MUSKIE. I think that it is customary, at least in my Stateand I think in others to have more than one appraiser. They do not necessarily coincide and the agency does not always select a single figure or any combination of those two as an approved appraisal figure. These agencies do not indulge in that practice. Are you saying that they should?

Mr. HENDRICKS. They should. I should say that one of them should be right, rather than an average or somewhere in between.

Senator MUSKIE. Is appraising that exact a science?

Mr. HENDRICKS. No, sir; it is an opinion business.

Senator MUSKIE. Then if you have two competent appraisers or three competent appraisers or as many as it is the practice to use, who

have a variation in their appraisals, how can you say that even one of them gives you the right one to the exclusion of the others?

Mr. HENDRICKS. There should be a reasonable range between the two appraisals. Obviously, if there is a great difference of opinion, if I were the administrator I would order at least one more, or, perhaps two more appraisals.

Senator MUSKIE. Then if you have two or three, how would you decide which one to accept? An administrator by definition is not himself a competent appraiser. He employs two or three, and he gets two or three different figures. The variation normally, probably would not be great, but it would be some. How is he to decide which is the correct figure?

Mr. HENDRICKS. Well, a competent appraisal should lead the administrator to the proper conclusion.

Senator MUSKIE. If he had two or three appraisals, and they are all different, how would he decide which one is the right one?

Mr. DAVIS. At that point the administrator has to make a decision that the documentation and the support for one of these appraisals is adequate in his opinion to justify that as the fair market value. He may choose the lowest appraisal or the middle one or the highest one, but at some point he is going to come to a decision that this is what he believes is the market value of the property. At that point we feel that he should offer that amount.

Senator MUSKIE. Well, it seems to me that the appraisal figures are going to serve a different function in S. 1201, if enacted into law, than appraisal figures previously have served. It is my understanding that up to now, the administrator has used the appraisal figures. This is why we need more than one-in order to justify his paying that much-not for the purpose of fixing with precision what he thinks is the just figure, but rather for the purpose of building the record that would justify the figure that he ultimately pays to the property owner.

In other words, the appraisal figure is not now used so much to fix what the property owner ought to get, as it is to justify the administrator's decision when a price is finally agreed upon.

Am I wrong in this? That is why the administrators seldom identify one of two or one of three as the appraisal figure in terms of fair compensation for the party.

In other words, in the highway program these appraisal figures are available and then you go out and buy and you may start with the lower appraisal figure or a higher one or some figure in between or something below them all, but your attempt is to arrive at a figure that is generally supported by the appraisal figure. Is this not so?

Mr. DAVIS. At some point, though, he comes to the decision on a figure because of what he has in his appraisal. And what we are saying is that he should not start below this figure, that is, maybe he finally decides that his lowest appraisal is what his agency is willing to pay. Then it has been customary in some Federal agencies to start 10 percent below that appraisal. We are saying that if that is the approved estimate of the market value, according to this administrator, then he should start there in negotiation.

Senator MUSKIE. With the lowest figure?

Mr. DAVIS. No, not necessarily with the one that he feels is representative of the market value.

Senator MUSKIE. I know, but if he has hired these appraisers and has three different appraisals how does he decide which one of the three is the correct one?

Mr. HENDRICKS. I think the test comes when you negotiate for the property. In New Jersey, particularly in East Orange, we have had several large urban renewal projects. The proposed East-West Freeway bisects an urban renewal project. I made the appraisal for the redevelopment agency. The redevelopment agency was to acquire the property, part of it for the highway department, and the highway department was to pay the redevelopment agency exactly what they had paid for it. Unfortunately, when the highway department reviewed our figures, in some cases they did not agree with the appraisal. One owner got one value, and down the street, because the highway department would not accept the figures, that owner got considerably less.

Senator MUSKIE. I am trying to figure out the practical effect of this provision.

If an agency has three appraisals would it not tend to feel that the lowest one is as fair as any other figure? They are all a matter of opinion. Would not that administrator tend to take the figure that would be the lowest appraisal? And if he did, is that wrong?

