Fair Market Value & Just Compensation

In real estate transactions, there are sellers and able and willing buyers in which a price, terms, and conditions are negotiated. If either party is unwilling to compromise and reach a reasonable conclusion for both parties, the real estate process would be terminated.

In terms of eminent domain, there is a buyer (government) and perhaps not a willing seller. The fair market value of the property in question has to be established. This value is typically established by a current property appraisal and guided by local laws. In most instances, the government entity may have to obtain three separate appraisals to set the fair market value for the property.

If the seller does not except the appraised value and price offered, both parties may proceed through legal proceedings. Both parties would have their appraisers as expert witnesses offering testimony for the record.

Just Compensation

The fair market value of the property may be more than the appraised value of the property. Many think of eminent domain as the taking of vacant land but in most cases, buildings, businesses and homes are the focus of an eminent domain proceeding. Not only should the just compensation include the value of the land and structures but the value of the business. And the use of the land to be taken by eminent domain may have additional impact on the value on the remaining property. Just compensation should include the value of the remaining property, retained by the owner, but impacted by the project.

Public Use

Government has always used eminent domain for projects and/or improvements associated for “public use". This approach has expanded to include protecting the health, safety, welfare and “convenience”. Typical government improvements include road, water, and sewer projects. Now government is seeking to redevelop property for new uses – public and private. Property has now been classified as “blighted” by government to justify redevelopment efforts by government.