In Defense of an Opinion

By Allen G. Dorin Jr., MAI, SRA, RW-NAC

Article printed in the March/April 2017 issue of Right of Way magazine published by the International Right of Way Association

In Defense of an Opinion

By Allen G. Dorin Jr., MAI, SRA, R/W-NAC

Article printed in the March/April 2017 issue of Right of Way magazine published by the International Right of Way Association

Merriam-Webster defines opinion as “a belief based on experience and on seeing certain facts that falls short of positive knowledge”. A belief is defined as “a feeling sure that someone or something exists or is true or trustworthy” or “something that one thinks is true”. Everyone can have an opinion and it is more often based upon one’s interpretation of what one believes to be true or on experience from similar circumstances involving previous renderings of one’s opinion.

Those who have strong opinions generally think they are right and that those who disagree with them are misinformed, have confused the facts, or have possibly distorted the truth. Those who are more objective with their opinions and who are willing to admit that others are entitled to their own interpretation of their beliefs can be considered more credible but open themselves to being challenged and in some instances even discredited.

In a court of law, opinions are often rendered by an expert witness or “one qualified to render expert testimony”, which is defined as “testimony of persons who are presumed to have special knowledge of, or skill in, a particular field due to education, experience, or study”.[1] As decided in a U.S. Supreme Court decision, there are four considerations in the determining the reliability of expert testimony including testing, peer review, error rates, and acceptability in the relevant scientific community.

In most, if not all, condemnation cases a key expert witness is the real estate, or more properly termed, real property appraiser. This is an appraiser who has had specialized training and experience in the valuation of property that is being acquired in whole or part typically for a public infrastructure project where the power of eminent domain is being used. It is noted that other than the landowner, it is unlawful in the Commonwealth of Virginia for anyone other than a licensed real estate appraiser to testify for compensation regarding the value of real property.[2]

The need for an appraiser with such training and experience is most evident in those situations where only partial rights are being acquired. Such issues as before and after value, damages to the remainder, larger parcel, loss of reasonable access, uneconomic remnant, and easement valuation are all terms with which many real property appraisers are not familiar and would have diminished credibility in dealing with if having to testify in a deposition or condemnation trial. Therefore, before engaging an appraiser to render value opinions in such instances, it is important to review the appraiser’s qualifications and experience relative to the complexity of the assignment.

For the appraiser who is considering accepting an assignment involving the acquisition of private property for public use, whether being approached by the acquiring authority, the landowner, or legal counsel representing either, it should be emphasized in the initial response to the potential client that the role of the appraiser is to render an objective opinion of value based upon factual evidence and, if applicable, reasonable assumptions and/or conditions. As stated under the Conduct section of the Ethics Rule of the Uniform Standards of Professional Appraisal Practice (USPAP), “An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests”. Among other standards of practice, the appraiser:

must not perform an assignment with bias
must not advocate the cause or interest or any party or issue
must not accept an assignment that includes the reporting of predetermined opinions and conclusions
must not communicate assignment results with the intent to mislead or to defraud
must not use or communicate a report that is known by the appraiser to be misleading or fraudulent
must not knowingly permit an employee or other person to communicate a misleading or fraudulent report

If any of these requirements are even perceived as not being adhered to, the credibility of an appraiser’s opinion can be significantly diminished.

For those who have experience in dealing with eminent domain, including right-of-way professionals employed by federal, state, and local agencies, consultants specializing in the acquisition of real property for public infrastructure projects, and attorneys who represent either the acquiring authority of the landowner from whom rights are being obtained, there is at least a perception that certain appraisers are more favorable either as valuation providers for the acquiring authority or for the landowner. As with attorneys who typically represent one side or the other in an eminent domain proceeding, appraisers involved in this specialty tend to be hired almost exclusively by the acquiring authority or landowner attorney. As such, the notion that appraisers who typically are hired by one side or the other tend to assume the role of advocacy for his/her client is not an unreasonable supposition.

