Farm Appraisal: What you need to look out for
Residential appraisals are far less complicated as compared to the farm appraisals. House appraisals includes two or three major things such as location and condition but when it comes to a farm appraisal it can be much more challenging, as it requires familiarity with a vast range of regulations, commodities prices and even the quality of the soil.
Farm appraisal is classified alongside commercial appraisal as it includes property cost, sales comparison, and income. Most of the agricultural appraisers often grew up in agricultural families, or in parts of the country where farming is the chief industry.
Considerations
Some of the big issues in farm and farmland appraisal include:
- Irrigation availability and rainfall
- Drainage and other existing facilities
- The farm’s current and future use
- Existing facilities and accessibility
- Potential for betterment in terms of profit
Issues faced in farm appraisal
Due to modernization many fatms adapted and became more profitable by using latest technology like solar or wind energy. This cost a lot of money and the results on production were difficult to deduce.
“It’s too soon to tell about solar production,” he says, “but wind energy has more history behind it. Wind towers don’t take much space and could bring an extra $1000 per acre. Seth Baker, president of Field Level Agriculture (Mt. Zion, Ill)
The role of government regulations
The government policies can be predicted if there is a need for change in a certain industry but one can never be so sure about what is to come. While appraising a farm, you need to be careful of the regulations imposed by the government in that are,
Rebecca Stone, vice president of Farm Credit East (Watertown, N.Y.), agrees that farm appraisal value will depend on the type of farming or ranching involved, and the location—plus state and local regulations.
“Every state has specific laws about land use,” she says. “Many properties have conservation easements, and many states have restrictions within the easements. The closer you get to New York City, for example, you’ll see more restrictions. The same thing, the closer you are to Chesapeake Bay and that watershed.
The more complex the property is the more you need to research about it. For example if a farm has a small production facility installed then you also need to look at it in terms of a manufacturing unit resulting in additions of more and more paperwork and estimations.
Lack of good sales data
Whenever it comes to buying and selling any available sales data can be of some food use. But in the field of farm appraising there is a dearth of such data.
“Probably the biggest challenge farm appraisers are struggling with now is a good sales data source,” remarks L. Craig Harris, appraiser at Peoples Company (Shenandoah, Iowa). “Activity is slow compared to two years ago. Not all markets go through the same economic conditions at the same time. Grazing land values may be strong if beef prices are high; corn and soybeans might be different. Some timberland has more appeal than the marginal cropland.
Farm appraisals aren’t just about the land. Farms usually include a surprising variety of buildings, which tend to depreciate very quickly. Farm equipment and livestock can be tricky to appraise as well. In Twin Falls, Ida., Jay Proost, executive director of the American Society of Agricultural Appraisers, advises that valid comparable in these areas can be hard to find.
In the end, farm appraising can be very profitable when done right yet there are certain things involved where one needs to be very careful. Form tackling lack of sales data to keeping in check what the government will do can make things more intricate.