So You Think You Want to Be a Farm Appraiser

[Don Jones]

Hey, @Don Jones - how are you doing? Long time no hear...

Hello Terrel, I'm doing fine for an old man. Still jumping hip-pocket high and topping tall cotton. Still staying busy here in Southeast Missouri and Northeast Arkansas working mostly for Farm Credit and estate work. Don't do the stuff that makes my brain hurt these days. I stick mostly with row-crop farmland. Hope you are doing well down your way. Kind Regards !

 

[KGster]

I'm a little late to this party but I'll pitch in my $0.02 as an appraiser in a rural area and lurker of this sub. The ASFMRA offers qualifying General Sales and Cost approach classes that are specific to appraising farm ground. The "standards" and techniques they teach are commonly used and applied in the "Uniform Agricultural Appraisal Report" or UAAR. This form is standard for most lenders and Farm Credit associations in rural areas. Like any other assignment, appraising farm land is as simple or complex as the subject property in question.

In a typical vacant land scenario, the unit of comparison is usually a particular land use (pasture, cropland, waterways, etc.) then, more specifically, soil type (class, productivity, slope). Subsurface mineral rights are noted for their presence or separation from the subject - income derived from a producing well is commonly treated as personal property and not part of the valuation assignment. Wind leases can have a significant impact on value. Most wind farm developments are specific to an area and comparable sales with similar leases can usually (hopefully) be found. Once a vacant land value is established, a value attributed to a lease (or presence of mineral rights) can be extracted.

Some wrinkles to the equation can be property that is bought and sold for recreational use - which I am starting to see more of. In Kansas, most ground is used for farm production, so the recreational properties typically stand out from a sales perspective.

Hope that helps!

 

[Terrel L. Shields]

Spot on, I've dissected auctions before and the crop, the pasture sell for different things according to productivity and that "odd" lot of 40 acres and large watershed reservoir full of fish will out sell the rest by a mile.

income derived from a producing well is commonly treated as personal property and not part of the valuation assignment.

I do differ from ASFMRA on minerals and I know ARA instructor John Widdoss does apply some nuances with minerals. Since mineral rights are real property rights, they should be treated separately from the land if producing. As such, I think the average appraiser is better off limiting their valuation of land with producing minerals to the partial estate of fee in surface only. That was the gist of my classes as well as my book regarding mineral valuation. The mineral right has a value which isn't dependent upon the farm and is dependent upon the market and geology for oil or gas. These rights are sold and bought routinely and I'd rather see an appraiser call out the mineral value based upon sales than to speculate about the income only unless they consult someone knowledgeable.