Before discussing what techniques an appraiser can use in the courtroom to convince triers of fact that his/her opinion is both credible and more close to right than the other appraiser’s opinion, it is worthwhile to discuss what might be termed “opinion influencers”. Appraisers are human and like most humans enjoy the benefits of a productive life. As with many professionals who aspire to use their education, training, and experience to provide quality service to their clients, they also expect to be paid commensurately for their work. And when appraisers can find clients who respect their opinions as well as their performance on the witness stand, such as in a condemnation trial, they tend to appreciate the relationship as being a member of a team whose collective goal is to serve the client’s best interest. But this goal, which is really one sought by the attorney as an advocate for the client, can at times conflict with the role of the appraiser, which is to be an advocate for his/her opinion. For this reason, it is imperative, not only to optimize the credibility of his/her opinion but also to adhere to the standards and ethics of the profession, for the appraiser to be explicit in his/her purpose when accepting an assignment that will most likely involve an opposing opinion of value.

Once it is understood by all parties on the side for which the appraiser is hired, whether it be the acquiring authority or the landowner, as to the role of the appraiser as an advocate for his/her opinion, there are other common “opinion influencers” with which the appraiser is confronted. These include extraordinary assumptions, hypothetical conditions, and jurisdictional exceptions. An extraordinary assumption is defined by USPAP as “an assumption, directly related to a specific assignment, as of the effective date of the assignment results, which, if found to be false, could alter the appraiser’s opinions or conclusions”. An appraiser must be careful when presented with an assumption by legal counsel or the client that such assumption is reasonable and not an attempt to influence a value conclusion in favor of the client.

A hypothetical condition is defined by USPAP as “a condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis”. Any time where the appraiser essentially denies the existence of a condition that is obviously true, the stated assumption of such condition will likely be perceived as an attempt by the appraiser to conclude a value favorable to his/her client, especially when the use of such assumption cannot be clearly explained to and understood by triers of fact who typically are not well-versed in appraisal terminology.

A jurisdictional exception is defined by USPAP as “an assignment condition established by applicable law or regulation, which precludes an appraiser from complying with a part of USPAP”. It is not uncommon in eminent domain appraisals to encounter requirements in the federal or state codes that may conflict with the requirements of USPAP. It is therefore imperative that the appraiser consult with the attorney when such encounters may be possible and to rely upon the attorney’s legal opinion as a basis for the inclusion of a jurisdictional exception in the appraisal report.

In most instances involving acquisition of property rights through the eminent domain process where the guidelines of The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, more commonly known as The Uniform Act, have been followed, a negotiated settlement can be obtained where reasonable parties can agree. However, in some instances, the landowner’s opinion of the value of the rights being acquired, inclusive of damages to the remainder, if applicable, are beyond the limits of what the acquiring authority can justify as being fiscally responsible to the taxpayer. In those instances where a settlement is not possible, a certificate of take is filed in the public records and the landowner often resorts to hiring legal counsel. If further negotiations do not result in a settlement, an appraiser will usually be hired by the landowner’s attorney to render an opinion of value. If the appraiser concludes a value substantially different from that of the appraisal on which the offer was based, which is more often the case, then it is typically left up to the court to decide just compensation. This is when the battle of the opinions occurs.

But what is the reason for these variances? One would think that two professional appraisers who specialize in this type of assignment are given the same parameters under which to appraise the property and rights to be acquired would conclude similar values or certainly values upon which a settlement could be based. The wide divergence in values is generally the result of one or both of the following: the unit value of the land and/or improvements acquired and/or the value of damages to the remainder. While the credentials, experience, appearance, and demeanor of the appraiser are important, it is his/her judgment in the selection of comparable sales, rentals, and/or capitalization rates and the proper assessment of the impact of the acquisition of the remainder that is most often challenged on the witness stand.

Aside from poor judgment regarding the two aforementioned issues, there are some instances where more plausible and defendable causes of valuation divergence occur. These are typically the result of different legal instructions, different appraisal methodology, such as when a “larger parcel” is involved, different highest and best use conclusions, and assumptions and hypothetical conditions under which the appraiser is instructed to reach a value conclusion. While these issues may be the cause of divergence, the interpretation and treatment of them nonetheless must be supported by the law and/or sound appraisal theory.

