View Full Version : HBU: SFR with 10 acres of almonds


Juanito
10-21-2011, 04:47 PM
So I have an assignment to review a standard 1004 for a mortgage lending transaction. Subject is a generic 2300 SF SFR on 10 acres, 9 of which are an active almond orchard.

Appraiser states, "subject is an income producing farm with 9 acres of almond trees."

He goes on to state that "the subject's almond orchard is not valued in this appraisal report as there is no market reaction for this feature." He also does not value an outbuilding (standard pole barn/machine shed)--simply ignoring it.

Appraiser marks subject as highest and best use as improved/present use.

Would you consider this acceptable? It appears to me that while subject may be highest and best use as improved, appraiser did not value as such, unless one can justify the comment that there is no market reaction to the almond orchard.

Randolph Kinney
10-21-2011, 05:01 PM
9 acres of almond trees is not worth that much, neither is 9 acres of avocados, not in California. That's like a hobby farm.

How much income does the production of almonds return, net?

Juanito
10-21-2011, 05:07 PM
How much income does the production of almonds return, net?

The appraisal does not address anything about it aside from what is stated above.

Randolph Kinney
10-21-2011, 05:08 PM
Well, what do you show? How can you make a case on HBU if you don't do the work?

CANative
10-21-2011, 05:10 PM
9 acres of almonds would probably gross at least $50k per year. Maybe more.


Appraiser marks subject as highest and best use as improved/present use.

Yes. What's the alternative use? Tear the house down to plant another acre of almonds?

Randolph Kinney
10-21-2011, 05:20 PM
Commercial almond production

Expected yield range: 1,400 2,600 lbs. per acre
Expected price range: $0.90 - $2.10

You need 2000 pounds per arce at $1.90 per pound to break even.

http://www.almondboard.com/Growers/Documents/Economics%20of%20Growing%20Almonds,%20revised.pdf

OSU Beavers
10-21-2011, 05:24 PM
Sounds like the appraisal was Made As Instructed.

The real question is do you say All-Monds or Ah-Mands?

JRS at OBX
10-21-2011, 05:26 PM
Sounds like the appraisal was Made As Instructed.

The real question is do you say All-Monds or Ah-Mands?

All-monds.

Juanito
10-21-2011, 05:29 PM
9 acres of almonds would probably gross at least $50k per year. Maybe more.




Yes. What's the alternative use? Tear the house down to plant another acre of almonds?

No alternative use--I have no doubt that it is highest and best use, the question is why the appraiser did not appraise as such, ignoring the almond income.

OSU Beavers
10-21-2011, 05:31 PM
Best guess: Crops were considered to be personal property and not valued.

CANative
10-21-2011, 05:48 PM
Best guess: Crops were considered to be personal property and not valued.

Trees are not personal property. And crops are emblements.

CANative
10-21-2011, 05:52 PM
No alternative use--I have no doubt that it is highest and best use, the question is why the appraiser did not appraise as such, ignoring the almond income.

$50k per year, $25k after expenses (assume irrigation, maintenance and sharing the income with whoever manages the grove.) Cap that at about 5 and you get $500k value.

What's the house and acreage worth without the grove?

Dale Smalley
10-21-2011, 06:29 PM
Sometimes you feel like a nut.

AnonApprsr
10-21-2011, 07:00 PM
I don't see any problem.

NorthTexValuation
10-21-2011, 07:46 PM
Typical fast and cheap appraisal from somebody who does not know how to perform a Highest and Best Use analysis.

PropertyEconomics
10-21-2011, 09:07 PM
9 acres of almonds would probably gross at least $50k per year. Maybe more.




Yes. What's the alternative use? Tear the house down to plant another acre of almonds?


This is a 43,000 square foot house ?????? :laugh:

Lee in L.A.
10-21-2011, 09:14 PM
Maybe H&B use is a different cash crop. Or not. :peace:

Alpine
10-21-2011, 09:57 PM
This is classic appraiser obfuscation. “No market reaction”?! I guarantee you that every potential buyer will have a very specific “reaction” to 9/10ths of the property being in orchard. Hell, I’ve got a reaction to it, and I don’t even know where it is, because I appraised a highly comparable property years ago. It was sited in a local river valley known for world-class Steelhead fishing and white-water rafting, wherein old, small acreage filbert farms are transitioning into residential and recreational usage. Likely reactions: “How much annual profit does the orchard make?” and “How much work and overhead are involved? Can we see the ledgers?” Or, “What happens if we don’t work them?” and “How much will it cost to cut it down?”

