Just Compensation in North Carolina – Determining How Much Your Eminent Domain Case Is Worth

When the government or a utility company operating under governmental authority decides to take your property under the power of eminent domain, the law states that fair compensation, known as “just compensation,” must be offered.

But in eminent domain, just compensation depends on more than a simple appraisal. Determining what constitutes “just compensation” is often at the heart of eminent domain cases.

Just compensation is typically defined as the impact, or loss, to the fair market value of your property. “Fair market value” is defined as the highest price that a seller could get for a property from a knowledgeable buyer in a voluntary transaction (unlike eminent domain).

How does the condemning authority determine what it offers a property owner?

The condemner – let’s say it is the North Carolina Department of Transportation (NCDOT) – will have an appraiser analyze the property being taken and base its compensation offer on the result. However, that offer may not reflect fair market value at all.

In appraisals, multiple methods are used by appraisers depending on the property. Different methods are used depending on the circumstances – and the circumstances of an eminent domain appraisal can get very tricky.

The three primary appraisal methods are:

Sales Comparison Approach

By looking at other similar properties’ sale prices, an appraiser can establish a value for the subject property. This is a common approach to appraising residential properties, but its conclusions may be incomplete in eminent domain cases. The sales comparison approach is also known as the market approach.

Cost Approach

This approach draws on the sales comparison approach to calculate the value of the land, then adds the cost of improvements on the land (minus the depreciation of those improvements) to arrive at a total value.

Income Approach

The income approach – also called the income capitalization approach – determines the value of the property based on the income it produces. There are a number of factors considered, including projected future income, and this kind of appraisal is vital in calculating compensation for takings of commercial and income-producing properties.

Consult with an experienced eminent domain attorney before agreeing to anything to try to ensure you’re not leaving significant money on the negotiating table.

Should I accept the NCDOT’s first offer?

You should almost never accept the government’s first offer. 

When you are notified that the government wants to take your private property under eminent domain, you may feel compelled to accept the first offer. However, this is not required, may not be in your best interest, and may not equal just compensation.

The basis of the government’s offer will be their appraisal of your property. Mistakes can be made. And you want the appraisal to reflect the unique variables of your land that make it valuable.

Remember, each piece of land is unique. Just because your neighbor’s land isn’t worth much, that doesn’t mean yours isn’t valuable. The appraisal should provide evidence of the highest and best use that you should be compensated for, even if it’s not the use the property historically had.

The appraisal process is not an exact science, and the government is not responsible for prioritizing your best interests. So how do you get fair compensation?

That’s where we come in. We can work with our network of land experts across the state to obtain an appraisal that demonstrates the true value of your property.