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Eminent domain

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Stephen, Illinois eminent domain law is a little different. I am not sure if that is "law" but experience has shown that in most cases, that is the most acceptable. Often the income approach is discredited as being 'speculative" in nature. That rates of return are not guaranteed nor are the easily quantifiable. for instance in a range of market-abstracted cap rates who can say with certainty a rate of 10.5% is correct or 9.85%? Second, since expenses are variable and often calculated differently be different people or different disciplines, this leaves room for error, as are vacancy rates etc.

However, that sales price per SF is a concrete, definable number, not open for speculation. Second, the approach is the easiest for most jurors with limited real estate knowledge to understand. And lets face it, most jurors are not rocket scientist, they could not even find a way to get off jury duty (LOL). Many attorneys I have worked with due not like adjustments if you can avoid them, but prefer a ranking of the comparables in terms of their degree of comparability to the subject, unless those adjustments can be clearly demonstrated and explained beyond "in my experience" or "in general . . ."

More than once I have seen a goo trial lawyer well-versed and experienced in eminent domain in Illinois get appraisers' testimony stricken solely because they relied upon the income approach in their value estimate. I guess when you begin valuing the whole based on the income approach, and the opposing attorney then can raise questions regarding the use of the income approach, then the rest of the appraisal is dead in the water. I would suspect this is the attorney's reasoning here.

I find this ironic since then the value of temporary easements is based on some "relatively" arbitrary interest rate multiplied by the value of the property lying within that easement, in most cases.

Having worked in most Midwestern states, I find Illinois to be somewhat of an anomaly in this regard. But then again, giving the high credibility of the politicians in Illinois (sarcasm) I guess we can only expect such when dealing with legal matters.
 
The attorney needs to cite the specific law precluding your ability to comply with a portion of USPAP. It can't be a choice. It must definitely be a specific prohibition cited by law. Judges can toss whatever they don't consider to be relevant. To do so goes to weight; not admissibility.
 
Brian Weaver said:
The attorney needs to cite the specific law precluding your ability to comply with a portion of USPAP. It can't be a choice. It must definitely be a specific prohibition cited by law. Judges can toss whatever they don't consider to be relevant. To do so goes to weight; not admissibility.
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And there you have it. A good attorney can raise questions about the income approach, or even discredit it to the point the evidence has little weight.

Lets say for example, "Mr. Appraiser you used 10% for your cap rate? What would happen if you chose 9%? or if you used 10.5%? Would your value change? If your comparable sales data shows a range of 9% to 11%, then how can you say the value is $zzz,zzz? it could be $yyy,yyy could it not? Well if the value of the whole is between $zzz,zzz and $yyy,yyy - then how can we be certain what the value of the taking is?" Well what if vacancy were 7% instead of 5%? what if management was 5% and not 6%? what are reserves for replacement? If that is not an actual expense, why are you including it here?

Jurors tend to prefer simple explanations. And, they expect concrete numbers. They understand the sale price/square feet, but not the financial and accounting aspects employed in the income approach.
 
GregoryK said:
And there you have it. A good attorney can raise questions about the income approach, or even discredit it to the point the evidence has little weight.

Lets say for example, "Mr. Appraiser you used 10% for your cap rate? What would happen if you chose 9%? or if you used 10.5%? Would your value change? If your comparable sales data shows a range of 9% to 11%, then how can you say the value is $zzz,zzz? it could be $yyy,yyy could it not? Well if the value of the whole is between $zzz,zzz and $yyy,yyy - then how can we be certain what the value of the taking is?" Well what if vacancy were 7% instead of 5%? what if management was 5% and not 6%? what are reserves for replacement? If that is not an actual expense, why are you including it here?

Jurors tend to prefer simple explanations. And, they expect concrete numbers. They understand the sale price/square feet, but not the financial and accounting aspects employed in the income approach.
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Very good, Grogery K. I have experienced all these questions over the years. And I am a long ways from Illinois! Lol
 
I think we are all in agreement the law needs to be spelled out in order to invoke jurisdictional exception. I have an email into him now.

Some of the the other comments about the income capitalization approach are just as applicable to all approaches. They they are very common questions asked in most court cases. I am not worried about this aspect. I was simply wondering if anyone else had heard that only the SA was admissible in ED cases in Illinois. Great feed back, I find it most valuable.

More than once I have seen a good trial lawyer well-versed and experienced in eminent domain in Illinois get appraisers' testimony stricken solely because they relied upon the income approach in their value estimate. I guess when you begin valuing the whole based on the income approach, and the opposing attorney then can raise questions regarding the use of the income approach, then the rest of the appraisal is dead in the water. I would suspect this is the attorney's reasoning here.
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Good comments Greg, I appreciate your feed back. The "d" added to the word goo is mine. I should talk I make more typos than most. However, I am never sure if it was a good attorney or a poor appraisers testimony when these things are stricken (unless I was in the court room). Generally it has been my experience it is a little of both. Still having something stricken and invoking jurisdictional exception are two separate issues. Further the report does not rely solely on the income capitalization approach. It relies on both SA and IC which is reflective of the market. With that said you echoed many of the things this same attorney spoke of.
 
Cap rate derivations are generally no more subjective than SCA adjustments for condition or quality, and, in the case of the subject property, functional utility. Unless the judge is just too lazy to attempt to follow your reasoning, and, in the absence of a specific and actual JE, you should be free to both utilize and emphasize the most meaningful approach(es).

There are a wide variety of analogies which could be utilized to convince the judge that your particular approach to solving the problem may be more complex and difficult to digest, but is far and away the most appropriate and accurate methodology, and that to rely more heavily upon a less accurate approach would be misleading and unethical.
 
For one case involving the income approach, see below. It involves billboards but but also speaks to the income approach in general. It is Indiana law; your results may vary.

I'm very familiar with this case because I was one of the court-appointed appraisers.



http://caselaw.findlaw.com/in-supreme-court/1437467.html
 
I'm more inclined to interpret this as an assignment condition rather than a jurisdictional exception. Eminent domain, although laws and regs apply, is more influenced by "precedent" cases.
Nancy
 
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