No market reaction? That’s a bogus disclaimer which dismisses the reality of a property so he can earn a residential fee. If he states it’s an income producing farm, and that this is its HBU, but he’s not going to value any of the trees or the influence of their presence and income potential on the market value of the property, then it seems in order to value it solely for residential use he must utilize a hypothetical. If “income-producing farm” is HBU and current use, thus true, but he values the property only as residential use (to the point of excluded an outbuilding), thus untrue, then isn’t that a hypothetical?

And what is the HBU? Is 10 acres of almonds with a house in the middle typical in the area? Or is this the only renegade almond farmer? If so, HBU might be residential with no value to a highly personal hobby usage. But if small-scale almond production is highly typical of usage in the area, and zoning allows for it, these types of orchards must be making some money, thus HBU is income-producing agriculture. The client in that area may have programs to finance residential loans for such properties, and may instruct the appraiser to value only the land and improvements, but to appraise it without a hypothetical is misleading. It reminds me of the old client requests to value only 5 theoretical acres of larger acreage parcels. You’d better make it hypothetical…

Tom Woolford
10-21-2011, 10:34 PM
25k potential net income and it has no effect on value?

Metamorphic
10-22-2011, 08:46 AM
You kind of wonder if the nut income would have been worth dealing with if the equity had been tighter.

JSmith43
10-22-2011, 09:32 AM
House and 10 acres, freshly planted olive trees. 3+ year until initial productivity. Sounds like most house & 10 need an almond tree hypothesis in the HBU analysis in CA. DCF.

With enough encouragement there will be enough almonds to put two on the Mounds bars, that have historically been shorted the almonds.:shrug:

Metamorphic
10-22-2011, 09:42 AM
Sounds like the appraisal was Made As Instructed.

The real question is do you say All-Monds or Ah-Mands?

Do the Ah-Mands people eat AhMandJoys or Almondjoys?

Smokey Bear
10-22-2011, 11:37 AM
Expected yield range: 1,400 – 2,600 lbs. per acre
Expected price range: $0.90 - $2.10

Not if you keep them raw. Raw almonds are mostly banned in California because a few people got salmonella or something like that. Really raw almonds (that have not been pasteurized and will sprout) sellf for about $8 per 1/2 lb at the farmer's market, and the only other way to buy them is directly from the farmer, and there's a limit to how much you can buy at a time.

I love the gubmint telling me what I can eat, and telling farmers what they can sell.

Randolph Kinney
10-22-2011, 01:33 PM
Not if you keep them raw. Raw almonds are mostly banned in California because a few people got salmonella or something like that. Really raw almonds (that have not been pasteurized and will sprout) sellf for about $8 per 1/2 lb at the farmer's market, and the only other way to buy them is directly from the farmer, and there's a limit to how much you can buy at a time.

I love the gubmint telling me what I can eat, and telling farmers what they can sell.

That would be retail price, not what the grower sells to a processor / wholesaler.

Wholesale price for Whole Brown Almonds sell for $3.20 per pound in 25 pound cases from the wholesaler. see the link: http://www.nidatrading.com/specials.pdf

If your cost of production is $1.90 per pound, and assuming the grower gets $3.20 per pound, that leaves $1.30 profit. At 2000 pounds per arce times 9 arces, that is $23,400 net. Somewhere less than that number is what the grower will realize in net profit because he does not sell to the wholesaler at the price one can buy from the wholesaler.

Smokey Bear
10-22-2011, 02:01 PM
That would be retail price, not what the grower sells to a processor / wholesaler.

Nope, they can only sell direct via farmer's markets, direct sales at the farm or mail order.

PropertyEconomics
10-22-2011, 02:37 PM
I would nto pay too much attention to those who dont know the age of your trees, their production capacity, or anything else. Appraisers like to throw out numbers but none of them really know a damn thing about the property the OP is appraising. Free with advice not knowing anything. Talk of $50,000 in production without knowing production ... seriously guys.

