The State's Domain, Part 1: A Buyer's Market
A standard real estate deal is based on a simple principle. A willing buyer and a willing seller agree on what both sides see as a fair price.
But there are situations where a buyer can force the sale of property and control almost every step of the purchase. These cases pit private property owners against the state. It's what’s known as eminent domain.
In The State's Domain, WFAE’s Tom Bullock examines how eminent domain is being used in North Carolina, and the debate those practices have stirred in Raleigh. It's a two-part series. Part one is called The Buyer's Market.
For property owners, stopping their land from being taken is nearly impossible. That’s why Rennea Wilmot is preparing for what she knows will come.
"The state’s taking land. The state’s taking the sticks and the bricks of my house, but to me it's my home."
Her living room is now a warren of cardboard moving boxes, mismatched furniture and stacks of clothes.
"This is all yard sale stuff, things I’m going to get rid of," she says.
Last June, Wilmot was told the North Carolina Department of Transportation was using eminent domain to claim her property. Wilmot had just retired after 30 years of teaching public school.
Wilmot’s three-bedroom, 1,600 square foot house in Concord is being taken because it sits just a few blocks away from a section of Interstate 85 where the highway goes from four lanes each way down to just two. That’s something which will changed, says Jordan-Ashley Walker, a spokeswoman for the North Carolina Department of Transportation.
"It's essentially a $187 million project that is interstate widening with some interchange improvements."
Rennea Wilmot’s house will be torn down to make way for one of those interchange improvements. She’s just one of some 200 home and business owners who will lose their property in this project alone. Their story shows the natural tension at the heart of eminent domain cases - individual rights vs. public good.
Under North Carolina laws, state and local governments and some private corporations and utilities have the right to claim private land for anything deemed of “public use or benefit.” That’s a very broad term says Jason Campbell, a lawyer who represents land owners in eminent domain cases.
"They can force you to sell all or part of your property to the state whenever the state wants."
Eminent domain can be used to make way for things like parks and pipelines. A proposed constitutional amendment making its way through Raleigh would bar the state from using eminent domain to take property and then sell that land to a private company for development.
But the majority of eminent domain claims are made by the NCDOT. And that would not be affected by the bill. The DOT is required by law to pay a fair market price for the property. But nearly the entire process of determining that price is controlled solely by the state.
The process begins with a face-to-face meeting, says the DOT’s Walker.
"Once we reach out to that property owner, we’ll begin an appraisal of the property itself. The appraisal becomes the offer. It’s no more or no less," she says.
It sounds like a straight-forward process, but it’s not that clear cut, says lawyer Jason Campbell. He says there's "something of a disconnect between what the property owner expects and what the DOT is actually doing."
Take that appraisal. It’s done either by a DOT employee or a subcontractor pre-approved by the state. And the details of an appraisal? That’s not something property owners automatically get to see. They have to ask for it. "They can request a copy of the appraisal," says DOT spokeswoman Walker.
State law mandates that only the land and things “permanently attached to the land,” like buildings, are appraised. What those structures are used for is irrelevant, and Campbell says that limitation is bad for businesses.
"What if you owned a McDonald's franchise, or you owned a small business? Or maybe it's your office location," Campbell says. "Well, if they put you out of business, they don’t pay for business damages."
For homeowners, there are other problems. The appraisal is for current fair market value, which is what you’d expect under normal circumstances. But remember, these people are being forced to sell now. "We all know the recession has occurred," says Campbell. "Property values have dropped and a lot of people are under water."
Meaning they owe more on the mortgage than the house is worth. Campbell says they "run the risk of losing their property, losing all the proceeds from the condemnation and still having an outstanding mortgage."
That was a fear for homeowner Rennea Wilmot. Her mortgage is about $80,000. Wilmot hoped the state’s offer would cover that and be enough for a good down payment on another house, "Because at this stage of my life," says Wilmot, "I do not want a huge mortgage. I can't do it, I’m retired. There’s no way."
Months into the process, Wilmot feels the DOT has been stringing her along. She was told in June that the state would take her property by eminent domain. However, an appraisal didn’t take place until this February. Then, two weeks ago, she says the agent finally showed up, but without the appraisal details.
Wilmot won't say how much the state has offered her. She says it would cover her mortgage. Still, it’s not what she was hoping for in part because of another aspect of eminent domain. The DOT can decide it will buy only a portion of an individual’s property, leaving that person with whatever remains.
There’s a series of painted wooden stakes in Wilmot’s yard. Connect the dots and it goes diagonally through her house, leaving a large parcel at the front, which the DOT will buy. But there’s a small pie-shaped piece in the back.
"It's like from my deck to the fence," she says. If the DOT gets its way, Wilmot’s property will go from more than half an acre to "0.289 parts of an acre because they say they don’t need the rest."
At some points, Wilmot says it’s roughly 20 feet wide. She contends that pie shape makes it unusable. If Wilmot keeps the property, she’ll have to pay city and county taxes on land she no longer wants.
Now, it’s important to note the DOT has a financial responsibility to keep its offers as low as possible. Every dollar spent acquiring a property through eminent domain is a taxpayer dollar.
The DOT does give property owners the ability to negotiate says, spokeswoman Jordan-Ashley Walker.
"They do have the chance to make a counter offer. And there are times when we do settle based on an agreement between their offer and our offer," she says. If a settlement isn't reached, the landowner can opt for a jury trial to try to get more.
As for Wilmot, she’s hired an attorney to force the DOT to buy all of her land. State law requires the DOT purchase what are deemed uneconomic remnants in eminent domain cases. That’s what Wilmot believes she is left with.
For landowners in eminent domain cases, the fight over how much they get in compensation is a difficult one. But even that may be overshadowed by just when that money is paid. That story is part 2 of our series.