What Is Eminent Domain in Real Estate?

Eminent domain is the legal power that allows the government to take private property for public use—such as building roads, schools, or utilities—as long as the owner receives just compensation. While controversial, eminent domain is an established part of U.S. property law and can significantly impact homeowners and real estate investors.

How Eminent Domain Works

The government—federal, state, or local—can initiate eminent domain when a property is needed for a project that benefits the public. The process usually follows these steps:

  • Public purpose is identified (roads, transit systems, utilities, parks, etc.)
  • Property is appraised to determine fair market value
  • The owner receives an offer based on the appraisal
  • Negotiations occur between the owner and the government
  • A condemnation action may occur if the owner disputes the taking or value

The U.S. Constitution requires “just compensation,” meaning owners must be paid the fair market value of the property being taken.

Example of Eminent Domain

A city plans to expand a major highway.

  • Several homes lie in the planned expansion path.
  • The government appraises each property and offers compensation based on market value.
  • Most homeowners accept the offer, while one challenges the valuation.
  • A court reviews the appraisal and determines the final compensation amount.

The government acquires the land and proceeds with the highway expansion.

Why Eminent Domain Matters for Homeowners & Sellers

  • You may receive notice that your property is part of a future public project
  • Compensation is based on market value—not sentimental or business value
  • If only part of a parcel is taken, remaining property value may decrease
  • Owners have the right to dispute valuation or necessity in court
  • Investors should evaluate potential government projects before purchasing property

Related Real Estate Terms

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