“Why in the world does the appraisal cost that much?!”
It’s a question that many a flabbergasted client has asked me over the years. And, to be fair, it’s a completely justifiable question. It is true that appraisals in condemnation cases are expensive – significantly more than appraisals people are used to seeing in their everyday lives. What might cost a couple thousand dollars for a bank loan appraisal can cost in excess of $10,000 for a condemnation appraisal. So, what gives?
There are numerous factors that increase the cost of a condemnation appraisal. Here are a few:
Condemnation Appraisals Require Specialized Knowledge
Appraising property in a condemnation case requires intricate knowledge of the unique rules governing such appraisals. The most important of these rules establish what is (and what is not) compensable in a condemnation case. Understanding the nuances of those rules requires a level of expertise that is not common among appraisers. For instance, there are numerous issues impacting market value that are often excluded from consideration in the condemnation context. Understanding those issues and being able to dodge potential land mines associated with them is often the difference between testimony being admitted and excluded when a condemnation matter goes to trial.
Condemnation Appraisals Receive Heightened Scrutiny
A condemnation appraisal requires heightened attention to detail. Unlike almost all other appraisals, an appraisal in a condemnation case will eventually be provided to a lawyer whose job it is to undermine it and pick it apart. Every sale, every data point, every opinion is subject to cross examination. As a result, there is an extra layer of time and precision required to produce an appraisal in the condemnation context.
Condemnation Appraisals Represent Two Appraisals in One
A condemnation appraisal is really two appraisals in one. It’s an appraisal of the property before the taking (without the project in place) and an appraisal of the property after the taking (assuming the proposed project has been constructed). The after-taking analysis is a significant additional step that is not present in most appraisals. In many cases, the after-taking portion of the appraisal is the most difficult and time-intensive portion of the project. The extra layer of work comes with an extra cost.
The Appraiser’s Job Isn’t Just to Write a Report
When an appraiser agrees to a condemnation assignment, they aren’t just agreeing to perform an appraisal. They are agreeing to serve as an expert witness and to testify under oath. It’s a job that is not for the faint of heart and that drastically reduces the pool of potential candidates willing to take on the task. Just like in real estate, when you reduce the supply, the price goes up.
Appraisers are an invaluable part of the condemnation process for landowners. While not every condemnation case justifies the landowner hiring its own appraiser, many do. And, when they are required, you want one that thoroughly understands the process and the significant expectations involved with the project. Though the cost of the appraisal might be a tad eye-popping at first, a well-done appraisal is ultimately worth its weight in gold.