Receiving a letter saying the government wants to purchase part—or all—of your property can be confusing and stressful.
The letter may come from a city, county, TxDOT, a utility provider or another entity with eminent-domain authority. It may include an appraisal, a proposed acquisition map and an offer to purchase the property.
Before accepting the offer, it is important to understand what is being acquired, how the project may affect the rest of your property and what options you have as a Texas property owner.
Quick Answer
Do not ignore the letter, but do not assume you must immediately accept the offer.
Save every document, review exactly what the government wants to acquire and obtain independent real estate and legal guidance before making a decision.
The initial offer is not necessarily the final amount.
What Is Eminent Domain?
Eminent domain is the legal authority that allows the government—and certain other authorized entities—to acquire private property for a public use.
Public-use projects may include:
- Road and highway expansions
- Drainage improvements
- Utility lines and pipelines
- Sidewalks and public transportation projects
- Schools and other public facilities
- Water and sewer infrastructure
The government may need your entire property, but many eminent-domain cases involve only a portion of the property.
For example, a road-expansion project might require a strip of land along the front of a commercial property.
Even when only a small portion is being acquired, the project could affect access, visibility, parking, traffic flow and the usefulness of the property that remains.
What Is Condemnation?
Eminent domain and condemnation are related, but they do not mean exactly the same thing.
Eminent domain is the government’s legal power to acquire private property for a public use.
Condemnation is the formal legal process used to acquire the property when the owner and the acquiring entity cannot reach an agreement.
A condemnation case does not necessarily mean your property is unsafe or in poor condition. In this context, it means the government is using a legal process to acquire the property needed for the public project.
A simple way to remember the difference is:
Eminent domain is the authority. Condemnation is the process.
How Does the Process Begin?
The process usually begins when a government agency or other authorized entity identifies the property needed for a public project.
The acquiring entity normally hires a certified appraiser to evaluate the property being acquired. The property owner may then receive:
- A written offer
- A copy of the appraisal
- A survey or acquisition map
- A description of the property rights being acquired
- The Texas Landowner’s Bill of Rights
- A proposed purchase agreement or easement document
The offer may look official and final, but you generally have the right to review it, ask questions, negotiate and obtain your own professional advice.
How Is the Government’s Offer Calculated?
The government’s appraisal is prepared for the acquiring entity. It generally considers the value of the land or property rights being acquired.
When only part of a property is taken, the analysis may also consider whether the acquisition damages the property that remains.
This is where partial-acquisition cases can become complicated.
The real question is not only:
What is the land being taken worth?
You also need to ask:
What was my entire property worth before the project, and what will the remaining property be worth after the project?
The Value May Be More Than the Land Being Taken
Suppose the government wants a narrow strip of land along the front of your commercial property.
The strip itself may not appear large. However, the road project could also:
- Remove parking spaces
- Change or eliminate a driveway
- Reduce visibility from the roadway
- Move traffic farther from the building
- Affect delivery-truck access
- Change drainage
- Reduce usable building area
- Create new setback or development problems
- Make the remaining property harder to lease or sell
These issues may affect the value and usefulness of the property you keep.
In some cases, the effect on the remaining property may be more significant than the value of the land being acquired.
A Simple Driveway Example
Imagine that you own a neighborhood retail center with two entrances.
A road-expansion project requires a portion of the property along the front of the shopping center. After construction, one driveway is removed and customers must enter from a side street.
The government may be acquiring only a small strip of land, but the larger questions include:
- Will customers still be able to enter and exit easily?
- Will delivery trucks have enough room?
- Will traffic continue to pass directly in front of the property?
- Could the change make the storefronts harder to lease?
- Will the property still function the same way after construction?
These are practical real estate questions that may not be answered by simply calculating the price per square foot of the land being taken.
What If the Government Wants an Easement?
Sometimes the government does not purchase the land outright. Instead, it may request an easement.
An easement gives another party the right to use part of your property for a specific purpose. Examples include utility, pipeline, drainage, access and temporary construction easements.
You may continue to own the land, but the easement can limit how you use it.
Before agreeing to an easement, determine:
- Where the easement will be located
- Whether it is temporary or permanent
- What construction activity will occur
- Whether buildings, parking or landscaping will be affected
- Who is responsible for restoring the property
- Whether the easement will restrict future development
The wording and location of an easement can have a lasting effect on property value.
Do I Have to Accept the First Offer?
Not necessarily.
A property owner can review the offer, ask questions and obtain an independent opinion of value. If the available market evidence supports a different value, the owner may be able to submit a counteroffer.
A counteroffer should be supported by facts rather than based only on the amount the owner would like to receive.
Useful support may include:
- Recent comparable sales
- Current market conditions
- Zoning and development potential
- Rental and income information
- Replacement costs
- Parking and access changes
- The effect on the remaining property
- Maps, photographs and site plans
- Opinions from qualified real estate and legal professionals
What Is a Broker Price Opinion?