Having discussed the basis for a value opinion foundation and assuming that the appraiser has sound justification for his/her conclusions and is prepared for the witness stand, the following suggestions can help the appraiser at a minimum appear competent and knowledgeable and prepared to defend his/her opinion:

Have a copy of the appraisal report, reference books, and all notes (none that may be detrimental to the case that opposing counsel may request to review) to which reference will be made available and easily retrievable so there will be no fumbling through pages
Have a calculator (fresh batteries) and know how to use it
Know all questions that will be asked in direct examination and be prepared to answer them
With the counsel of the retaining attorney, be prepared to answer anticipated questions that will likely be asked in cross-examination

Under direct examination the following is a typical format that is followed:

The appraiser will be asked to review his/her qualifications and credentials including education, license status, professional designations, and experience. If any evidence can be presented showing that the appraiser has performed valuation services for both acquiring authorities and landowners, it will likely enhance the credibility of his/her testimony. Keep in mind that the appraiser on the other side will likely have similar credentials; however, at a minimum this will at least equalize the appraisers relative to their capabilities.
The appraiser will be asked to describe the appraisal process. This should be done in simple language avoiding technical appraisal terms but in a professorial manner.
The appraiser will be asked to describe the work undertaken in appraising the property that is the subject of the trial. This would include how and when the appraiser was engaged, when the property was viewed and who was present during the viewing, what market data was used, and how were the comparable properties viewed. It is important that the appraiser knows and followed all the required procedures relative to the appraisal process in accordance with the law.
The appraiser will be asked to describe the property and its neighborhood or market area. While not every detail needs to be shared, be prepared to answer questions about the subject property and neighborhood that could possibly be asked under cross-examination, whether you consider them relevant or not.
The appraiser will be asked about his conclusion of highest and best use of the property. This is arguably the most important part of the appraisal in that it establishes what type of market data will be analyzed in valuing the property. The determination of highest and best use is the leading cause of divergence in market value estimates between appraisers in eminent domain cases.[3] If there is a difference in the conclusion of highest and best use between appraisers, the one who is most convincing of his conclusion can effectively negate the other appraiser’s testimony because the comparable sales, rentals, and capitalization rate, if applicable, that were used would be rendering an estimated value for an inappropriate use of the property.
The appraiser will be asked about the conventional three approaches to value (Cost Approach, Sales Comparison Approach, and Income Approach), how they were developed, what market data was used, and what value was indicated for the subject property. If any of the approaches were not used, the appraiser should be able to explain why that particular approach was omitted. For those approaches that were used, the appraiser should be able to explain in detail how the approach was developed in arriving at an indicated value for the subject land and improvements, if applicable. There are weaknesses in each approach that can be challenged effectively by the opposing counsel and the appraiser should be prepared to address them. For example: In the Cost Approach the measure of deprecation from any cause is difficult to support based on market-derived data, especially if the age of the improvements is high. In the Income Approach a slight variation in the capitalization rate can greatly distort value and is often a concept that is not easily grasped by the lay person. In the Sales Comparison Approach the use of adjustments, whether quantitative or qualitative, is often subjective and difficult to support from market-derived data.
In those situations where partial acquisitions are involved, which is the vast majority of the cases that end up in court, the appraiser will be asked to summarize his/her estimate of the value before the acquisition (final reconciliation of value based on the approaches previously discussed), the value in the acquisition, the remainder value before the acquisition (also referred to as the value of the remainder before damages or enhancement), the remainder value after the acquisition, and the value of damages or enhancement, if applicable. As discussed previously, the divergence in values between appraisers is typically either the unit value concluded for the land and/or improvements and/or the degree of damages, if any, to the remainder. These divergences are reflected in the value in the acquisition, which is based on the concluded value before the acquisition, and/or, if damages are incurred to the remainder, in the value after the acquisition. The appraiser must be able to explain in detail how and why damages accrue to the remainder if such is concluded. Additionally, since a conclusion of no damages would not typically be addressed under direct examination, the appraiser should be able to refute the other appraiser’s damage conclusion under redirect examination.

