All Forum Posts by: Maxine Kunimura

I'm going through this exact scenario right now, but in Minnesota. It's a partial taking, vs. a full acquisition. The above advice is pretty spot on - the county/city will offer what they assess fair market value to be and it could be a really good deal, or not. It's always best to consult an attorney, of course. I had several attorneys do free consults but they don't get involved until you've received an official offer. For me, it's working out well. I hired an attorney to ensure we had someone in our corner to protect our best interests. All the attorneys I spoke to charged a percentage of what ADDITIONAL compensation you receive after retaining them. So, if the city offered $300k but you hire an attorney who negotiates $400k, the attorney is paid 30% (or whatever is agreed upon) of $100k.

Also be aware, if there are current plans to widen the street and the property will be effected, the seller is legally required to give you all communication and information they've received from the county/city so you're thoroughly educated on what projects (if any) are going to be underway. I think it's worth looking into and I wouldn't be scared away from possible projects down the road. It's a looong process anyways, so if there are no current plans, you'll likely have a few years to force equity, use it as a rental, enjoy it yourself, etc. Also, full acquisitions, like your case would be, are easier to evaluate than partial takings. 

I personally wouldn't wait unless you have solid information (such as a letter from the county/city) as to the rezoning that will take place. Going from rumors to action could take years. I've spent years myself waiting to do home projects because of 'rumors' and it wasn't worth it. Granted, those rumors are now (6 years later) coming to fruition but it was still worth it to move ahead at the time. There's no right or wrong answer in my opinion. If you can get a great sale out of it now and make a good profit, then I would go for that. But it couldn't be a terrible idea to wait if you're able to get good use out of the warehouse in the mean time. It's hard to know with eminent domain what price you'll get, but keep in mind you'll likely need to hire a condemnation attorney and go through litigation to some degree.

I'm by no means an expert but I've been going through eminent domain proceedings the last year and have met with a few eminent domain lawyers over the years. My understanding is the developer would have to obtain city approval and prove that their plans are in the city's best interest. This can take years.. At least it did in my case. It's definitely not an overnight process. I think this developer may be trying to scare you. They likely have little to no room to do anything right now.

As far as what you can do, I would speak with some lawyers and get their advice. Then, if things eventually go sideways, you have an attorney in mind that you can immediately retain. Before they can take your land, they will have to make you an offer in good faith, you both would attempt negotiations, and if an agreement isn't reached, it will go to court where they must prove their need to take your land through eminent domain. 

UPDATE. Instead of a whole new thread, seems best to provide an update here and see other's thoughts. 

The county has proceeded with the project in John's original post. They've made offers to home owners (including myself) and intend to acquire the property needed in May 2021. I've retained an attorney and appraiser, and the county has initiated a quick take on my property as of this month. This will be a partial taking with significant damages. What I mean by this is that the road expansion will made it so that my garage will be only a few feet from a retaining wall. My property is unique in that we are zoned commercial and there is intent for this area of homes to be developed commercially in the next 5-10 years. This is important because our properties were appraised with commercial land sale comparisons, in addition to residential home sales.

Anyways, my focus now is on how to best use the settlement in regards to taxes and investing opportunities. I have a few CPAs and finance folks that I'm meeting with in the near future but would love to gain more info here if possible. (I'm also open to recommendations in the Twin Cities, MN metro area!) The settlement is roughly 50% for loss in the property's value, 30% for a temporary easement (I've been told this could be considered rental income for tax purposes), and 20% in damages.

This is far from tax advice but I want to share what I've learned so far. It's my understanding that I must report the full settlement as income, and therefore pay tax on the entire sum. I've read the 2017 Trump Tax bill removed any deductions for attorney fees. All the eminent domain lawyers I met with work on a contingent fee basis. Let's say that fee basis is 40% and the county offered me $100,000 but my attorney was able to get me a $200,000 settlement. The lawyer will take $40,000 and I'll be left with $160,000. I must still report the full $200,000 on my taxes and can't take the $40,000 as a deduction - which seems odd because the lawyer will also be reporting the $40,000, so it appears that chunk will get taxed twice? I know it's getting in the weeds here but I feel this is valuable to know ahead of time. This is my primary residence, so it doesn't currently qualify for a 1031 exchange but I'm looking into making it a rental and what that would look like. 

I don't have a specific question, but welcome any other's thoughts or experiences around this!

@Kris H.

They did speak with the lender, and they shouldn’t have. Having owned a child care business, I would never release information to someone I didn’t know via phone or email.

@Amy Beth

My DTI is high because they are counting 2 mortgages instead of one since we don't have a signed lease for our current home yet. We have no consumer debt. The lender initially said they would be able to make the 2 mortgages work due to our income being high enough and we wouldn't need a signed lease, but that's not going to be the case.

@Brian Spies

The lender is requesting I write a letter stating I gave notice to my daycare that I’m withdrawing my child. Otherwise I agree with your statement :)

@Chris Mason

You're correct that it's a VA loan. Are there any pros/cons of me withdrawing my application vs. them denying my loan? I'm trying to avoid getting in trouble for not performing on this Purchase Agreement. The lender is pushing me really hard for getting this letter today, stating child care expenses will end soon. We're supposed to close 12/31. I'm trying to get a hold of an attorney but it's tough with this timeline (and the holidays). I don't want to be accused of not performing because I was uncomfortable when I feel I'm being forced to choose between 1) removing my son from daycare to reduce debt or 2) creating a document I wont be complying with.

To be clear, I’m not seeking advice on how to make this deal work by any means necessary. If the lender can’t provide the loan legitimately, then so be it. I’m trying to ensure I’m doing my due diligence in this process.

Thank you for weighing in on this!

@Joel S.

I know it's on me to improve my DTI, but I'd like to do that legitimately and not through false documentation. I'd rather the loan fall through then potential mortgage fraud. The contacting of the daycare rubs me the wrong way but I'm not resentful. I'm trying to learn if this is normal practice.

My lender has contacted my son's daycare (without my knowledge) twice now. Not to verify the cost or attendance, but because he is trying to come up with a "strategy" (he calls it) to document that my child care costs will end soon, even though I've made it clear that we have no intention of ending child care. He wants to do this because they have to reduce my DTI to make the loan work. I feel they are crossing two big lines: 1) trying to misrepresent my finances (mortgage fraud?) and 2) speaking with my son's daycare, not for ‘normal' purposes, without notifying me.

Am I mistaken? Do lenders typically do this?