Evidence of Value in Real Estate, Diminution in Value
Real estate litigation is often high stakes. Generally, and based on experience, the two most common types of real estate disputes pertain to (1) title/ownership disputes and (2) claims that a defendant’s conduct has damaged the value of real estate. For item (1), that usually comes in the form of a quiet title petition in which a person asks the Court to adjudicate all interests relative to a parcel of real estate. Item (2) is much broader and is often seen with trespass or nuisance claims. However, damage to real estate and a claimed diminution in value to land is often included in damages requests in civil suits — even when the suit itself does not directly pertain to real estate (e.g., breach of contract). In Missouri, proving a loss to real estate value requires specific evidence.
An owner of property is ordinarily qualified to give his/her opinion regarding the value of his/her own property even though he/she is not a real estate expert. Casada v. Hamby Excavating Co., Inc., 575 S.W.2d 851, 857 (Mo. Ct. App. 1978). This, however, is based on the assumption that the landowner is familiar with the property and is thus aware with its uses and condition. Shelby County R-IV School District v. Herman, 392 S.W.2d 609 (Mo. 1965). As such, if the landowner’s opinion is based on improper elements outside the scope of the landowner’s knowledge, then the testimony may be prohibited. The safer route, then, is to have an expert discuss real estate value. To qualify as an expert witness, the witness must appear by reason of education or specialized experience to possess superior knowledge on subjects which individuals having no particular training are incapable of forming an accurate opinion or of drawing accurate conclusions. An expert’s opinion will often carry more weight than a landowner’s opinion, particularly because the landowner will usually be a party and can be painted as biased.
The general rule in Missouri for damages to real estate is the diminution in value test, which is calculated by determining the difference between the fair market value before and after the event causing the damages. Tull v. Housing Auth. of City of Columbia, 691 S.W.2d 940, 942 (Mo. Ct. App. 1985). Alternatively, the cost of repair test may be used when the cost of restoration is less than the diminution in value. Id. Under that approach, damages are measured as the dollar amount of repairing the defects or supplying the omissions to make the land to the condition it was prior tot he wrongdoing. White River Dev. v. Meco Systems, 806 S.W.2d 735, 741 (Mo. Ct. App. 1991).
In Missouri, then, proving damages to real estate is generally a two step process: first, assign a fair market value to the property using the landowner and/or real estate expert (e.g., appraiser, real estate agent, real estate speculator); second, calculate damages under the diminution of value test or cost of repair test.
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