0.2 Governing Principles. Federal acquisitions entail different appraisal standards than other types of property transactions because they involve payment of just compensation. As the measure of just compensation is a question of substantive right “grounded upon the Constitution of the United States,” just compensation must be determined under federal common law—that is, case law.3 Federal case law holds that just compensation must reflect basic principles of fairness and justice for both the individual whose property is taken and the public which must pay for it. To achieve this, an objective and practical standard was required, and the Supreme Court has long adopted the concept of market value to measure just compensation. As a result, just compensation is measured by the market value of the property taken. “To award [a landowner] less would be unjust to him; to award him more would be unjust to the public.”4

“… nor shall private property
be taken for public use, without
just compensation.”
— U.S. Constitution,
amendment v

Most of the case law on just compensation stems from the federal exercise of eminent domain, but the resulting practical, objective rules for determining market value have been adopted in numerous federal statutes, rules and regulations, and programs and agency policies. As a  result, the federal eminent domain-based valuation requirements reflected in these Standards apply to all types of federal acquisitions.5
And because these Standards require appraisers to provide an opinion of market value and not just compensation, they also apply to the appraisal of property for many types of government transactions that require a reliable determination of market value without reference to just compensation, such as land exchanges under the Federal Land Policy and Management Act (FLPMA).6

Certain types of transactions may require exceptions to specific valuation rules contained in these Standards—for example, to comply with special legislation—but the underlying principles of just compensation remain in force. In addition, while just compensation does not exceed market value fairly determined, Congress has the power to allow or require the United States to pay more than the just compensation required under the Fifth Amendment. For example, under the Uniform Act, people and businesses displaced by public projects receive moving and relocation expenses in addition to the market value-based just compensation received for the acquisition. Just compensation is determined under federal rather than state law. Appraisers must apply federal law throughout the process of opining on market value, recognizing that federal and state laws differ in important respects. Most appraisals for federal acquisitions involve straightforward application of established law to the facts. But some valuation problems require nuanced legal instructions to address complicated or undecided questions of law. These Standards address both routine and complex legal issues that arise in federal acquisitions.

Where just compensation is concerned, a reliable process is necessary to ensure a just result. For federal acquisition purposes, the appraisal process must result in opinions of market value that are credible, reliable, and accurate. These federal Standards governing the appraisal process protect against allowing “mere speculation and conjecture to become a guide for the ascertainment of value—a thing to be condemned in business transactions as well as in judicial ascertainment of truth.”7

“[O]ur cases have
set forth a clear and
administrable rule for
just compensation: ‘The
Court has repeatedly held
that just compensation
normally is to be
measured by ‘the market
value of the property at
the time of the taking.’”

— Horne v. Dep’t of Agric.,
135 S. Ct. 2419, 2432
(2015) (quoting United
States v. 50 Acres of Land
(Duncanville), 469 U.S. 24,
29 (1984))

3 United States v. Miller, 317 U.S. 369, 380 (1943); see Marbury v. Madison, 5 U.S. 137 (1803).
4 Bauman v. Ross, 167 U.S. 548, 574 (1897).
5 Similarly, the appraisal requirements set forth in the Uniform Act regulations “are necessarily designed to comply with . . . Federal eminent domain based appraisal requirements.” 49 C.F.R. app. A § 24.103(a).
6 See Sections 1.12 and 4.10 for a discussion of special considerations arising in the appraisal of property for federal land exchanges under FLPMA, 43 U.S.C. § 1716, and other statutes.

7 Olson v. United States, 292 U.S. 246, 257 (1934).