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Understanding market value compensation and eminent domain

On Behalf of | Apr 20, 2020 | Municipal Law |

Citizens rely on sound and efficient public utilities. And in sprawling metros like San Antonio, local governments should focus on utility expansion to keep up with the surging population. But sometimes, these developments require seizing private land from others.

While local and national governments can take private property for public projects through eminent domain, they must pay citizens the appropriate amount for their land. Under the Fifth Amendment, neither the federal nor local governments can take private property without giving the owner just compensation.

But how can municipalities know precisely how much a piece of land is worth?

Finding the answer can be challenging. And if owners don’t know either, this can complicate matters. However, governments can use different methods to determine property value before making an offer.

3 ways governments can examine home value

Homeowners research property value before they decide to sell. But if they’re getting forced out, people likely won’t research it on their own. Because of this, municipalities need to make sure they’re getting the right estimate. Here are a few ways they can do this:

  • Use comps: One method municipalities can use to get this data is through comps. Comps can provide information about other home’s in the neighborhood and are less costly than hiring an appraiser. Since properties in the same area can differ in price, it’s best to pull more than one comp to get an accurate estimate.
  • Get an appraisal: Hiring an appraiser can be expensive. But at the same time, they can be a reliable resource in getting an accurate property estimate. Not only do many look at comparable prices in the market, but they also look at home upkeep, depreciation and vacancies.
  • Using the FHFA price index calculator: Some local governments are skeptical about using outside parties to come up with an estimate. If they wish to carry out the process themselves, the Federal Housing Financing Agency (FHFA) provides a home price index calculator. It uses the repeat sales method, which can track home data back to the 1970s and uses that information to examine how a home’s value has changed over time.

Even though local governments can seize property, it’s equally crucial to keep the landowner’s interests in mind. As they’re getting forced out of the place they call home, they deserve to receive the appropriate funds to find a new one.



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