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Property appraisal, if you do it right, should be lonely work

From the Ground Up

When I heard that a local city council member was questioning the appraisal process during a taking for a road widening I figured he was just playing up to his constituents.

After all, it’s difficult to explain to an elderly homeowner that the government wants to take your land and that it will treat you fairly. Then I learned that the appraisers apparently arrived in the same car to gather information about the property. My feelings about the City Council member changed quickly. Fortunately he raised a red flag about an appraisal procedure that should be questioned.

Imminent domain is one of the four powers of government. The other three are taxation, escheat and police power. Imminent domain is the power of government to take private property for public use. In the case at hand, the public use is the widening of a road, which is a legitimate public and common public use and purpose. The process of exercising the power of imminent domain is known as condemnation. When a property is condemned it is taken from the owner, who must be compensated the fair market value of the property.

In most cases the public agency orders an appraisal to determine the value of the property and the property owner will do the same thing. More often than not the property owner’s appraisal will be the higher of the two. When the government or other entity doing the condemning and the property owner are unable to reach agreement on the compensation the case goes before a jury.

Many property owners are surprised to find that juries don’t see quite the value in the property that the owner does.

It appears that in the above case, the public agency ordered two appraisals of each property for the purpose of setting the value as the average of the two. Obviously, the public agency was going above and beyond the call of duty to make certain that the property owners received fair compensation.

The explanation for the appraisers’ conduct is that they were simply saving time. Let’s review the appraisal process.

An appraisal is defined as an estimate or opinion of value. The appraiser should have no interest in the property under appraisal and if her or she does it should be disclosed. The appraiser is an independent, third party hired to give an unbiased opinion. The first step in the appraisal process is to gather the data about the property. This will include reviewing the legal description and making a personal inspection of the property. The inspection involves a visual examination of the property, usually including measurements and photographs. In fairness to the appraisers, it is indeed time saving when both inspect the property at the same time and assist each other with measurements and visual examinations. Sharing such information does not damage the integrity of the appraisal.

Unfortunately, it gives the appearance that the appraisers might be sharing more data than just the property description or even market information. It gives the impressions that they might be comparing notes. In short, it just doesn’t look good. It doesn’t mean that anything is wrong, and I’d bet that the appraisers haven’t done anything wrong.

So, what should an owner do in such a case? Let me answer that question in this manner — I would not sell my property unless I had my own appraisal done by an independent appraiser who was not employed by the government agency that was doing the taking. The way I would find such an appraiser is to call two banks in my community and ask them to provide a list of their approved appraisers. When I received the lists I would start calling appraisers to discuss their qualifications, especially their previous experience at appraising property for road expansions. When I found one that indicated a professional demeanor and knowledge I would hire him or her right away to provide an unbiased opinion of value. If the appraisal received was higher than the public agency’s, then I would use it as a bargaining tool to get more money for my property. If it were lower, I would take what the agency is offering.

Appraisers are put in some difficult positions in such cases. They are asked to work quickly, but efficiently. They are asked to testify if necessary. Sometimes they aren’t paid nearly enough for what they do. It’s a tough job. It’s also a lonely job.

And that’s the way it should be.

Phil Hardwick’s column appears regularly in the Mississippi Business Journal. His e-mail address is hardwickp@aol.com.

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