- Unaccepted Offers as Evidence of Value?
- April 16, 2015 | Author: Elliott B. Pollack
- Law Firm: Pullman & Comley, LLC - Hartford Office
- When an ad valorem assessment is challenged as excessive or when the amount awarded for real property taken in an eminent domain proceeding is attacked as inadequate, the central dispute is value/compensation. In addition to fact and other expert witnesses, the litigants present appraisers’ testimony regarding the value of the property at issue; the appraisers employ classic cost, income and sales approaches, and variants thereof, in their evaluations.
Is evidence of a purchase offer to buy a property by a third party which the owner rejected relevant in these proceedings? Some courts decline such evidence; others admit it. Some courts allow the appraiser to rely on a rejected offer; others do not. Is such evidence sufficiently trustworthy in valuation cases? Most courts think not, although a minority disagree.
A fundamental judicial concern can be linked to the question of reliability and the bear that a valuation plaintiff might be able to “create” such offers. More than one hundred years ago, the U.S. Supreme Court cast great doubt about the reliability of such evidence. However, on closer examination, rather than excluding it entirely, courts might condition admission on the availability for cross-examination and direct judicial inquiry of the offeror whose proposal was declined. (Even when the offeror is available for cross-examination, many courts reject such evidence.)
A few state courts admit offers made in good faith by a knowledgeable offeror and without financing conditions as evidence of recent market activity.
Since materials relied upon in an appraiser’s report need not be admissible in and of themselves (appraisers can employ hearsay and other third party data in reaching an expert opinion) it may be challenging to find an appraiser who would not find such data to be probative.
No Connecticut court has considered this issue. However, the editors of Property Valuation Topics question whether such evidence should be excluded as a matter of law. The weight accorded to declined offer evidence should be subject to strong judicial scrutiny and discretionary authority. Rejection of a bona fide offer from a serious purchaser with the ability to close the deal may very well influence a trier’s opinion - just as the valuation plaintiff’s acceptance of a low offer from a purchaser who was unable to consummate the transaction might be a piece of data that an opponent would want to present to the trial court!