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Condemnation six steps to expanding your domain.

To maintain a stable practice it is essential for appraisers to be diverse in the work that they do, according to Robert W. Taylor, MAI, SRA, and Director of the Virginia Real Estate Center. He is not alone. Any appraiser would agree that planning for a diverse business practice is the best way to prevent losing substantial business due to a particular change in the law or the economy. The ball is in each individual appraiser's court to take the steps necessary to get involved with some of the more challenging and lucrative specialties.

One such specialty with a significant amount of work available is eminent domain, or condemnation, proceedings. C. Spencer Powell, MAI, of PGP Valuation, Inc., Salem, Ore., has been doing condemnation work since he started as an appraiser 30 years ago. Powell points out that condemnation proceedings, including inverse condemnation proceedings, do fluctuate. "The more public work is going on then the more condemnation work there is," he said. Condemnation work makes up over half of his business today.

Condemnation clients can come from both sides. Sometimes an appraiser is hired by the landowner and sometimes by the condemning agency. Either way, in condemnation proceedings, an appraiser is asked to determine the fair value of the land being condemned or a diminution in value due to factors such as easements. During inverse condemnation proceedings an appraiser is hired by the landowner to show that actions by the government have or have not destroyed or reduced the value of the property in question. These valuations can be complex and do require experience and technical proficiency. As Taylor put it, "You can't just pass an exam and begin doing condemnation work. This area requires extensive training and an understanding of state and federal laws." Then, how does an appraiser get into condemnation work? Some appraisers who work with condemnation weighed in on the issue.

Step 1.: Admit the need for diversification Like many appraisers in the early 1990s, Gerald F. Hansen, MAI, of Hansen & Co., Inc., Hollister, Calif., saw his business take a sharp drop when the changes in federal law caused a decrease in the amount of bank work available. It was then that he realized that he needed to diversify if he wanted to maintain a stable business. At that point his choice was simple, he could continue to compete for limited mortgage work or branch into new areas.

This choice may not be facing you today, but if you do not plan effectively to combat this possibility then it may sting you in the future. Bank work still represents a large percentage of appraisal work, yet Richard Betts, MAI, SRA, of Betts & Associates, Oakland, Calif., points out that "there are a lot of little niches in appraisal work. Loan work is the biggest chunk, but it isn't all of it."

Diversification is an attainable and necessary goal for any appraiser's business. In Powell's case, his first job out of college provided him with his first exposure to condemnation work and when he moved to Salem, Ore., in 1973, he continued to build on his experience and work with dispute valuations.

Step 2: Cultivate the desire

An appraiser's own initiative is essential to making condemnation, or any new specialty, a consistent part of their business. However, why make condemnations a part of your business? Richard Neustein, MAI, SRA, of Los Angeles, Calif., said if you like solving puzzles, don't mind spending the time needed to work them through and have a self-critical eye, then condemnation work is for you. These "puzzles" can be complicated. Neustein found himself spending the better part of a whole year working on a single takings case.

While condemnation work is often more complex than many other areas of appraisal, Hansen points out that this is exactly why it is a good area to get into. "It is often more challenging but there is less competition," he said. Hansen added that its complexity provides appraisers the opportunity to "avoid the routine of simpler sorts of valuation jobs:' He remembers one inverse condemnation job where the state had built a new bridge and had simply left the old bridge where it was. The change in landscape created a damming effect and caused the surrounding land to flood. Hansen was then charged with calculating a diminution value for this property. Hansen worked on a valuation based on the damages and the cost of preventing such flooding from reoccurring. Ultimately, however, the state settled and removed the old bridge.

Step 3: Search out a mentor

The desire to work the condemnation arena is best seasoned with the help of a more experienced appraiser. Terrie L. TaschSensing, MAI, of Regional Appraisal and Research Company, Woodstock, Ill., stresses that "an appraiser needs to work in a supportive environment" This gives guidance to help develop the necessary skills.

As is a common route, Betts fell into condemnation work when he apprenticed with an older appraiser. The apprenticeship gave him opportunities to gain the needed experience. "Condemnations are hard to break into, because new clients are most often by referral," Betts said.

Taylor repeated the sentiment that a mentor helps an appraiser who is trying to simultaneously get the hands-on experience and the understanding of the laws and procedures that will allow growth in the area of condemnations.

