Condemnation appraisals

Condemnation appraisals differ in many ways from typical market value assignments. Condemnation appraisals are typically required when a condemning authority seeks to acquire real estate. The condemning authority is typically a governmental or quasi-governmental entity. While condemning authorities have an absolute right to take property, they are required to pay market compensation for property taken. Opinions of market compensation can vary widely. In condemnation appraisals, appraisers often cannot consider the best comparable sales (if they were purchased by the condemning authority) and comparable sales impacted by condemnation. In addition, to the condemnation appraisal, the values of the "part taken" and "damages to the remainder" must both be calculated. Further, since a condemnation appraisal may be scrutinized during a judicial proceeding (see expert witness testimony) a higher standard of care is required in researching and preparing the appraisal.

In condemnation actions, the rights of condemning authorities are broad and virtually limitless. They can take property for public use or even for private use (to facilitate assemblage of individual properties).

Property owners should proceed with caution when approached by condemning authorities. Some condemning authorities are straight forward and make their initial offer their best offer. Other condeming authorities start off with a below-market offer and slowly escalate offers at each step in the process (initial offer, commissioners court, subsequent to following suit, and at courthouse steps). Property owners should consult with an appraiser or property owner familiar with the condemnation process to ensure fair and equitable treatment.

Most condemnation actions take only a portion of the property (referred to as "part taken"). The balance of the subject property is referred to as "the remainder". The market value of the part taken is typically not a source of meaningful contention. However, the damages to the remainder is generally a highly contentious matter. (Damages to the remainder refers to the diminution in market value for the property not taken through condemnation.) Consider the following examples:

• Condemning authority takes 1 acre of a 4 acre retail center. However, this 1 acre parcel comprised 40% of the center's parking.
• Condemning authority takes 90% of site including the office building. The remaining site is too small to allow any improvements.
• Condemning authority takes two-acres out of a 10-acre parcel improved with an industrial building. The two-acre portion includes the parking and office portion of the building. Damages to the remainder will include demolishing an additional portion of the building to rebuild the office and parking.
• Condemning authority takes two-acres out of a 10-acre parcel improved with an industrial building. The two-acre portion includes the parking and office portion of the building. Damages to the remainder will include demolishing an additional portion of the building to rebuild the office and parking.

Appraisers often reach markedly different conclusions regarding the damages to the remainder. Preparing a credible condemnation appraisal consistent with factual data generally encourages an equitable settlement. Opinions of value regarding condemnation often vary substantially. The most meaningful differences typically occur with regard to the damages to the remainder.

O'Connor and Associates is the largest independent appraisal firm in the southwestern United States and has over 40 full-time staff members engaged full-time in valuation and market study assignments. Their expertise includes condemnation appraisals, business valuations, commercial and single-family real estate appraisals, business personal property valuations, purchase price allocation for businesses, valuation for property tax appeals, partial interest valuation, estate tax valuation, and expert witness testimony. They have performed over 20,000 appraisals since 1988.

To obtain a quote or further information regarding condemnation appraisal proceeding, contact either George Thomas or Craig Young at 713-686-9955 or fill out our online form.