Appraisers often serve as expert witnesses in tax abatement matters. The more money at stake, the more likely the parties will need appraisers.
When used in that manner, an appraiser is considered an expert witness. Expert witnesses assist the judge, appeals board or other tribunal of technical matters and conclusions beyond the knowledge of ordinary witnesses. Ordinary witnesses generally testify only to matters of fact, such as “what,” “when,” “where,” and “who.”
By its nature, expert testimony is an opinion as to why something happened, or the meaning of certain evidence. In the context of tax abatements, the parties and tribunal look to the expert to provide an opinion of value; therefore, the expert ultimately will conclude by saying the real estate is worth $X, in his or her opinion.
One unusual aspect to expert testimony is the ability of experts to rely on hearsay evidence. Hearsay evidence are statements by someone not testifying in a case which a witness, such as an appraiser, puts forward as being true. Without having that “out of court” person available for cross-examination, how can the judge, board or tribunal know the statement is true? Non-expert witnesses ordinarily may not offer hearsay evidence, but experts may. For example, appraisers are permitted to rely on statements made by brokers as to cap rates used in transactions. This reliance does not mean the other party cannot challenge the cap rate information. However, they often are not. Rather, the other party will challenge the manner in which the appraiser applies that hearsay evidence.
But what if the appraiser bases his or her opinion on a scientific or geological conclusion? For example, in using the replacement cost method to value an electric utility’s poles and conduits, may the appraiser express an opinion as to the percentage of poles which must be installed in bedrock? Wouldn’t that opinion be outside the expertise of an appraiser?
The short answer is yes; however, the appraiser may render such an opinion if the appraiser relies on some other data, and discloses that reliance as an “extraordinary assumption.” The Uniform Standards of Professional Appraisal Practice, USPAP, recognizes this approach. This does not mean the other party may not challenge it. However, the appraisal will not be defective simply because of the reliance on the extraordinary assumption.
A key take-away for appraisers is to make sure to include a sentence disclosing any extraordinary assumption. Failure to include that one sentence could jeopardize the entire appraisal.
New England Telephone et al v. Town of Acworth et al (New Hampshire Business Court, 220-2012-CV-100, March 12, 2018).
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