Randolph offers the best advice ... and you will note he references production.

CaliforniaNative
11-03-2011, 09:25 AM
Best guess: Crops were considered to be personal property and not valued.

Assuming this report is for a lender client then what they want is a residential property. They don't want to run afoul of the GSE and have to repurchase because it is considered a farm or agricultural use. I wrote a report where the acreage was 5 acres of Cabernet and zinfandel grapes and 2500 sf home. He intended to simply trade the grapes to a vintner for cases of wine to give away, and golly probably drink too. I noted in my report his intentions and when the client asked for clarification I told them there was no ag. equipment onsite, reiterated my statement about trading the product, and if they needed more I suggested they ask the borrower; implying they can check his tax returns and see if it is a business operation or not. Small acreage like that or more, is similar to horse property. Only there I would give value to the barn etc. and compare it to other little ranches. But I would not value the horses, neither did I value the grapes.

CANative
11-03-2011, 10:19 AM
Two tons per acre, $2,000 per ton, times 5 acres. $100,000. Split the income 50/50 with the vineyard contractor/manager. Net about $50,000.

David Wimpelberg
11-03-2011, 11:15 AM
He goes on to state that "the subject's almond orchard is not valued in this appraisal report as there is no market reaction for this feature."

That statement is nonsensical. He states that the almond orchard was not valued, then continues on and renders an opinion of value of $0.:)

He also does not value an outbuilding (standard pole barn/machine shed)--simply ignoring it.

Obviously the appraiser cannot do this with reason and explanation, and provided it is appropriate to the assignment.

Would you consider this acceptable? It appears to me that while subject may be highest and best use as improved, appraiser did not value as such, unless one can justify the comment that there is no market reaction to the almond orchard.

Ignoring and not explaining relevant factors is obviously not acceptable. Another thing to keep in mind is that these types of assignments include the consideration of components that are not residential in nature, and might require a CG license to complete.

Pilgrum
11-03-2011, 01:29 PM
Sounds like the appraisal was Made As Instructed.

The real question is do you say All-Monds or Ah-Mands?

A'mond or ahmond cause when they harvest the l gets knocked out of them.
Seriously. The L is silent.

Randolph Kinney
11-03-2011, 03:07 PM
So I have an assignment to review a standard 1004 for a mortgage lending transaction. Subject is a generic 2300 SF SFR on 10 acres, 9 of which are an active almond orchard.

Appraiser states, "subject is an income producing farm with 9 acres of almond trees."

He goes on to state that "the subject's almond orchard is not valued in this appraisal report as there is no market reaction for this feature." He also does not value an outbuilding (standard pole barn/machine shed)--simply ignoring it.

Appraiser marks subject as highest and best use as improved/present use.

Would you consider this acceptable? It appears to me that while subject may be highest and best use as improved, appraiser did not value as such, unless one can justify the comment that there is no market reaction to the almond orchard.

Here are the cost and profit breakdown on almond production.

http://appraisersforum.com/attachment.php?attachmentid=21664&d=1320350312
http://appraisersforum.com/attachment.php?attachmentid=21665&d=1320350378
http://appraisersforum.com/attachment.php?attachmentid=21666&d=1320350548



9 acres, say net 2005 peak, 9 x $2,382 = $21,438 income.

HBU is SFR. Hobby farm income.

Terrel L. Shields
11-03-2011, 03:57 PM
Assuming this report is for a lender client then what they want is a residential property. They don't want to run afoul of the GSE and have to repurchase because it is considered a farm or agricultural use.
ah... a jewel in the dross.

Q & A March 2008 makes it clear one can appraise a portion of the property. That is, the appaiser could have appraised only the house and acres without considered the orchard value...or the barn value for that matter...The problem is the GSEs and they are not going to find that acceptable. Further, such reports must state what is being appraised and what impact any other part not included might have on the value.

The appraiser appears to have described the property (it has trees and it has a barn) but did not include the value of same nor did provide an explanation of the impact such has on the part that is being appraised. It was some bad wordsmithing at best....inadequate otherwise...

The value of 9 ac. of almonds is not the issue....and the house would have to be pretty bad to not be worth more than at any other HBU...its a hobby farm-residence where the appraiser attempts to value it as a SFR on a large lot...