When a government agency or utility company wants to take your property in Texas, they cannot simply name a price and walk away. State law requires them to pay fair market value, but that phrase carries more weight than most property owners realize. Understanding how that number gets calculated and who controls the process can make a significant difference in the outcome of your case.
What Does Fair Market Value Mean Under Texas Law?
Texas law defines fair market value as the price a willing buyer and seller would agree on when neither is under pressure to complete the deal.
Texas Property Code Section 21.042 requires the condemning authority to pay the property owner the market value of the property taken. The Texas Supreme Court has reinforced that this standard reflects an arm’s-length transaction, meaning the price should reflect open-market conditions rather than the government’s internal budget or project timeline.
Fair market value is not the appraised value on your county tax rolls. It is not the price you paid for the property years ago. It is the price a knowledgeable buyer would pay on the open market as of the date of the special commissioners’ hearing.
How Do Appraisers Determine That Number?
Appraisers use one or more of three standard approaches to estimate fair market value: the sales comparison, income, and cost approaches.
In most residential cases, the sales comparison approach drives the analysis. An appraiser identifies recent sales of similar properties in your area and adjusts for differences in size, condition, and location. In McAllen and the broader Rio Grande Valley, local sales data plays a central role, and a property’s proximity to commercial corridors, transportation infrastructure, or agricultural use can meaningfully affect the number.
For income-producing properties, appraisers often rely on the income approach, which estimates value based on the property’s ability to generate income. For specialized improvements with no clear market comparison, the cost approach estimates the cost to replace the structure or improvement, minus depreciation.
The condemning authority hires its own appraiser. That appraiser’s job is to produce a report that meets legal requirements, but their conclusion need not favor the property owner. While Texas Property Code Section 21.0113 requires the condemning entity to provide a certified appraisal, property owners can—and often should—hire their own appraiser to present competing evidence at the hearing.
What Is the Hearing Before Special Commissioners?
Special commissioners are three impartial landowners appointed by the court to hear evidence and set the award in a Texas eminent domain case.
Under Texas Property Code Section 21.014, after the condemning authority files a petition, the court appoints three special commissioners. Both sides present evidence, including competing appraisals, and the commissioners issue an award. That award becomes the baseline compensation.
If either side objects to the award, the case moves into the district court for a full trial. At trial, both sides present their appraisal evidence to a judge or jury, who then determines the final compensation amount. This is where independent appraisal evidence becomes especially powerful.
Can Severance Damages Affect Your Total Compensation?
If only part of your property is taken, Texas law may entitle you to additional compensation for how the taking damages the remaining land.
Texas Property Code Section 21.042(c) allows property owners to recover damages to the remainder of their land when a partial taking reduces its value. This is called severance damages. For example, if a utility easement cuts through your property and limits how you can develop or use the land that remains, that lost value factors into your total compensation.
Many initial government offers do not account for severance damages at all. Property owners who accept the first offer without reviewing their full rights often leave compensation on the table that the law specifically allows them to recover.
What About Business Losses or Relocation Costs?
Texas law provides separate compensation for certain relocation expenses, but business damages are generally not recoverable in eminent domain.
The Texas Relocation Assistance Act, administered by the Texas Department of Transportation, provides payments to eligible displaced businesses and residents. These relocation payments are separate from the fair market value award and cover costs like moving expenses and comparable replacement housing or business space.
Business losses, such as lost profits or loss of the customer base, are typically not recoverable as part of fair market value under Texas law. This makes it even more important for property owners to document every compensable element of their claim, including the fair market value of improvements and fixtures, and severance damages to the remaining land.
Why the Government’s First Offer Is Rarely the Final Word
The condemning authority must complete a formal, multi-step bona fide offer process under Texas law before filing suit, but property owners are not obligated to accept the offer.
Under Texas Property Code Section 21.0113, the condemning authority must provide a written appraisal and make a bona fide offer through a multi-step statutory process—including a written initial offer, a certified appraisal, and a final offer at or above the appraised amount—before initiating condemnation proceedings. That initial offer is based solely on the government appraiser’s assessment. It does not reflect an independent review of your property’s value, your specific land use, or your severance damages.
Property owners in McAllen facing highway expansion projects along US-83, pipeline easements in Hidalgo County, or utility corridor acquisitions should treat that first offer as a starting point, not a conclusion. The law gives you the right to challenge it, present competing evidence, and have a neutral body evaluate the competing claims.
Work With Garza Law on Your Eminent Domain Claim
If you received a condemnation notice or a government offer to purchase your property, Garza Law is ready to help you understand what your property is actually worth. We work with property owners throughout McAllen and the Rio Grande Valley who want a clear picture of their rights before making any decisions.
Call us at 956-201-7787 or contact us to schedule a consultation. Our team is here to answer your questions in plain language so you can move forward with confidence.
