Arborist's method of ornamental tree valuation

[Walter Kirk]

Trees and plants can have value greater than the land that they grow on however that value is as personal property not as real estate. As real estate appraisers we can only deal with the contributory value to the land. The property owners loss can be calculated partially by the loss in real estate value and partially by the loss of personal property.

 

[Riick]

Everyone who's saying that the value is the before value, less the after value, should take a course in Eminent Domain.
I just finished one, and what I learned raised more than one of my eyebrows.
Some very special rules apply to eminent domain.

.

 

[OldFigBBJ2]

Everyone who's saying that the value is the before value, less the after value, should take a course in Eminent Domain.
I just finished one, and what I learned raised more than one of my eyebrows.
Some very special rules apply to eminent domain.

.

Well, diminution in value (subtracting the after value from the before) is the measure of severance damage in California, though costs to cure is an alternative measure if it is less than diminution in value. The diminution in value measure is even in the pattern jury instructions, if I recall correctly.

 

[Terrel L. Shields]

That's a better return than the best growth stocks. Forget everything you learned from your certified financial planner and head to the nursery!

I appreciate your tongue in cheek. Clearly

determine the value before, subtract the value "after" in order to arrive at a "damage" value.

precisely

the value is the before value, less the after value, should take a course in Eminent Domain

Perhaps. And perhaps a lot of us have. The fact that a court may give additional compensation can relate to several things, most of which is governed by law or legal precedent. The person I referenced above will tell you basically the same thing.
First, you can never make a property "whole" exactly like it was because you cannot transplant a tree much larger than say 8" in diameter. Secondly, If a storm wipes out that old tree in the front yard my insurance, for one, won't pay a dime...unless it lands on the roof, they will clean it up and fix the roof.

Trees as mere ornaments contribute a minimal amount to a lot value. Wooded residential lots vs open lots where I live bring pretty much the same per acre. Where a property is impacted by say, road noise, a stand of scrub brush may act as a sound barrier that is far more valuable as screening than a few larger trees for shade.

The diminution in value measure is even in the pattern jury instructions, if I recall correctly.

good point

Someone pointed out that an old tree might not be as valuable as a younger one. It would be one really rare species of tree that would saw out wood that was worth thousands of dollars. I have seen a few trees of walnut with certain likes of crotch wood that made spectacular gunstocks sell for over $2000. That's pretty rare. No Arborist can point to a single tree selling for $45,000 or any such.

Having suffered thru an ice storm of epic proportions all across N Arkansas, if the arborist is right, then we lost enough trees to support the entire national Gross Domestic Product for 5 years.

 

[Scott Cullen]

Ornamental Tree Valuation

Interesting thread. A few valid points made. Very many more unsupported opinions displaying a lack of familiarity with the issues if not bias.

The original inquiry was about eminent domain in California. Of course the law in California will define the appropriate and relevant type of value which must be identified by the appraiser in defining the appraisal problem and scope of work (a unversal requirement in USPAP, IVS, RICS Red Book, AICPA Standards, EVS Blue Book).

In most jurisdictions it is some form of reduction in market value of the land and improvements. In the UPSFLA Yellow Book it is market value but w/o the time on market requirement.

How this is estimated varies and is divided generally into the so called Federal and State Rules.

Many states allow something like "severance value" which considers a loss in value of the remainder. here again the rules vary. It may be again limited to market value loss (e.g. in the Yellow Book). It MAY be some other measure like some restoration measure of things like ornamental trees. I have heard of cases in which the condemnor OFFERS this in addition to the market value of the taking in order to avoid the expesnes of law suits and delays.

True enough in many if not most eminent domain cases the value of ornamental trees is limited to their contribution to the market value of the land. But in any exceptions so called "arborist methods" may apply.

Board feet applies market value of timber. This meaasure may or may not apply to ornamental trees.

Moving beyond Eminent Domain, we know that USPAP and all those other standards require us to identify the purpose and intended use of the apprasial. So called arborists methods may be applied to many other intended uses includiong but not limted to tort or contract damages.

Are arborists a joke? Probably as frequently as real estate appraisers are a joke. And that frequency goes up as either opine outside their areas of competence. I suppose we can add forsters to the same list.

Are arboist methids market based? To date most so called arboist methods have been Depreciated Replacement Cost approaches. The USDA Forest Service has mre recently developed what are essentially income or benefits based approaches using avoided cost of alternative services as income. The Council of Tree and Landscape Appraisers (CTLA) is working on market appraoches and has recognized their appropriateness in some cases since 2000.

Are so called arborit methods rejected by the courts simply becuase they are not market based? Again, it depneds. More than a few state Supreme courts and Appeals courts have recognized replacemebnt or replacment cost (or value) based opinions, frequently in excess of diminution of the market vlaue of the land and even in some cases in excess of the total value of the land. This may hinge both on the chracter of the trees as "ornamental" under the law in the jurisdiction and so called "reasons personal" for attributing value to the trees.

Does the IRS reject so called arborist methods? The IRS indeed rejects any formulaic method in deducting casualty losses on reseidentl use owned property. The loss is the difference in market value immediatey before and fater, vby compenet r.e. appraisal. For leased or business use property, however, the market value test does not apply. Thus the IRS rule is not general as alleged and any assertion that the IRS practice for residentil owned property must govern all other cases regardles of intended use certainly rings hollow.

