How effective can an expert witness be in determining the outcome of your real estate lawsuit?

Even if the homeowner has the only expert witness regarding damages in an eminent domain action, that testimony needs to be grounded in a proper interpretation of the law, or it will be barred, and the homeowner will not recover any damages in excess of the fair market value of the house.

This rule was applied in the recent McNamara case where the family sued the Department of Transportation for taking their house for an improvement project in Prunedale. The McNamara appraiser conceded that the decrease in the value of the their home from September 2006 when the project was approved, and the date of valuation of the house in July 2008 when DOT filed its lawsuit, was due to the general market decline, and Caltrans was not responsible for the decline.

Significantly, the DOT had not restricted the McNamara’s sale of their property before July 2008, and the Appellate Court cited the rule in the Klopping case that any losses occasioned by a general decline in property value that occur before the date of the taking must be borne by the property owner. In other words, if the general market decline caused the loss of value, the property owner cannot hold the DOT responsible due to general market decline. The McNamara appraiser admitted he could not attribute the property’s loss due to anything other than the market’s decline.

Although the trial judge awarded the McNamara’s $400,000 in damages above the value of their home of $1.2 million, plus their litigation expenses, the Court of Appeal reversed the trial court’s judgment, finding that the McNamara’s expert did not show a causal relationship between DOT’s conduct, and the property’s decline in value.

This case demonstrates that it is not enough to show a duty is owed (i.e., taking personal property requires just compensation), and damages in the form of a decrease in the property’s value. It is essential that the property owner present competent expert testimony that the DOT’s conduct caused the value loss. If not, a win at the trial court level will be reversed by the Appellate Court. In the McNamara’s case, they not only lost the additional $400,000 damages and their expenses, they had to pay the DOT’s costs on appeal. In effect, the McNamara’s are a unique example of the devastation in personal wealth resulting from the real estate crash.

Ironically, after the McNamara’s demanded $1,395,000 and the DOT offered $1,355,000 (which was $155,000 more than the McNamara’s ultimately received), the jury found the value was $1.2 million. The McNamara’s would have received more compensation from the DOT if they had accepted the DOT’s offer, and also avoided their additional attorneys fees and costs. Sometimes, a bad settlement is better than a good trial.

For information only by Craig B. Forry, attorney, broker, expert witness/consultant, and no retainer agreement is intended or created.