Farm Assessed Land

[Henry Baker]

I am working on residential appraisal for an 18-acre horse farm located in Hopewell Township, New Jersey.

The inspection revealed a new construction 3-BR ranch house, a older 3-BR two-story home, a 9-stall horse barn, and a three-stall horse barn, plus several fenced in paddocks all located on the front two acres.

The tax records show the two-acre portion being assessed for residential use by the township at $361,600.
The remaining 16 acres is assessed as a farm with a taxable value of $1800.

How much value should I attribute to the land for the farm assessed portion of this property?

 

[Ray Miller]

Need I say complex appraisal.

The taxed value of the land has nothing to do with the appraised value of the land when in comes to ag taxes in many townships and states.

You need to establish what the additional acreage is worth as ag, res (if legal) how many splits, what the current market says about the land, establish it's HUB. Then you can start to look for comparables.

Then you need to ask what is your scope of work on this subject. Do you need to mark the report HUB yes or no.

What are other similar proprities selling for with the additional acreage.

A lot of research will go into this one or should.

 

[Terrel L. Shields]

whatever vacant land sells for. Ag lands are appraised "in use" not at market value. Further, I am one of those appraisers who believes that the assessors method of dividing the residential improvements and buildings and allocating a value for them seperately from the simple method of analyzing the value of the property in toto is incorrect. It leads to a higher valuation for the buildings for tax purposes but any summation method leaves a lot to be desired.

In other words, I would be appraising a 18 ac. tract with improvements, not a 16 acre vacant tract plus 2 acres and improvements. You analyze your improved sales the same way and you estimate the vacant land contribution to the overall property value by gridding similar vacant lots to determine a value "as if vacant and available for its highest and best use".

 

[Ray Miller]

Is it currently legal with two homes on the two acres?

Have you walked or rode the additional acreage to see if there are any problems?

Can any part or all of the additional acreage be split off and use as development lots? Is the area developing new home sales on smaller acreages/lots in the area?

Is the horse barn legal per zoning? What is the max number of horse's that be kept on the 2 acres with 2 homes and horse barn? What is the max number of acres required to have livestock per head? Is the horse barn a commercial operation? If so are you appraising it as such? If it is commercial are you making a statement in your report as such?

Is the new federal requirements for handling manure in palce for small acreages that have livestock, if not do they have a waiver?

Then you can start to look for value.

 

[Ray Miller]

whatever vacant land sells for. Ag lands are appraised "in use" not at market value. Further, I am one of those appraisers who believes that the assessors method of dividing the residential improvements and buildings and allocating a value for them seperately from the simple method of analyzing the value of the property in toto is incorrect. It leads to a higher valuation for the buildings for tax purposes but any summation method leaves a lot to be desired.

In other words, I would be appraising a 18 ac. tract with improvements, not a 16 acre vacant tract plus 2 acres and improvements. You analyze your improved sales the same way and you estimate the vacant land contribution to the overall property value by gridding similar vacant lots to determine a value "as if vacant and available for its highest and best use".

Same thoughts here.

But the property may have a higher value HUB then its present use as a whole and in part.

So now I would think that your scope of work would enter into it. May I ask what that scope of work is?

 

[Restrain]

Just a follow up on Ray's comments. Tax assessments are based on tax law, not valuation principles. While I cannot comment directly on your state, due to differences in valuations and exemptions, normally the residence is separated from the remainder (homestead exemptions, over 65, etc), then the remainder is valued as vacant subject to ag exemptions, etc. For example, in my area it is not unusual for ag land to be valued at $5,000-$20,000 per acre and assessed at $200-$400 per acre on the basis of ag valuation. Therefore, tax assessment splits are not relevant in the valuation process.

Look at the H&B use of the property. Is it common and typical for the property to be an 18 acre farm? Would the typical purchaser utilize such land for the same? Or would they purchase the property for redevelopment?

In our area, we have an area that for decades has been used to raise quarter horses. We're talking million dollar 20 acre properties, including all the barns, all to raise these half-million dollar hay-burners. However, some of the larger acreage tracts are being subdivided into 1-5 acre ranchettes. Now, the appraisers are having to closely examine the H&B use. An operating ranch may be the H&B use, or investment purposes recognizing the potential for redevelopment may be the H&B use. This determines the sales to use.

Whatever the H&B use, the valuation is based on the nature of the subject. You don't appraise the property as, say, six 3 acre sites, unless you figure in development costs (roads, etc), survey costs, legal costs, holding times, etc., as well as entrepreneural profit. Instead, you would look at what a purchaser would pay for an 18 acre tract with the consideration of redevelopment, not as what it would be worth after redevelopment.

JMHO.

 

[Walter Kirk]

This sounds like a common farm land assessment in New Jersey. The house sites are assessed at market value, the farm land is assessed at an artificially low rate which allows farmers to afford the taxes (New Jersey real estate tax rates are among the highest)

Ignore the farmland assessment if your H&BU is the current use. If your H&BU is as a subdivision you must consider roll back taxes ( retroactive taxes at the higher rate for three years prior to sale). If you haven't handled farmland or woodland assessed property talk to an appraiser with experience. There should be plenty of comps in the Hopewell area.

 

[Ben Vukicevich SRA]

Henry,

Better pull the tax map. You'll probably see that the 2 acre parcel does not exist as a legal entity.

Only the 18 acres exists. If your HBU analysis is for subdivision, I wouldn't proceed with the appraisal until you have a preliminary subdivision plan to work from. Think of it as your plans and specs for a proposed project.

 

[Mike Dzurick]

Two PID's or One?

 

[Couch Potato]

You are not planning to put the report on a 1004 are you?