Appraisal basics
What an eminent domain appraisal actually is
It is an opinion of value prepared for one purpose: to estimate what a government must pay an owner for property it is taking. That purpose changes the method, the date, the definition of value and what may be counted.
Definition
An appraisal written for a legal question
Most appraisals answer a commercial question. A lender wants to know whether a property secures a loan. A seller wants to know what to ask. The appraiser estimates what the property would fetch and the answer is useful because it predicts behaviour in a market.
An eminent domain appraisal answers a constitutional question instead. The Fifth Amendment requires just compensation when private property is taken for public use, and every state constitution contains a similar guarantee. Just compensation has been interpreted to mean fair market value, measured at a fixed date, under a definition supplied by law rather than by the market.
That reframing has consequences throughout the report.
The difference
How it departs from an ordinary appraisal
| Element | Market or lending appraisal | Eminent domain appraisal |
|---|---|---|
| Purpose | Inform a transaction or a loan | Estimate compensation owed under law |
| Date of value | Usually current | Fixed by statute, often the date of taking or filing |
| Definition of value | Market value as defined by the lender or the client | Fair market value as defined by the law of the jurisdiction |
| The project | Treated as part of market conditions | Generally excluded, so neither the owner nor the agency gains from it |
| Part of a property | Rarely valued alone | Routinely valued as a before and after difference |
| Damage to what remains | Not considered | Severance damages are part of the valuation |
| Audience | Client and lender | Agency, owner, counsel and potentially a jury |
Four features
What makes this appraisal different in practice
The project influence rule
Value is measured as though the project causing the taking does not exist. An owner cannot claim the increase a new interchange will bring, and an agency cannot pay less because the planned road blighted the area first.
The larger parcel
Before anything is valued, the appraiser decides what counts as the whole property. Unity of ownership, use and contiguity drive that call, and it determines whether damage to a neighbouring tract is compensable at all.
The unit rule
Property is valued as a whole, not as the sum of its parts. An owner cannot add the value of the trees to the value of the land to the value of the buildings and call the total compensation.
Non compensable items
Business goodwill, sentimental attachment, relocation costs and the inconvenience of moving are generally excluded, however real they are to the owner. Several states modify this by statute.
Questions about the appraisal itself
Who orders the eminent domain appraisal
The condemning agency orders one to support its offer. The owner may order an independent appraisal, and in contested matters generally should. Both are opinions, and neither binds the other.
Must the agency show me its appraisal
Practice varies. In acquisitions with federal funding the agency must provide a written statement of the basis for the offer, which in substance means the appraisal. Many states impose a similar duty. Ask in writing and keep the request.
Can the appraiser value just the strip being taken
Only where nothing else is affected. Where part of a property is acquired, the correct method values the whole before and the remainder after. Valuing the strip alone omits severance damages by construction.
Does the appraiser decide what I am paid
No. The appraiser gives an opinion. The agency makes an offer, the parties negotiate, and if they cannot agree a court or a commission determines compensation, often with competing appraisers testifying.
What qualifications should the appraiser have
State certification as a general appraiser, demonstrable condemnation experience and familiarity with the jurisdiction. For federally funded work, familiarity with the Uniform Appraisal Standards for Federal Land Acquisitions, the Yellow Book.
Get a valuation question answered
If an offer has arrived and the number does not match what you believe the property is worth, the appraisal behind it is the place to look. Start with the pages below.