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Condemnation appraisals differ in many ways from typical market value assignments. 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, an appropriate 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 straightforward and make their initial offer their best offer. Other condemning 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.
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.