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Ag appraisers - size adjustment

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Terrel L. Shields

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May 2, 2002
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Certified General Appraiser
State
Arkansas
Ranch property - several farms operated separately by same Corp.

MLR suggests the woodlot portion to be worth about 50% of the pasture and that a size adjustment is necessary. Problem is that the largest comparable in a 2 county region is about 600 acres. Two of the farms are over 1000 acres. Four are larger than the largest comparable.

Attempting to plot size vs adjusted dollars gives me an adjustment for land but it is a hyperbolic decline as site gets larger. Maybe $7 an acre for tracts in the 100-200 ac. range to $1-2 an acre if you extrapolate beyond the 600 acre size.

Anyone have any good suggestions on supporting size adjustments beyond 600 acres. I mean really, when you get near twice the size of the largest comp, what is to anchor you beyond that point?

Further, as the size gets larger the contribution of improvements logically is lower and lower. And the nature of those improvements are a factor. In one case there are (21)-14,000 SF abandoned poultry barns on the site

While on small tracts a couple such barns might contribute $0.25 - $0.75/SF because they typically are modified to store round bales or use for shop building, etc. - On a large farm with so many barns, imho, they contribute little or nothing. They are going to need to be removed eventually and at $5000 a pop (easily) that is a chunk of change. They are not in terrible shape but they will be in another 10-20 years.

Anyone handle such a surplus of improvements before?
 

farmguy

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Jun 27, 2007
Professional Status
Banking/Mortgage Industry
State
Texas
What we are starting to see is very little adjustment as the tract sizes get larger. It is tough to get a good handle on where the size is beeaking as we still see a size adjustment in smaller tracts. Sounds kind of like what you are seeing. Still have an adjustment 100 to 200 acres, but a 1000 acre place may bring same per acre as a 2500 acre place.

We have a good bit of data to support that argument.

What kind of tract is it, you mention $1 to $2 breaks, is it pretty cheap stuff?

We see the same you report on abandoned poultry. $0.50/sf or so. I agree with you at some point you have enough sorry storage. A buddy did one the other day and we kicked it around quite abit. We finally settled on making a call on how much just shed kind of storage a 600 acre place generally had. Based on a number of sales it seemed logical that in addition to specialized equipment, etc. Just "storage for junk" 3000 sf was about norm. Made a call that 3000 sf of poultry house added about $0.75 per foot and the rest nil. Not the cleanest analysis I ever saw but sometimes you just have to do the best you can with what you have.
 

Joker

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May 28, 2002
Professional Status
Certified General Appraiser
State
Ohio
In some areas, there is a premium for large tracts of land over the 200 acre size. In the few large farm sales I have seen, there was no reduction in per acre price but yes, the per acre cv of improvements does tend to be less.
 

Wayne Tomlinson

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Jan 25, 2005
Professional Status
Certified General Appraiser
State
Illinois
In central Illinois we are seldom dealing with 1000 acre stuff, but I have never discounted for a parcel being too big.
My observation that there is just a different set of buyers but the price does not go down.

In my market, most of the rural land is sold at auction.
The biggest and the one which sells the most land almost always breaks up most farms and offers them separately with no combination being offered and not combining the entire property in the end as has previously been the practice here.

Since any large parcel around here can be divided just by creating a new legal, how can there be a discount for large size when the owner has the option of making smaller ones out of the larger.

This auction company works over a large area of Illinois, Iowa and Missouri and they do them the same way in those areas. There business is growing rapidly.

Are there areas where farms cannot be divided?

Where? I would like to know>

Wayne Tomlinson
 

Terrel L. Shields

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Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
In central Illinois we are seldom dealing with 1000 acre stuff
That's our problem. The subject farms are likely at least 25% of all the farms in the county that have 1000 acres or more. 3 years ago they would have been snatched up like hotcakes. We have a dozen plus Wal-Mart Executives that are trying to unload large tracts they paid huge premiums on to develop into small ranchettes (and I suspect to capture some sort of conservation easement) I have quite a few sales of 200 - 300 acres from the past 2 years, virtually nothing over 300 acres that was not a 1031 tax exchange or otherwise a difficult property to use in the first place. Incredibly in the midst of all this is a 200 ac. sale for $10,000 per acre...surrounded by sales of $2900- $4400 per acre. That sale was Wal-Mart executive (retire in disgrace and under house arrest) to Investor group.

Making a $1 per acre adjustment means the 600 ac. comp and 1000 ac. subject is adjusted by $400 per acre, about 8% or so adjustment. In the 40 ac. - 100 ac. range the appropriate adjustment is more like $5-7 an acre. So a 40 ac. tract sale and 80 ac. subject would be 40 x 5 = $200/acre adjustment. which is more like 6% of unit value
 

murray stroupe

Senior Member
Joined
Apr 27, 2005
Professional Status
General Public
State
Tennessee
AG land not divided;where?

In central Illinois we are seldom dealing with 1000 acre stuff, but I have never discounted for a parcel being too big.
My observation that there is just a different set of buyers but the price does not go down.

In my market, most of the rural land is sold at auction.
The biggest and the one which sells the most land almost always breaks up most farms and offers them separately with no combination being offered and not combining the entire property in the end as has previously been the practice here.

Since any large parcel around here can be divided just by creating a new legal, how can there be a discount for large size when the owner has the option of making smaller ones out of the larger.

This auction company works over a large area of Illinois, Iowa and Missouri and they do them the same way in those areas. There business is growing rapidly.

Are there areas where farms cannot be divided?

Where? I would like to know>

Wayne Tomlinson
================
Well, Wayne, quote ''cannot be divided'' ;
not many rural propertys around here like that.Auctions are more common,but regular MLS are more common here.

But especially if owner wants to keep/cut his 5+/ acre + homesite out, cash out sale;
& most value a rural setting, so they don't [for sure] want to live in a subdivision .So owners dont want to divide, plenty like that in TN.And a 600 acre tract did sell/list for a discount last year.
Drought probably helped that buyer more than seller; bout 12 + months market time. Plenty of rain now , cattle ponds filling after several drying up completely,last year. LOL

Remember when i was doing some banking business last year;
heard a farmer say as he walked out''no need of even borrowing money during drought''

And slightly different subject but related ;
112 acres swamp land /hunting land did list/sell @ a discount, about $1,200 an acre.

Fun read & topic.
 

farmguy

Member
Joined
Jun 27, 2007
Professional Status
Banking/Mortgage Industry
State
Texas
Terrel just curious. How much are the Walmart execs asking? Are they asking alot more than they paid? Arkansas is our neighbor and I am stumped. If anything is in short supply here and commanding a premium over what it used to sell for it is large parcels, cultivated, ranch and timber.

Is you place mostly cultivated, pasture or woods? Some of the Temple Inland stuff is coming back on market in Arkansas.
 
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