Appraisal of commercial property must reflect the land's income-producing potential.(Recent Court Decisions)

When a parcel had inherent income-producing capacity because of its location, an appraisal based on sales of lots without commercial value was improper, according to the Mississippi Court of Appeals.

For fourteen years, Bonnie Burks operated a gas station and convenience store and resided on a 3.34-acre parcel abutting a highway. In 2000, the Mississippi Transportation Commission (MTC) condemned 1.24 acres of the parcel to widen the highway, taking the gas station and store.

At the condemnation trial, Burks's appraiser testified that he used the income capitalization approach, the sales comparison approach, and the cost approach to assess just compensation at $350,000. In contrast, the MTC's appraiser testified that Burks was entitled to only $62,897. The MTC appraisal contained a mixture of the cost approach and the sales comparison approach.

To determine the parcel's value before the taking, the MTC's appraiser valued the land as if unimproved, using four sales of vacant lots elsewhere in the county, and then added the depreciated value of the improvements. He then calculated the property's post-taking value by adding the value of Burks's home to the same unimproved-land valuation. The jury ultimately awarded ...