A broker price opinion, or BPO, is a real estate valuation analysis prepared by a qualified real estate broker.
A detailed BPO may evaluate comparable sales, market conditions, property characteristics, income information and the possible effect of an acquisition on the remaining property.
A BPO is not the same as a certified appraisal, and it does not replace legal advice. However, it can provide additional market information and help a property owner better understand the offer.
The right valuation strategy depends on the property and the circumstances. Some cases may also require a certified appraiser, engineer, land planner or other specialist.
How SVN | Hanna Solutions Helps Property Owners
At SVN | Hanna Solutions Commercial Real Estate, we help property owners evaluate the real estate side of an eminent-domain acquisition.
Our work may include:
- Reviewing the government’s offer and appraisal
- Examining the acquisition map and proposed right-of-way
- Researching comparable property sales
- Evaluating the property’s market position
- Analyzing access, parking, visibility and usability
- Considering the potential effect on the remaining property
- Preparing a detailed broker price opinion
- Organizing market evidence to support a counteroffer
- Working alongside the owner’s attorney and other experts
- Providing expert-witness testimony when appropriate
In many cases we have worked on, our research and valuation have helped support compensation above the original offer. Every property is different, however, and no particular result can be guaranteed.
Mark’s Take
When a property owner receives an eminent-domain letter, the first offer can feel like the only option.
It is not.
The owner should understand what is being acquired, how the offer was calculated and what the project may do to the remaining property.
A small taking can create a much larger problem if it affects access, parking, visibility, drainage or future development.
My role is to help owners understand those real estate issues and provide market evidence that can be used to support a fair valuation.
What Happens If an Agreement Cannot Be Reached?
If the property owner and the acquiring entity cannot agree, the entity may begin a formal condemnation case.
In Texas, a judge typically appoints three disinterested local property owners to serve as special commissioners. The commissioners conduct a hearing, review evidence from both sides and determine an amount of compensation.
The special commissioners are not a jury.
If either side objects to the commissioners’ award within the required period, the case may continue as a civil court case and could eventually be presented to a jury.
Because condemnation cases involve legal rights, procedures and deadlines, property owners should speak with a qualified Texas eminent-domain attorney.
A commercial real estate broker can provide market analysis and valuation support, but a broker cannot give legal advice.
What Should I Do After Receiving a Letter?
Start with these steps:
- Do not ignore the letter. Eminent-domain matters may involve important deadlines.
- Do not sign immediately. Take time to understand the offer and the documents.
- Save everything. Keep the letter, appraisal, maps, plans, emails and proposed agreements.
- Identify what is being acquired. Determine whether the government wants the entire property, a portion, an easement or temporary access.
- Study the remaining property. Consider access, parking, visibility, drainage, tenant operations and future development.
- Obtain an independent valuation. A broker price opinion or independent appraisal may identify information not fully addressed in the original offer.
- Consult an eminent-domain attorney. An attorney can explain your legal rights, deadlines and options.
- Build a fact-based response. Any counteroffer should be supported by reliable market data and property-specific evidence.
Frequently Asked Questions
Can the government take my property even if I do not want to sell?
In certain circumstances, an entity with eminent-domain authority may acquire private property for a public use. However, it must follow the required legal process and provide compensation.
Is the first offer always the final amount?
No. Property owners may review the offer, obtain independent professional opinions and negotiate when the available evidence supports a different value.
Can I negotiate if only part of my property is being taken?
Yes. Partial acquisitions frequently involve questions about both the value of the land being taken and the possible effect on the property that remains.
Who pays for my independent valuation or attorney?
That depends on the circumstances and the professionals you hire. Ask about fees and representation agreements before beginning the work.
Is a broker price opinion the same as an appraisal?
No. A BPO is a market analysis prepared by a real estate broker. A certified appraisal is prepared by a licensed or certified appraiser under applicable appraisal standards.
Should I speak with the government’s representative?
You can ask questions and request information, but consider obtaining independent advice before signing an agreement or making statements that could affect your position.
Where can I learn more about my rights?
Texas property owners can review the Texas Landowner’s Bill of Rights, published by the Office of the Attorney General of Texas.
Get a Confidential Review of Your Offer
Did you receive an eminent-domain or right-of-way letter?
Contact SVN | Hanna Solutions Commercial Real Estate for a confidential review of the offer, appraisal and acquisition map.
We can help you understand the real estate value, the potential effect on your remaining property and whether additional market analysis may be appropriate.
Mark Hanna, CCIM
SVN | Hanna Solutions Commercial Real Estate
Office: (956) 322-4001
Cell: (956) 821-8001
Mark.Hanna@svn.com
This article is for general educational purposes and is not legal advice. Property owners should consult a qualified Texas eminent-domain attorney regarding their legal rights, deadlines and individual circumstances.
