Why Rural is Harder

[Econobot]

All I do, it seems, are oddball rural assignments, it's where I live... Land value is always critical but it becomes less important when you find comparables that are close by, location seems to have a major impact on values (at least where I'm at). The saving grace behind this type of work is bracketing, it helps solves the puzzle by reigning in a tighter range. Granted when you engage in these efforts you usually end up with a large spread between unadjusted sale prices but if your adjustments are solid and data-driven, the adjusted range will tighten and the method needs to be explained. IMO opinion you can't go wrong with bracketing, going back in time, and going to another area... IMO you need to have time adjustment support and location support (from land sales) once you go further away from your subject. All of this should be the standard operating procedure for competent appraisers... Comparing a property 20 miles closer to an economic center with no location adjustment is misleading. I've seen too many reports where the appraiser went far away from the subject and made no adjustment for location, this is borderline fraud loosely based on the principle of progression. Before I was an appraiser, reading the first appraisal report (ever) on the property we were buying I became livid when I noticed the use of a comparable 25 miles away in an area where they can't give the land away... I think my economics background kicked in and I felt that this distant property was in an area we would never consider living was not a comparable (we looked at a property near it). I later discovered that the appraiser searches for comparables based on sale prices and could care less where the property is located, classic form filling. I was astounded as you can drive 100 miles and find land you can't give away, and in town lots selling for 1 million cash. Location is everything...

 

[Sid Holderly]

For new homes in rural counties around a central employment center, a comp donut is useful, but explaining to an AMC is near futile. Local rural banks and farm credit understand what it shows.
Getting the MLS data dissected to support is getting easier with polygonal searches.

 

[Michigan CG]

Comparing a property 20 miles closer to an economic center with no location adjustment is misleading. I've seen too many reports where the appraiser went far away from the subject and made no adjustment for location, this is borderline fraud loosely based on the principle of progression.

Many times the farther out comps will show a difference in value as the land value is less. So the land value bakes in the location factor.

 

[Terrel L. Shields]

the farther out comps will show a difference in value as the land value is less

Exactly. A very von Thünen concept. Land values vary in part due to the location (distance from a market center.) Rural residential property competes with agricultural uses, and since agricultural uses frequently involves a domicile associated with the land, the markets can be quite distinct yet competitive to each other. Are we real farmers or are we hobby farmers? Does the market care? Not really.

 

[Econobot]

Exactly. A very von Thünen concept. Land values vary in part due to the location (distance from a market center.) Rural residential property competes with agricultural uses, and since agricultural uses frequently involves a domicile associated with the land, the markets can be quite distinct yet competitive to each other. Are we real farmers or are we hobby farmers? Does the market care? Not really.

I partook in AI's Rural Valuation Baiscs course this summer...the instructor felt that his research proved that recreation drives rural land values not ag use... Does this mean that HBU is always Residential?? It's an argument in that direction, after all, it seems in my market that only the wealthy are buying large acreage and we all know the wealthy aren't farmer/ranchers...but they do hire folks to do that very work when it fits the tax deduction agenda or their personal desires to own a "ranch"

 

[Michigan CG]

..the instructor felt that his research proved that recreation drives rural land values not ag use...

I can assure you that in mid western states (NE, IA, IL, IN, OH, KS, MO) that ag drives the value.

 

[Econobot]

I can assure you that in mid western states (NE, IA, IL, IN, OH, KS, MO) that ag drives the value.

I think it was more in reference to non-production land, maybe previously farmed but not currently... I agree with what you're saying though. The instructor was from Oklahoma....

 

[ramrcdk]

optimistic value I want to learn how to do a report using the OV approach.

Anyway in reading my nephew's recent appraisal, the guy box checked "rural" 1/4 mile from the center of town & in a housing development adjacent other SFR devs'.
I found that interesting and wondered IF it was due to the comps exceeding the guideline of mileage for the suburban box check. A twist on Rural, perhaps.
Also, found it interesting that the market there must be extremely stable in that 2 of 3 sales closed over 1 year.
It's a local bank, so it may remain "in-house" with different SOW, who knows.

Clearly, I am not knowledgeable of market in that area. Therefore, negative comments would be pessimistic.
My Nephew is very happy with the value and I remain optimistic ! Perhaps the definition of OV !
OK, being facetious...kidding.

 

[Econobot]

optimistic value I want to learn how to do a report using OV approach.

Anyway in reading my nephew's recent appraisal, the guy box checked "rural" 1/4 mile from the center of town & in a housing development adjacent other SFR devs'.
I found that interesting and wondered IF it was due to the comps exceeding the guideline of mileage for the suburban box check.
Also, found it interesting that the market there must be extremely stable in that 2 of 3 sales closed over 1 year.
It's a local bank, so it may remain "in-house" with different SOW, who knows.

Clearly, I am not knowledgeable of market in that area. Therefore, negative comments would be pessimistic.
My Nephew is very happy with the value and I remain optimistic ! Perhaps the definition of OV !
OK, being facetious...kidding.

Sounds like a certified form filler.....was there any commentary on the dated sales? That's a minimum, describing why you used them and before that, what your search criteria was.

 

[pbidwell]

Exactly. A very von Thünen concept. Land values vary in part due to the location (distance from a market center.) Rural residential property competes with agricultural uses, and since agricultural uses frequently involves a domicile associated with the land, the markets can be quite distinct yet competitive to each other. Are we real farmers or are we hobby farmers? Does the market care? Not really.

Terrel, I appreciate your statement about the Von Thunen theory. I had a few college courses at Michigan State that talked of his market influence concepts. I might add that many people who don't do much rural or vacant land appraisal assignments think (what is so hard about appraising bare dirt or land). Once I discuss the use of a Land Mix analysis to the valuation of land, some kind of go, Huh? Some areas of South Central Michigan have recreational land that is as valuable as prime agricultural land because of Whitetail Deer hunting.