The average reader of The Real Deal may not need help assessing property values, but jurors and arbitrators do. And like doctors or other specialists, real estate professionals who serve as expert witnesses in court are well compensated for their services.
For that reason, work as an expert witness has become an increasingly important source of supplemental income for many New York real estate professionals in the last few years — especially for appraisers, whose field has shifted dramatically since the downturn.
“There is a general perception that [testimony] is more well-paid than general appraisal,” said Theresa Nygard, a Manhattan-based commercial appraiser at KTR Real Estate Advisors, who often serves as an expert witness in cases that involve land valuation. “But I can say that you definitely earn it.”
Nygard has worked on some of the highest-
profile property disputes in New York City, including a years-long case involving several Times Square properties that the city took possession of through eminent domain in the 1990s.
Currently, much of her work consists of cases where the lessor (or land owner) in a 99-year land lease is renegotiating with a tenant (usually a developer). Nygard is called in to estimate the fair market rent.
When appraisers do legal work, they set their own fees. And they’re paid by the party who hired them, whether it’s the defense or the plaintiff.
While Nygard would not disclose her rates, Timothy King, a broker with commercial brokerage CPEX, said he charges between $750 and $1,250 per hour for work as an expert witness. King has worked on disputes between tenants and landlords and between buyers and their architects or brokers.
Jonathan Miller, president of the appraisal firm Miller Samuel, said expert witness work has been on the rise — at least for his firm. He said about 75 percent of his firm’s business is now in legal support services, compared with only a quarter in 2006. His firm has minimized its traditional appraisal activities in recent years, he said, because of the changes in the industry since the real estate downturn.
Indeed, appraisers have struggled since the adoption of the federal Home Valuation Code of Conduct in 2009, which requires third-party firms called appraiser management companies to dole out appraisal assignments, instead of appraisers finding their own clients (see related story, “Can Mitchell, Maxwell & Jackson survive?”).
In court cases, expert witnesses in real estate are expected to do meticulous research and then state with authority — and brevity — why one property is worth more or less than the other party thinks it is. According to Miller, valuing a property can take up to several days.
On the residential side, divorces are a significant portion of the cases that require expert witnesses. Criminal cases — possibly where a defendant purchased a building illegally or defrauded their investors — and disputes between building boards and their shareholders are also somewhat common, said Larry Sicular, a broker at Brown Harris Stevens and the head of the separately owned appraisal firm Lawrence Sicular & Associates.
Sicular said he charges $5,000 to $6,000 for each apartment he researches for a trial or arbitration. For townhomes or single-family homes, he charges $7,000 to $8,000.
But New York City has only a handful of sought-after expert witnesses in real estate, and it can be hard to break into the field.
Attorneys want an expert who can stay confident in the face of questioning, and that’s not always easy.
“Some people don’t like to be raked over the coals,” said Nygard. “These attorneys are no slouches. Their job is to find the chinks in your armor.”
The stakes are high: If an expert does a good job in arbitration, their testimony can prevent a case from going to trial, saving both parties money. So when leading commercial lawyers see a good expert witness on the stand, they are likely to come calling repeatedly.
“It’s a little bit like the chicken or the egg, because [lawyers or landlords] want someone with trial experience,” King said.
As a result, expert witnesses said they usually see the same four or five experts retained in every case they work on. “It’s a small world,” Nygard added.