Market value is the prevailing, but not exclusive measure of determining the just compensation owed to a landowner under the Fifth Amendment.
Fair Market Value is defined by appraisers as the most probable price, in terms of cash that would be paid by a willing buyer to a willing seller, each being fully informed of the property's good and bad features, with the property being exposed on the market for an adequate time to attract offers.
[5] Depending on the jurisdiction, the property owner's attorneys' and appraisers' fees may be paid by the condemnor.
In California and New York an award of such fees is discretionary with the court while in others like South Carolina it is mandated.
[6][7] Moreover, property owners are always entitled to receive interest on the just compensation owed to them if the payment is delayed.
[9][10][11] Although their valuations may be different, the appraisers for the condemnor and the condemnee both follow the same three-step process: The highest and best use of the property is often the most important factor in determining the fair market value of land being taken by condemnation.
[13] Appraisers traditionally analyze alternative uses to a property to determine its highest and best use with the following criteria in descending order:[13] 1.
[1] The appraiser also estimates the costs of demolishing and replacing the existing structures on the property as well as other expenses such as permitting fees.
These methodologies are: In a typical assignment, an appraiser for a party in an eminent domain case uses all three methods and then determine which one most appropriately calculates the fair market value of the subject property.
[1] This is because property values fluctuate with supply and demand which is influenced by, among other things, shifts in financial markets and mortgage interest rates.
[14] In eminent domain cases, depending on the jurisdiction, the data collected on sales of similar properties may be admitted as direct evidence and/or as support for the appraiser's testimony.
"[16] Using this approach, appraisers try to determine the property's market value by analyzing its capability to produce income.
Those methodologies alone may be ill-suited to appraise unique property interests that are not fee simple title,[14] or for appraising the just compensation owed to landowners in jurisdictions with protections in their state constitutions that require just compensation be paid to landowners when the government "damages" their property.
[18] However, the admissibility of their opinions based on these methodologies is subject to jurisdictional rules of evidence on expert witness testimony.