Anatomy of An Eminent Domain Appraisal

This Article is written by Owners’ Counsel of America for general informational purposes only.  It is intended to assist landowners by providing them with some basic advice on how to critically review an eminent domain appraisal that seeks to develop an opinion of fair market value in a condemnation case, which in many instances will strongly influence of the amount of just compensation to be paid. This Article is not to be viewed as providing legal advice or to be considered as a substitute for consulting with an experienced eminent domain, takings or property rights lawyer on the matters covered herein.

We begin with the question of why it is important to review an eminent domain appraisal and what can be learned by doing so. In a nutshell, a critical review of an appraisal will lead to a better understanding of:

• The strengths and weaknesses of the opposing sides’ valuation case
• The qualifications and experience of the opposing appraiser to opine on the matters set forth in the appraisal
• How the opposing appraiser thinks or analyzes keys issues
• Settlement options or possibilities
• How to go about preparing for depositions or cross-examinations
• What pre-trial or in limine motions may be necessary to address valuation and appraisal opinions

Next we view an appraisal to determine:

• Just how credible the opinion of value is
• Whether it is based on speculation or conjecture
• Whether there are any  flaws in the logic or reasoning
• Whether there are any errors or omissions
• Whether it is poorly written or difficult to follow and understand

Drilling down further, we determine whether the appraisal opinion is:

• Based on an incomplete or misleading valuation analysis
• Improperly ignores compensable damage elements
• Inconsistent with known facts or fails to consider relevant facts
• Based on extraordinary assumptions or limitations not supported by the facts
• Utilizes improper appraisal methodologies or applies appropriate appraisal methodologies incorrectly
• Relies improperly on opinions of others
• Lacks proper verification or confirmation of data being relied on

Of course, there are basic appraisal standards that all appraisals must comply with which are called the Uniform Standards of Professional Appraisal Practice or USPAP. These standards were adopted by Congress in 1989 and compliance is required by state-licensed and state-certfified appraisers, particularly those involved in federally-related real estate transactions.

Remember that eminent domain appraisals are not typical appraisals such as those that are obtained for real estate transaction purposes or to obtain a loan or a mortgage. Such appraisals are unique in that they must comply with special rules, procedures, standards, and even laws for valuing property that is the subject of a condemnation action. If an eminent domain appraisal fails to comply with the necessary requirements for its preparation, it can be deemed inadmissible in a condemnation case. This is one further reason why a critical analysis of an eminent domain appraisal is so very necessary.

For further information about how to critically examine and evaluate an eminent domain appraisal please review “Anatomy of an Appraisal,” based on a presentation given by the Executive Director at the annual national ALI-CLE Eminent Domain and Land Litigation Valuation Conference.