Opinion ID: 1794035
Heading Depth: 1
Heading Rank: 6

Heading: testimony of russell nelsen

Text: Nelsen, a licensed real estate appraiser and broker, conducted an appraisal of the 61.43 acres. Nelsen determined that the highest and best use of the property was passive recreation, such as camping, picnicking, fishing, hiking, and birdwatching. Nelsen utilized a comparable sale approach and income approach method to appraise the 61.43 acres. Nelsen based his comparable sale upon a 26.66-acre tract of land north of Blair which Nelsen stated sold for $300,000 through an installment contract. According to Nelsen, the $60,000 downpayment on the installment contract represented the cash equivalency of the sale price. Nelsen divided the $60,000 by the 26.66 acres to determine that the comparable land sold for $2,250 per acre for that part of the 26.66 acres which was nonagricultural treed land along the river. Nelsen acknowledged that the $60,000 was not the total amount paid. Nelsen stated that he did not know what amount was paid in the installments and that a common appraisal practice is to arrive at an exact amount of cash that exchanged hands. Nelsen testified that using this method, he valued the 61.43 acres at $123,600. Nelsen, using the income approach method, also concluded that the 61.43 acres was worth $123,600. Nelsen relied upon information gathered from Rohrberg whose Iowa property earned an income of $10 per front foot. Nelsen capitalized projected net income, relying upon the $10 per front footage rental receivable by Rohrberg and discounting that to $8 per lineal foot. Nelsen made adjustments for a projected $3,000 capital expenditure. He estimated that the 61.43 acres, as a recreational project, would net $14,240 per year less an estimated 20 percent from vacancies, expenses, and capital expenditures over the first several years of startup. Nelsen testified that the 20-percent figure represents a long-term estimate derived from an 8-percent expense figure used by Rohrberg and an additional 12 percent added by Nelsen to account for other expenses and interest. Under cross-examination, Nelsen stated that any projections as to occupancy rate would be guesswork on his part. The NRD offered the testimony of James Grove, a real estate appraiser. Grove stated that he would not use the downpayment on a land contract as a reliable indication of the price paid for the real estate because the $300,000 land contract sale was never completed. Grove analyzed the 61.43 acres as wet chute and timber, waste from an agricultural standpoint, and valued the 61.43 acres at $39,200 or $637.52 per acre. NRD contends that the trial court erred in allowing Nelsen to testify as to the sale price of a purported comparable piece of property. The value of an opinion of an expert witness, or any witness, must be dependent upon and is no stronger than the facts upon which it is predicated, and it has no probative force unless the assumptions upon which it was based are shown to be true. Langfeld v. Department of Roads, 213 Neb. 15, 328 N.W.2d 452 (1982). Generally, evidence as to the sale of comparable property is admissible as evidence of market value, provided there is adequate foundation to show the evidence is material and relevant. The foundation evidence should show the time of the sale, the similarity or dissimilarity of market conditions, the circumstances surrounding the sale, and other relevant factors affecting the market conditions at the time. Wear v. State Dept. of Roads, 215 Neb. 69, 337 N.W.2d 708 (1983). In condemnation proceedings where the value of real estate is in issue, evidence of particular sales of other land may not be introduced as independent proof on the question of value, unless foundation is laid indicating that prices paid represented the market or going value of such land. Timmons v. School Dist., 173 Neb. 574, 114 N.W.2d 386 (1962). We do not agree with Nelsen's suggestion that one can place a fair market value of land at $60,000 because that is how much the buyer gave as downpayment on a $300,000 installment contract. The buyer and seller did not agree on the mere downpayment as the fair market value of the 26.66 acres. The fair market value is the `value of the property if offered for sale upon the open market as between one who is ready and willing to sell but is not compelled to sell, and one who is ready, able, and willing to buy but is not required to buy.' Schmailzl v. State, 176 Neb. 617, 623, 126 N.W.2d 821, 825 (1964). Installment contracts should be carefully scrutinized before admitted as evidence because they may reflect terms at variance with custom and usage and it is common knowledge that deferred payment sales eventually cost the buyer more than if the buyer purchased upon a fair cash market value. See, Gradison v. State et al., 260 Ind. 688, 300 N.E.2d 67 (1973); Redfield v. Iowa State Hgwy. Commission, 252 Iowa 1256, 110 N.W.2d 397 (1961). The record suggests that the buyer never paid the full $300,000 obligation of the installment contract. Nelsen testified that he used the downpayment because he did not know how much the buyer eventually expended. The knowledge that Nelsen needed in order to lay the foundation for a comparable sale, i.e., how much the buyer was actually ready and able to spend and the seller willing to accept, was the precise knowledge that Nelsen lacked. Nelsen's testimony did not establish the existence of the supposed comparable sale that his valuation of the 61.43 acres relied upon. When an expert's opinion does not have a sound and reasonable basis such that the expert is able to express a reasonably accurate conclusion as distinguished from a mere guess or conjecture, the opinion should be stricken. Holman v. Papio-Missouri River Nat. Resources Dist., 246 Neb. 787, 523 N.W.2d 510 (1994). To admit into evidence such a valuation to the trier of fact was an abuse of discretion on the part of the trial court. Nelsen's capitalized projected net income was premised upon discounting the projected income by 20 percent each year for several years based upon startup expenses and vacancies. The capitalizing of an estimate of the net rents from a probable use of the property is an accepted method of valuation. Iske v. Metropolitan Utilities Dist., 183 Neb. 34, 157 N.W.2d 887 (1968). NRD claims that Nelsen's use of a 20-percent discount in arriving at his estimate of net rents is mere speculation. Nelsen informed the jury that the 20-percent discount over several years is his estimation of startup costs, extraneous expenses, and vacancies over a long-term period. Although Nelsen could not know the occupancy ratio in the first years that the 61.43 acres would be used for recreational purposes, he based his long-term estimation regarding vacancies upon the Rohrberg recreational property. Thus, Nelsen based the 20 percent upon data he found as comparable from the Rohrberg property adjusted upward for additional capital expenditures. This is not mere speculation. Furthermore, the jury was provided with Nelsen's explanations of his methodology and NRD's attacks upon that methodology. The weight of Nelsen's credibility is reserved for the jury. See Lincoln Branch, Inc. v. City of Lincoln, 245 Neb. 272, 512 N.W.2d 379 (1994).