Mr. DAVIS. The point that we are trying to avoid is starting below the lowest.

Senator MUSKIE. I understand that. Would he then tend to use the lowest of the appraisal figures? Would it be wrong if he did that? Mr. DAVIS. We would hope that he would use the appraisal that in his judgment is best supported by the data.

Senator MUSKIE. His judgement would have value?

Mr. HENDRICKS. They must examine all of them. Once you have acquired a number of properties in a given neighborhood you have a pretty good idea of what you are paying.

Senator MUSKIE. The judgment is to be limited by the independent appraisers' judgment that you provide?

Mr. HENDRICKS. As a practical matter, if you are buying many properties, it has a very large impact on what the appraised value is. Senator MUSKIE. Having a good idea is something different than identifying the exact figure that I have been talking about here.

In

your statement you state that there is a way of finding the exact figure and that there is a just figure.

Mr. HENDRICKS. Only as to the last one. It is an opinion.

Senator MUSKIE. I do not know whether we can pinpoint it any better than we have. This is just one of the difficulties.

Mr. MORGAN. May I offer a comment at this point? The Senator has suggested that the lowest appraisal in every case should be the deciding point. I think that the administrative people may, in their judgment, decide in a specific instance that the lowest appraisal is not properly supported and does not represent the value because of the supporting data. I would dislike to see a law that would make it mandatory that the lowest appraisal be used, because it may not, in fact, be valid.

Senator MUSKIE. I am not suggesting that, but when we write these laws we have to try to anticipate what the practice will be. And you fellows are the experts. I want to get in the record something that

will be helpful to the poor administrator who sometime in the future may be trying to carry out our legislative intent and who looks to the record for help.

Mr. HENDRICKS. From that point of view we are on the other side of the fence.

Senator MUSKIE. Thank you. Please proceed.

Mr. HENDRICKS. The select subcommittee's study provides documentation to show that the property owner who is not aggressive or who is not informed is the property owner who suffers when less than just compensation is offered and accepted. We submit that these are precisely the people who most need the protection of the law.

What is often overlooked in considering the approved appraisal as the basis for an offer is that the appraisal itself can be used effectively in negotiations. At present, when negotiations start below the approved appraisal estimate, the agency does not dare show the property owner how its offer was conceived, or on what evidence the appraiser based his estimate of value. The appraisal, if it is the thorough job that most Federal agencies demand, will convince the reasonable property owner that the offer based upon its findings is objective and fully supported by the market.

Over a period of months and years, the confidence of the public in Government acquisition procedures is bound to reflect the good intentions of this law. When it becomes obvious that the acquiring agency's offer is based on a properly supported estimate of value, and that it isn't a deliberately reduced figure that is only thrown out to start the horse trading, we are certain that the whole atmosphere of negotiations will be improved and, far from resulting in more condemnation, the effect will be less.

Senator MUSKIE. I think the statement that you have just made is a very important one. In other words, we ought to take Uncle Sam out of the horse trading business.

Mr. HENDRICKS. Can we come back to that later?

Senator MUSKIE. All right.

Mr. HENDRICKS. To turn to another topic, and to the first of our suggestions for improving the proposed law, we have learned in our 4 years of close scrutiny of the Federal agencies through our public affairs program that a severe omission has been tolerated in the law, and this bill would seem to be a grand opportunity partially to correct the deficiency.

Congress has never required, so far as we can learn, that all significant transactions involving Federal moneys be based upon an informed estimate of market value. This has, perhaps, led to abuses in some places and will lead to others until it is corrected.

What this means, Mr. Chairman, is that a property can change hands from the Government to a private interest for a price that may have no relationship to the true worth of the property. The purpose of an appraisal is not only to protect the property owner whose land is being acquired, but to protect the taxpayer by assuring that he shall pay no more than just compensation. If an agency's administrators can conclude leases of Government property at whatever price they wish. without any relationship to market value, then almost anything can happen.