Several years ago, a South Carolina homeowners’ association decided to make golf memberships mandatory in order to help maintain the high caliber of the community. After the housing market collapsed, though, a group of owners attempted to file a class-action lawsuit against the association, seeking damages for an alleged loss of value to their homes because of the golf membership requirement. It was a complex case that showed the value of an expert witness who understands real estate market conditions.
This South Carolina case raised a number of interesting issues: How important is golf to a prospective buyer? How much of a premium does a golf course view still command? Can home sales in a golf course community developed in the 1970s be compared to a new community built in the 1990s?
Just as a careful real estate market analysis is essential for buyers and sellers in a real estate transaction, an expert witness can bring clarity to disputed valuations in a lawsuit. A solid understanding of market conditions is vital when analyzing the financial impact of one party’s decision in a shareholder dispute, damage claim, eminent domain taking, constraint of trade issue, divorce or other legal matter.
If construction problems delayed a condominium project from reaching the market before the downturn, what amount of damages should the developer or investor or lender receive? What if a government body seeks to obtain a private parcel through eminent domain? Should the price be based on today’s depressed market conditions or should the offer be based on a higher future value? In the latter case, our market research showed a major improvement in the market could be expected within 24 months. We presented the expected absorption rate for the new homes planned for that parcel, and convinced the jury that the actual land price was well above the number being offered in the taking.
Of course, any expert witness, regardless of their prior track record, should not rest on their laurels. Their testimony should always be supported by comprehensive research and a credible research methodology. A final point: No matter how complex the research work, the findings must always be presented in a way that is easily understood in court.