Step 4: Take further education

Without exception, the appraisers surveyed emphasized the importance of training in getting a strong foundation for work in condemnations. "Recognize that there is a specialized knowledge for work in eminent domain," remarked Betts. In Betts' view the first thing to do is to take seminars on condemnation. The Appraisal Institute offers two eminent domain and condemnation appraising courses and one seminar, information for which is available at www.appraisalinstitute.org/education. Also available is the comprehensive textbook, Real Estate Valuation in Litigation, 2nd edition, available at www.appraisalinstitute.org/ publications.

Step 5: Communicate your skills

Once you have decided to branch into condemnation then it is up to you to connect with people and make that happen. Hansen encourages young appraisers to actively let others know what you can offer. If you "let the world know what type of work you want," Hansen says, then you will be able to find the business. This may sound like stating the obvious, but Hansen credits his active effort for not only successfully branching into condemnation, but also for building up his work with estates. Betts added, "This may mean doing the first assignment for a very low price and/or sacrificing other possible work if need be."

Step 6: Scan the market

For some appraisers, condemnation makes up a majority of their business while others spend a small fraction of their time in this field. This is due to individual practices and fluctuations in local economies. Neustein enjoys the profit and intellectual challenge found in condemnation work. Although he says that they make up 25 percent of his business, he admits that it varies and some years he may not do any. Neustein advises appraisers to keep their eyes open for cities that are spending resources on developing their infrastructure. Those cities will see an increase in condemnation work for appraisers. "If you can find those places then it can be very lucrative for appraisers to be there," he stressed. Appraisers who are not looking to relocate, however, should simply recognize that condemnation work tends to be cyclical. However, Tasch-Sensing does not see this as a great disadvantage. "This need is not going away, therefore, it is a good field to be in."

RELATED ARTICLE: Other Areas of Litigation Support Offer Diversity, Challenges

Although a judge once told Robert W. Taylor, MAI, SRA, that his testimony was "as fun and exciting as watching mud thaw," appraisers consistently point out litigation work is both interesting and lucrative. Here are some areas other than eminent domain and condemnation that require expert witnesses and lead to litigation work:

Business Valuations: In this area of appraisal work an appraiser is hired to put a value on a business. Methods for business valuations vary. Therefore, different appraisers are very likely to come up with very different results in valuing the same business. This leads to a lot of litigation work that requires the technical skills necessary to effectively defend one valuation against the other party's objections.

Divorce: With a u.s. divorce rate over 50 percent it is no wonder that there is plenty of work with marital dissolution cases. Almost all of the appraisers we spoke with said that divorce cases make up some of their litigation business. These cases are often straightforward valuation jobs, but can also involve unique properties that create quite a challenge for the appraiser.

Richard Betts, MAI, SRA, was involved in one divorce case where the husband had 50 properties spread throughout the united States. He was hired to oversee this valuation project that involved numerous appraisers to go to the various locations, talk with the property managers, meet local appraisers who could help provide localized information and make any other necessary contacts. This is an illustration that not all divorce work is routine.

Estates: This area of appraisal can involve litigation, but not always. Betts said that estates make up nearly 15 percent of his litigation work. Yet Gerald F. Hansen, MAI, who does a substantial amount of estate work, has not been in court for years. This area of appraisal is not as complicated as condemnation. The real estate market in any given area is often quite predictable. Therefore, there is less likely to be a dispute over valuations. Estates include testate succession, valuation of gifts, valuation of estates for tax purposes, and more.

Title Insurance Claims: This field was repeatedly described as stressful yet very interesting. Perhaps Betts put it best when he said, "Although I sweat them, they are a good challenge." The complexity of the valuation can be both befuddling and very intriguing.

Hansen gave an example of the challenge to be found in this field of work. A 120-acre plot of land was divided into thirds and one 40-acre plot was sold. What neither the buyer nor the title company realized was that there was a road easement running along one end of the property and there was a pipeline easement taking water from one of the wells for use on an adjacent neighbor's property. Hansen was then hired to calculate the effect that these new discoveries had on the value of the property. This kind of work avoids the routine that often accompanies some larger areas of appraisal work.

For in-depth information on other areas, the Appraisal Institute offers Course 705--Litigation Appraising: Specialized Topics and Applications. Information on this course is available at www.appraisalinstitute.org/ education.

TIM EBLEN is a freelance writer and a law student at Lewis & clark Northwestern School of Law in Portland, Oregon.
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Author:Eblen, Tim
Publication:Valuation Insights & Perspectives
Geographic Code:1USA
Date:Jan 1, 2002
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