The words when spoken by retaining counsel after direct examination that are unsettling to most appraisers are “Mr. Appraiser, please now answer any questions that opposing counsel may have for you”. It is the goal of opposing counsel to destroy the testimony of the expert witness for the opposing side. This can be done in several ways including: discrediting the credentials of the appraiser, emphasizing the exclusivity of clientele either for acquiring authorities or landowners only, discovering that inevitable error in the appraiser’s report that may be irrelevant relative to the value conclusion but nevertheless incorrect and thereby creating the perception that the whole appraisal is wrong, or, depending upon the personality of the cross-examiner and his/her style of examination, attempt to humiliate or ridicule the appraiser to the point that he/she becomes so defensive, angry, or confused that his/her credibility is effectively diminished. Appraisers who have appeared on the witness stand before the same opposing counsel often develop a sense as to which technique will likely be employed to diminish his/her testimony and can prepare themselves accordingly.

As with economics, the law of supply and demand is applicable with opinions. In that opinions are in great supply, demand is low and few would pay much for them. However, the supply of opinions from expert witnesses is low thereby increasing demand and the price paid for them. The appraiser who can provide an opinion as an expert witness should appreciate the value attributed to it and treat it with respect and integrity. If the use of its rendering is abused, it will become worthless. But once rendered, even though how it was arrived at may be challenged, the appraiser should remember that once determined, his/her opinion of a concluded value is right and just and it should be defended accordingly.

Ten Categories of Questions That Worry Weak Witnesses

Bias – factual or inferred
Collusion and advocacy
Lack of real estate experience on special property types
Lack of appraisal education, training, and professional recognition
Personal incompetence – factual or inferred
Dishonesty
Lack of local experience
Lack of preparation and carelessness
Imperfections of appraisal techniques
Trick questions

Source: Walstein Smith Jr., “One Hundred Questions on Cross-Examination”, Real Estate Appraiser (May 1963), p. 8-13; “One Hundred Questions on Direct Examination”, Residential Appraiser (June 1962), p. 3-6; “One Hundred Questions Which Will Worry Weak Weaknesses”, Real Estate Appraiser (February 1967), p. 11-16

Ten Courtroom Commandments for Appraisers

Thou shalt not lie or be evasive.
Thou shalt not exaggerate the “highest and best use”.
Thou shalt not testify to a dictated appraisal.
Thou shalt carefully examine and evaluate all comparable sales.
Thou shalt be wary of capitalizing hypothetical income on vacant land.
Thou shalt be judicious in the exercise of thy right to explain thy answer.
Thou shalt not clothe thyself in the garments of infallibility.
Thou shalt remember that thou art an impartial witness and not an advocate.
Thou shalt so live with thyself that thou testimony would be the same if appearing for the opposing party.
Thou shalt always remember to control thy temper on cross-examination and retain a sense of humor.

Source: John P. Horgan, “Ten Courtroom Commandments for Appraisers”, Right of Way (October 1959), reprinted in The Appraisal Journal (January 1960)

Recommended reference material:

Real Estate Valuation in Litigation, Second Edition, J.D. Eaton, MAI, SRA, 1995

How to Become a Dangerous Expert Witness – Advanced Techniques and Strategies, Steven Babitsky, Esq. and James J. Mangraviti Jr., Esq., 2005

The Dictionary of Real Estate Appraisal, Fifth Edition, The Appraisal Institute, 2010

Uniform Standards of Professional Appraisal Practice – 2016-2017, Appraisal Standards Board of The Appraisal Foundation

[1] The Dictionary of Real Estate Appraisal, Fifth Edition, Appraisal Institute, p. 73.

[2] In 1995, the Virginia General Assembly amended Section 54.1-2010 to add Section B, which states, “[n]othing contained herein shall proscribe the powers of a judge to determine who may qualify as an expert witness to testify in any legal proceeding.”

[3] Real Estate Valuation in Litigation, Second Edition, Eaton, J.D., MAI, SRA, p. 486