As real estate agents, we rarely listen up until something could affect us. Eminent domain is one of those non-transactionals: not part of an agent’s everyday job, “the complicated legal thing” that attorneys handle for property owners.
However, for the private property owner whose home or land is being condemned, or for the trusted real estate professional who’s asked for advice, a thorough understanding of eminent domain is essential.
5 questions about eminent domain ANSWERED
1. Where does the concept of eminent domain come from?
Eminent domain is the power of the government to take away a person’s home or business for public use. It is addressed at the end of the Fifth Amendment to the U.S. Constitution, which states:
No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
Here, the provision imposes two important limits on the taking of private property:
- The use must be public
- Just compensation must be paid to the property owner
2. The limits seem pretty straightforward. How did private interest get involved?
In a 1954 Supreme Court decision, Berman vs.Parker, a Washington, D.C., urban renewal case, “public use” was newly interpreted as “public purpose,” and Pandora’s box was opened. State courts began to uphold “virtually any use of eminent domain, even for private parties.”
Urban decline and “blight” became buzzwords and an excuse for using eminent domain to take private property from one person and transfer it to another person or entity for financial gain. Redevelopment was born, pushed by ridiculous definitions of blight: merely “2 bedrooms 1 bath,” “no garage” and land that’s “vacant.” Abuse prospered and grew.
To fight governmental overreach, The Institute for Justice, a non-profit legal law firm, and its Activism Team provide free legal representation to individuals, helping to facilitate grassroots efforts to hold government officials accountable. The IJ has argued 13 cases at the U.S. Supreme Court; among the most widely publicized involve private property rights.
Among these was Susette Kelo’s “Little Pink House,” which was memorialized in a film of the same name based on her 2005 case Kelo v. City of New London. In that case, the municipality held that redevelopment was a public use, forcing Kelo out of her home, which was disassembled and moved as the neighborhood was razed.
In her dissenting opinion on the case, which found in favor of the city, Supreme Court Justice Sandra Day O’Connor wrote:
“The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”
3. How can eminent domain impact real estate agents?
Real estate agents can potentially be held accountable on both the seller and buyer sides, either for failure to disclose an upcoming instance of eminent domain or for failure to complete thorough due diligence.
When Joan and Marc Hendel came home to New England in 2023, they found land to build their dream home along the Cape Cod Canal. They moved in, then almost immediately received a condemnation letter. According to coverage from The Wall Street Journal, the couple felt blindsided by the possibility and angry that no one, including their real estate agent, had warned them.
The buyer’s agent, who was not a member of the National Association of Realtors, didn’t respond to The WSJ’s request for comment, but the listing agent for the property, Amanda Lucido Hodges, told the publication that “Prior to the Hendel’s purchasing the land in 2023, we informed their buyer’s agent of the potential risk and confirmed that the buyer’s agent had informed them.”
Longtime residents of the Cape say they were aware the bridge had been deemed “functionally obsolete” back in 2020, long before the Hendels began looking in the area. For their part, the Hendels blame their real estate agent and the homeseller and told The Journal they plan to take legal action.
What if all parties involved had used public open records to be on top of what was happening off-site before listing or selling the property? The agents and the seller were required under Massachusetts Consumer Protection Regulations to disclose to a buyer “any fact, the disclosure of which may have influenced the buyer not to enter into a transaction.”
4. How can a real estate agent make a difference?
First, here are a few terms to be familiar with, taken from the IJ’s Eminent Domain Survival Guide and glossary:
- Condemnation: Eminent domain process of acquiring property taken for public use
- Good faith offer and negotiation: In some states, the government’s offer to buy pre-condemned property is based on an appraisal. Offer considered negotiable
- Just compensation: The property’s value plus relocation costs
- Redevelopment / economic development: Removal/replacement of existing properties
In eminent domain, the buyer, the city, wants to buy low, and the seller, the property owner, wants to sell high — or in some cases, doesn’t want to sell at all. When facilitating for a past-client facing property seizure, you only have to be an expert in that which you’re already skilled in:
- Property values: The CMA, with real-time data evaluating “pending” properties against an appraisal’s “closed” sales
- Negotiation: “Pre-condemnation” assistance to counter a city’s “good faith offer”
- Relocation: As buyer’s agent, finding a “replacement” home in a preferred location
- Due diligence: Review and disclosure of public projects through open records, available in 50 states
If you want to be of service to homeowners dealing with an eminent domain fight, your expertise can be valuable in
- Identifying micromarkets and local trends in the area where the condemned property is located
- Explaining the in-demand features of the property if it were sold on the open market
- Providing a CMA of the estimated value of the property
- Helping homeowners to challenge the city’s offer with pending sales for a market price, not a move-out price
Education, resources, and knowing the “players” in your local area will help you help your clients when the time comes that they face the challenge of eminent domain issues with their property.
5. Who else can you enlist to help in an eminent domain fight?
An attorney, as an expert at the local level, is a critical advocate for just compensation, acting as a buffer for the property owner against government entities and handling the local lawsuit.
A non-profit attorney with expertise in fair housing and eminent domain, such as those at the Institute for Justice, often works with the local attorney to hold officials accountable. At every level, the IJ offers the property owner free representation.
Finally, an appraiser as expert witness sets a “before-project” value of just compensation of the home and any excess land and testifies in depositions and at hearings or trials.
Opportunity comes from doing the right thing
Some agents see eminent domain as outside their purview and too difficult to intervene in. There are many moving parts, and an eminent domain fight requires a caliber of agent who will dedicate time to “the human factor” with “a heart and a drive” to help people in distress.
In everyday transactions, we do the right thing. Outside of the everyday, eminent domain offers us another moment to do the right thing. Opportunity will always find you.
Annette DeCicco is a real estate broker and director of growth and development at Berkshire Hathaway HomeServices Jordan Baris Realty in Northern New Jersey. Connect with her on LinkedIn and Instagram.