March 21, 2018
North Carolina Supreme Court Allows Brokers’ Fair Market Value Testimony
The North Carolina Supreme Court in an opinion filed March 2 held that real estate brokers may legally testify regarding the fair market value of real property in condemnation cases.
The case, North Carolina Department of Transportation (NCDOT) vs. Mission Battleground Leasco, LLC, involved the NCDOT’s condemnation in 2013 of approximately two acres of commercial property in Greensboro for a highway construction project.
At trial, Mission Battleground attempted to offer the testimony of a licensed real estate broker as to the property’s fair market value to establish “just compensation.” The NCDOT argued against allowing the broker’s testimony based upon state law that says licensed real estate brokers are only allowed to provide opinions of the “probable selling or leasing price” of real property. NCDOT argued that a state-certified appraiser is the only party legally allowed to estimate the fair market value of real property.
The trial court agreed with the NCDOT, excluded the broker’s testimony, and a jury established “just compensation” based upon testimony offered by other experts.
Mission Battleground appealed, but the Court of Appeals unanimously affirmed the trial court’s decision. Mission Battleground then petitioned the state Supreme Court to exercise “discretionary review” of the decision of the Court of Appeals.
In the opinion written by the chief justice, the Supreme Court stated that the authority allowing experts to testify is found in the state’s Rules of Evidence, and not in a statute such as the one that allows licensed real estate brokers to offer broker price opinions and comparative market analyses. The court also stated, “Any person who can qualify as an expert under that standard, which is articulated in State v. McGrady, 368 N.C. 880, 787 S.E.2d 1, Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), and other pertinent caselaw, can testify without having to invoke any other source of authority. Meeting that standard is both necessary and sufficient.”
The case will now be returned to the Guilford County Superior Court for a retrial where Mission Battleground may reattempt to introduce evidence of the fair market value of the property as determined by a real estate broker. Importantly, the Supreme Court stated in its decision that it took “no position” on whether the broker in this case was qualified under the Rules of Evidence to offer expert witness testimony as to fair market value, only that the broker was legally allowed to offer that testimony. The court stated, “The superior court should decide in the first instance whether his testimony about fair market value is admissible under Rule 702.”
The North Carolina Supreme Court’s decision in this case means that state-certified appraisers are not the only party legally allowed to testify about fair market value in condemnation cases. In fact, the Court stated, “An intelligent lay person, without any license, could potentially testify about fair market value.” Whether a real estate broker or other lay person is qualified to offer expert testimony as to fair market value will be an issue for the trial court to decide. It is likely that this decision will have impact beyond condemnation cases, and could allow brokers to testify as to fair market value in other legal matters where real property valuation is concerned.