Is The Subject A "working Farm"?

[Gulf Coast]

The AMC asked me this question about a month after I sent the report in. I asked them to have the lender provide me a written definition of what a working farm is. They were unable to. The borrower called the lender and told them she provided them with a Schedule S and basically asked why they were wasting everyone's time when they already have the answer. I got paid for the appraisal and never heard anything else. What have your experiences been with this subject?

 

[glenn walker]

It Produces income and based on the borrowers tax returns it's either positive or negative just like any other business. 99% of the time your going to know a working farm or ranch the minute you pull up to the property. John Deer tractors, trailers, crops, animals , also a working farm would normally be done by a CG and not on a 1004 form and normally there are multiple buildings, barns, etc. I guarantee you will know a working farm or ranch when you see one Below is a definition of a hobby farm .
In the U.S., a high proportion of farms might be classed as hobby farms. In 2007, over 40% of farms reported less than $2500 in income and over 10% of farms had less than 10 acres (4.0 hectares) of land. Over 50% of primary farm operators reported that their main income was a job outside of their farm; although, this figure includes some farm operators who do not personally participate in farming and some quite large and productive farms.[2]

In the US, as farms grow in size, older farms become less economically viable. Some are purchased and most of the land combined with larger nearby farms, however the large farm has little use for the buildings. These can be sold off with only a building lot of real estate, but are much more sale able if a modest area, 5 to 15 acres (20,000 to 60,000 m²) is sold along with them. These are usually snapped up quickly by people with well-paying city jobs who wish to live in the country, or to retirees, who wish to be active as part-time farmers.

Some, especially in developed areas, are used as truck gardens, with their own produce stands, or a regular stall in a local farmer's market.

 

[Sid Holderly]

What is the definition of a farm?

The official definition of a farm for census purposes is “any place from which $1,000 or more of agricultural products were produced and sold or normally would have been sold during the census year (U.S. Department of Agriculture, 1999, p. VII).”

A farm is a tract of land cultivated for the purpose of agricultural production. A farm is classified of having $1,000 or more of agricultural products being produced or sold. A Small Farm according to USDA census is a farm that is 179 acres or less in size, or earns $50,000 or less in gross income per year. (North Carolina)

IC 32-30-6-1 "Agricultural operation" defined Sec. 1. As used in this chapter, "agricultural operation" includes any facility used for the production of crops, livestock, poultry, livestock products, poultry products, or horticultural products or for growing timber. As added by P.L.2-2002, SEC.15. (Indiana)

So states can have different definitions.

Based on this an apartment in the city raising a few rare orchids for sale is a farm, (according to the dept. of Ag's definition).

I don't think there is any definition out there that that is viable for their use. To me is not a "working Farm" until more than half the family income is from the farm. Below that it is a hobby farm, large garden, or recreational land.

City people do not know what it takes to be a working farm. The number of acres needed for a working farm varies by crop, livestock, produce, weather, soils and location.

Only AMC's ask this. I have never had such a question from a local bank, credit union or even local mortgage lenders. It is always from an AMC with headquarters in a large city.

I

 

[CANative]

To me it's a matter of highest and best use and what type of buyer would be interested in the property.

 

[J Grant]

To me it's a matter of highest and best use and what type of buyer would be interested in the property.

Exactly. MV asks what probable price a property should bring on X date in a presumed sale , (even f the owner is refinancing). Therefore the owner's tax return/ how much income they declare from the property is not our concern, though it might be of interest to the lender. Our concern is how the market and typically motivated buyers views the subject, and how they view the subject as a working farm might depend on a number of factors such as acreage, agricultural out buildings if any, ability to produce income above that of a hobby level

 

[bnmappraisal]

City people do not know what it takes to be a working farm. The number of acres needed for a working farm varies by crop, livestock, produce, weather, soils and location.

I wouldn't have a CLUE!!!

Only AMC's ask this.

YUP!

 

[Restrain]

In north Texas, acreage homesites are common and typical, and the homeowner will run a couple of cows, etc, to get an 'ag' exemption. Excluding the unique legalities involving 'ag' exemptions, we would routinely comment that it was a 'hobby' farm and not a working farm, that they were common and typical, and used for tax exemptions. Never any kickback, as it would take farms in excess of 100 acres to be a working, viable farm, unless you were doing a horse ranch. And that ranch would clearly be a working farm with arenas, barns, etc.

 

[Terrel L. Shields]

If the income off the schedule F (farm income) is more than the rent on the dwelling would be, then you might argue that it is a "working farm". Truth is our farm is paying the taxes and maybe the insurance, otherwise it is meant more as space for the three dwellings on the 200+ acres under the family fold. Some day it might be a golf course - hopefully I am dead by then.

 

[gregb]

Some lost items in my refrigerator are seen by some as a chemistry experiment; pretty sure the house is not considered to be a scientific laboratory.

 

[Terrel L. Shields]

Some lost items in my refrigerator are seen by some as a chemistry experiment; pretty sure the house is not considered to be a scientific laboratory.

Like the time I left the milk out of the fridge and didn't find it until the next day... They say it is a good culture for the septic system...