Before it can exercise its taking power over private land in the United States, the government is legally obligated pay “just compensation” to the owner. Courts interpret the Constitution’s mandate of “just compensation” as being the property’s fair market value. In other words, if you tried to sell a similar piece of property in a similar condition in a similar location, how much would you likely get for it?
Fair market value is ordinarily determined by a professional real estate appraiser: someone who is typically licensed by the state and has experience in real estate. The government will hire an appraiser to evaluate your home’s fair market value.
The appraiser will look at factors such as your property's location (for example, whether it's a parcel of land in a big city versus in a rural area), its condition (such as whether it's a brand new state-of-the-art home or a decrepit shack), its natural or manmade resources (e.g., whether it has a big pool or oil reserve in the back yard), what improvements have been made to it (that is, whether it's vacant land or has buildings or structures on it), and the general market conditions in the area (say, whether the property is in a very desirable neighborhood or a very undesirable neighborhood).
All of the above elements would go into the appraiser’s estimate of the property’s fair market value. This formula is not surprising; Any buyer who would make an offer on the property would consider the same elements when considering the appropriate price to pay.
It is certainly true that different appraisers may arrive at different numbers, for example if one places more or less value on one of those factors. However, all appraisers will attempt to find objective data points such as the above on which to base their ultimate number.
No matter what, however, it's true that your property will not have the opportunity to be tested on the open market. A property's true value is ultimately the amount a willing buyer will pay for it. So if you find yourself frustrated by the amount the appraiser arrives at, you are no doubt not alone.
Go to the main eminent domain FAQ page.