What Do Appraisers Need to Know to Value Properties Subject to Eminent Domain Takings?

If you’re an appraiser with a desire to do eminent domain appraisal work, there are several things you’ll need to know before embarking on such an assignment. Below is a quick and handy list of things to consider.  

Eminent Domain Appraisals Follow Unique Rules and Standards 

Appraising property for eminent domain purposes is not the same as appraising it for regular valuation purposes. While most jurisdictions allow market value to be determined by the comparable sales, income and cost approaches, eminent domain appraisals must also comply with specific statutes, case law, and procedural rules. Moreover, these additional standards are not uniform as they differ from state to state. 

Knowing what these added components are is critical in making sure that the eminent domain appraisal is sufficiently competent to form the basis of the appraiser’s ultimate value conclusion. This is why eminent domain appraisers often work closely with eminent domain lawyers to ensure that all necessary appraisal requirements are met. 

Eminent Domain Appraisals Employ Special Terms and Concepts  

Appraisers wishing to do eminent domain work must also master special terms and concepts. While terms like highest and best use, fair market value, and larger parcel are part of an appraiser’s general knowledge, in an eminent domain proceeding these same concepts may take on special meaning and application  depending upon the unique facts of the case. 

Still other terms, such as the scope of the project rule, the undivided basis rule, and special benefits may be unfamiliar to most appraisers; nonetheless, these terms (and many others) must be fully understood, should they impact the value to be ascertained for eminent domain purposes. 

Appraisers that are not knowledgeable about the special terms in an eminent domain case run the risk of providing a value conclusion that is either erroneous or subject to being challenged. 

Both Value and Damages Make Up Just Compensation 

Eminent domain appraisals are not just about ascertaining the value of the property being taken from the owner. In situations where only part of an owner’s property is being condemned, such appraisals must also address the issue of potential damages, sometimes called severance damages. 

The issue of damages to remaining property is important because it often drives the parties to litigate a case, particularly if  one side determines that no damages or minimal damages exist, while the other side contends that the damages are significant. 

Because the element of damages can play such a critical role in an eminent domain case, it is important that an appraiser have a full and complete understanding of how damages are determined, what elements make up a proper damage analysis, and what market data supports the final damage conclusion. 

Know How the Litigation Process Works

To be an expert appraiser in an eminent domain proceeding requires an understanding of how court proceedings work and what it takes to be a testifying expert witness. For instance, eminent domain appraisers often will have their deposition taken, at which point the opposing lawyer will ask questions in the hopes of exposing any flaws or errors in the appraiser’s logic, underlying analysis or value conclusions. 

Furthermore, while many eminent domain cases settle, many others go to trial. When that happens, the appraiser will likely be called to testify. And in situations where valuation opinions diverge to a significant degree, the appraiser needs to be prepared to zealously defend the opinion being given under what can sometimes be grueling cross-examination by the other side’s lawyer.

Time, Attention to  Detail, and Expertise

Becoming an expert appraiser in an eminent domain case clearly requires time, attention to detail, and unique expertise. However, many appraisers who do eminent domain work find it absorbing, worthwhile, and financially rewarding. 

Because appraisers doing eminent domain work must have specialized training and expertise, they can  often command hourly rates significantly above those who do not. 

About the Author:

Leslie Fields is the Executive Director of Owners’ Counsel of America. Before retirement in 2014, Leslie practiced law for 33 years, mostly with Faegre Baker Daniels (now Faegre Drinker), a law firm with national and international offices. While at Faegre, Leslie  served on the firm’s Management Board and became a renowned legal expert on eminent domain and property rights issues, co-chairing for many years the national ALI-CLE Eminent Domain and Land Valuation and Litigation Conference, and presenting on the subject of eminent domain in locales as distant as Tsinghua University in Beijing China as part of the Brigham Kanner Property Rights conference sponsored by William & Mary Law School. During much of this time, Leslie served as the Colorado member of OCA and wrote the definitive textbook on Eminent Domain Law in Colorado. Leslie came out of retirement in 2017, specifically to help lead OCA in its mission of helping private landowners in eminent domain and takings situations across the country.