Wednesday, September 28, 2011

What's So Fair about Fair Market Value When High-Speed Rail Is Concerned?

Here's another one of those articles that raises critical issues that can make the steam come out of your ears.

This is about FMV.  That means Fair Market Value of your property, be it residence, industrial, business, farm or whatever.  If the rail authority decided it needs your property, either for actually part of the rail corridor, or even for temporary construction easements, they will deploy their powers of eminent domain.  In other words, they will take your property and give you FMV.

This article discusses the problems with that, since FMV is a highly ambiguous and subjective number based on lots of direct and indirect variables.

It is now generally understood that any property within earshot of the rail corridor has already diminished in value.  The law requires full disclosure of the "likelihood" of rail corridors in proximity to your property.  And that's after discounting the general housing market decline and its impact on your particular locality and "comps."  That is to say, financial damage has already been done.

Now it's a matter of finding out just how much.  No one knows when this will happen.  Presumably it will happen in the Central Valley first since that's where construction will begin.

One might conjecture that if you are unlucky enough to be selected, you will sue and take the matter to court if necessary.

One reason is that the eminent domain process itself, long before it goes into actual effect, already has had a deleterious impact on your FMV. Therefore, by the time the rail authority makes you their FMV offer, they have already induced reduced value of your property.

That's a lawsuit waiting to happen.  If you sue, be sure to include the costs of the lawsuit itself.

California High Speed-Rail and Real Estate Limbo
How HSR Can Negatively Impact Homeowners and Businesses, Even If the Project Never Gets Off the Ground

By Frank Maccioli | Yahoo! Contributor Network – Tue, Sep 27, 2011

COMMENTARY | Across the country, several high-speed rail projects are in the works. They seem to be controversy magnets, with vociferous support and opposition. (See: Has Politics Killed HSR ...?)

The California High-Speed Rail Authority (CaHSRA) recently held workshops and hearings on the Draft EIR/EIS for the Fresno-to-Bakersfield segment of California's 800 mile HSR project. Referred to as the "backbone" of the system, initial construction is planned for 2012 if all goes well in the permitting process.

Those impacted by the projects have been assured that they will be offered Fair Market Value (FMV) for their property. The CaHSRA has distributed brochures describing the process if private property is needed. However, the information is short on details and doesn't get to the heart of what FMV is or how it's determined. (Ref: CaHSRA Draft EIR/EIS Public Hearing, 9/22/11)

Based upon public testimony at the hearing, one can see that not only are there many unanswered questions, but property owners near the proposed route are also facing a real estate "limbo" until a final decision is made. This limbo world affects owners whose property will be taken and just as importantly, those whose property won't be taken.

Is FMV based on the value the property has when an official route is selected? Is it based on the value when the first shovel of dirt is moved? Or is it based on the value the property had before anyone even started whispering that a new train track might be located nearby?

It is that latter question, coupled with the raging controversy between HSR supporters and opponents that has put property owners in an undesirable position. Because no route has yet been selected, no one has been officially notified that property will be taken. Consequently, many homeowners have no idea what their FMV will be. Furthermore, if they wanted to sell right now, many may find that there are few buyers. Who wants to buy a house now when the state may notify the new buyer in a year or two that their house will be taken from them?

And what of those who will receive no FMV offers but are left with noise and visual impacts? The CaHSRA has referred such owners to a California website for more information. However, such claims must be made within 1 year of their occurrence. Which brings us back to the question - when did the clock start? Will it be when the route is picked? Will it be when the track is built? Or was it when their property values dropped after rumors first started circulating about a possible HSR in the neighborhood? If the latter, then the time for filing a claim has already expired.

Say what you will about the positives and negatives about HSR - the prospect of jobs, environmental impacts, the enormous costs - this real estate limbo represents a major problem for those affected. How it is resolved will affect the success or failure of the entire project.

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