Real estate appraisers have a training and experience bias that may lead them to believ that market value is the only appropriate and relevant type of value that can ever apply to standing trees since trees are realty. That is not a supportable poistion.

Scott Cullen

 

[OldFigBBJ2]

Many states allow something like "severance value" which considers a loss in value of the remainder. here again the rules vary. It may be again limited to market value loss (e.g. in the Yellow Book). It MAY be some other measure like some restoration measure of things like ornamental trees.
Scott Cullen

Scott, I am not an appraiser. However, I wonder what you mean by "restoration measure". If you mean cost to cure, such measure is only recoverable to the extent of diminution in value. To the extent cost to cure exceeds diminution in value, it is nonrecoverable. That is the rule in California. I also believe it to be the general rule nationally, because I located the rule in Nichols on Eminent Domain, a national treatise on the subject of eminent domain.

I am also of the belief that the purpose of "just compensation" is to make the landowner whole -- and I do think there is constitutional and statutory compulsion to make the landowner whole -- but not to provide a windfall. I think that any approach which assigns value beyond what the market would recognize is arbitrary and lends itself to windfall. If the arborists' method is not, to your mind, arbitrary, then upon what data is it based?

 

[Scott Cullen]

Good questions.

OldFigBBJ2 wrote: Scott, I am not an appraiser.

SC I should clarify, I'm trained as a real estate appraiser but not licensed, certified or practicing. I am a licensed broker in two states. I am a Registered Consulting Arborist and specialize in tree and plant appraisals.

OldFigBBJ2 wrote: However, I wonder what you mean by "restoration measure". If you mean cost to cure, such measure is only recoverable to the extent of diminution in value. To the extent cost to cure exceeds diminution in value, it is nonrecoverable. That is the rule in California.

SC I would certainly defer to your understanding of the rule in California in eminent domain. My original post said that i understood market value loss to be the general rule for the taking. My "restoration measure" comment was directed to loss to the remainder. And I emphasized intentionally there MAY be another measure. In my experience there are frequently exceptions to general rules that may vary constantly and from jurisdiction to jurisdiction, so I would always get a current legal opinion. It may well be that what is "recoverable" at law is limited to a market value loss even if measured by a cost to cure or restore. IOW if you are presented with a claim for just compemnsation for a cure that is greater than the loss in market value it may well be unrecoverable. That said I do know of condemnors that have offered restoration for trees on the taking in addition to the market value of the taking (say they had screened the remainder), w/o necessarily scrutinizing the market value loss on the remainder in order to avoid delays and associated costs. I imagine this would become an issue if the cost was disproportionate to the avoided costs In any case this is the condemnor's discretionary call.OldFigBBJ2 wrote: I also believe it to be the general rule nationally, because I located the rule in Nichols on Eminent Domain, a national treatise on the subject of eminent domain.

SC as above, I'd always want to relue out exceptions.

OldFigBBJ2 wrote: I am also of the belief that the purpose of "just compensation" is to make the landowner whole -- and I do think there is constitutional and statutory compulsion to make the landowner whole -- but not to provide a windfall. I think that any approach which assigns value beyond what the market would recognize is arbitrary and lends itself to windfall. If the arborists' method is not, to your mind, arbitrary, then upon what data is it based?

SC I imagine what makes the landowner whole for the taking could be an endless debate for advocates and policy makers. From the apprasier's point of view it's the current law that matters and if the law is the loss in market value only than that's the deal. Period. My comments were addresed to exceptions - either under the law or at a condemnor's discretion. If any such exception allows a value for trees in excess of their contributory market value then addressing that increment or separate value would not be arbitrary just by looking beyond market value. Absent any such exception a method that ignores market value is not very credible... wether you label it as arbitrary, inappropriate or irrelevant.

SC The bulk of my comments were addressed to valuation of ornamental trees when the intended use of the appraisal is something other than emnent domain. This was to clarify the general comments about "arborists' methods" in the overall thread. The three principle methods in current use are the Replacement Cost Method, Trunk Formula Method and Cost of Cure Method. These all are Depreciated Replacement Cost approaches to value that rely on replacement or reproduction cost data. When the type of value sought is market value and market data are not readily availabale the costs would be depreciated to a range of market value knwon from general studoes in the literature. When the approprioate and relevant type of value is not market value, however, the result may exceed contributory market value after depreciation for other factors.

SC Thanks for your follow up questions.

 

[Terrel L. Shields]

I suppose we can add forsters to the same list.

In Arkansas, foresters who offer a 'value' to real property are required to be licensed as appraisers. Arborists, likewise, must be at a minimum registered as appraisers. In our state, if an Arborist testifies in court, his testimony can be stricten from the record if he isn't.
A trunk formula method that shows a diameter of 6' will yield thousands of dollars, even tens of thousands, depending upon species, etc. One 6" will yield values more similar to the "real world". It is those 6 footers that get the attention of Dave Reinhold - former Appraisal board member, chair, and a certified forester that holds CG002 license, at least here in Arkansas. A 1 acre lot that would sell for $40,000 will not result in compensation of $90,000 in this state..ever.
Replacement cost methods (i.e.- bucket trees or larger trees moved with a tree transplanter) are not unreasonable valuations in most cases. Trunk formula for large old trees are capable of producing seriously erroneous results...whether the court awards an excessive amount or not.